Kenswitch Kenya started in 2002 to provide lenders with a shared payment infrastructure. Since then, the company has worked closely with the Central Bank of Kenya (CBK) in driving the National Payments Agenda. In mid-June this year, the organization unveiled a new corporate identity to expand access to digital payment solutions. Karimi Ithau, who was recently appointed as the firm’s managing director, spoke to Victor Adar about the critical role digital solutions play, particularly at a time when physical contact is undesirable.
The uptake of digital and online payments has risen over the years. What role do Payment Service Providers (PSPs) play in this?
PSPs are critical players in enabling access to financial services and have accelerated the uptake of digital payments. They facilitate innovative payment channels, providing interoperability, and increased convenience. Brick and mortar channels are a preserve for very few institutions. We have seen customers demand speed, convenience, reliability, and the accessible, user-friendly modes of payments that PSPs and Fintechs facilitate. These have also become the new norm hastened by the effects of the pandemic on the economic sector with the movement restrictions and limitations on cash handling.
People worldwide need to make or receive payments daily. The gains in financial inclusion would not have been achieved without the contributions of PSPs. Financial inclusion efforts are beneficial to increasing access to financial services and enhancing the national payments infrastructure, and ultimately growing our economy.
The Central Bank of Kenya (CBK) recently launched the Kenya National Payment System Vision and Strategy 2021-2024, which envisions enhancing Kenya’s global leadership in digital payments. How is Kenswitch aligning with this strategy?
One of the key agendas of this vision and strategy was card payments interoperability and local routing of transactions which Kenswitch is currently providing, being the largest card payments switch in Kenya. In addition, Kenswitch is well aligned to CBK’s Visions as anchored on five core principles; trust, security, usefulness, choice, and innovation, which can be witnessed in our customer delivery, innovative systems, and product roll-out.
Which key challenges have the COVID-19 pandemic posed on Payment Service Providers?
While the Kenya economy appears to be picking up, the impact of Covid-19 has been significant. Kenya is largely a cash economy, and the pandemic has disrupted payment behavior patterns. PSPs, which are heavy on cash channels, were adversely affected. However, we are now experiencing an upturn over these channels, indicating increased economic activity.
Given the uptake of cashless transactions and change in landscape you describe, what are some of the changes that digital payment services can expect going forward?
The pandemic has undoubtedly demonstrated the importance of digital payments. There is a significant increase in cardless transactions, with consumers undertaking transactions from the comfort of their homes to purchase groceries, health care supplies, etc. This behavior has heightened the existing need for technology advancement. CBK data highlighted that digital payments surged 87% between February and October 2020, with 2.8 million new mobile users. This is a clear indicator that digital acceptance and issuing are on the increase and encouraged as the way forward. It calls for the roll-out of innovative payment products to suit consumers’ growing demand, which requires all industry stakeholders’ collaborative efforts.
What is Kenswitch doing differently to keep up with these changes?
We’re building an ecosystem anchored on collaborations with Fintechs and other PSPs to build the digital rails for interoperability and financial inclusion.
Are there new products in the offing?
Kenswitch’s rebrand aims to reposition the company as we gear towards introducing new services, like an Integrated Point Of Sale solution. This will allow merchants to accept all payments from one device. WhatsApp Banking is on our menu of new products. This service enables one to make payments from social media platforms, local and international remittances, e-commerce gateway that allows local merchants to sell their goods online. As well, the bulk payments solution enables corporates and SMEs to make real-time payments to their employees, creditors, suppliers, and other stakeholders.
The market is demanding new forms of digital payments which are secure and reliable.
Data theft is a real concern, with Kenya reporting more than 56 million cyber attacks in December 2020, according to the Communication Authority (CA). What systems and controls have you put in place to enhance cyber security?
Kenswitch has the requisite systems, processes, and controls in place and adheres to global security standards. We cannot emphasize enough the importance of ensuring security and data protection in every area of our operation. As well, we are keen on promoting consumer education on online safety in collaboration with other industry players.
Kenyans are a highly tech-savvy population means that we are quick to embrace new technology and innovative trends. We are witnessing the adoption of payment channels such as the contactless tap and go, eCommerce transactions have gained traction, as have mobile point of sales and WhatsApp Banking. The market is demanding new forms of digital payments which are more secure and reliable. The payments industry is transforming into an ecosystem where various payments like fintech, payment service providers, and other players contribute to the digital revolution by introducing new technologies that meet consumer needs.
What are your future plans for Kenswitch?
I want to be an enabler of change and ensure Kenswitch remains an innovative trendsetter without compromising quality, service delivery, and regulatory compliance. In line with CBK’s vision and strategy, we will enable interoperability and financial inclusion within the Kenya financial sector. And, taking cognizance of Kenya’s position as the economic hub of East Africa, I look forward to forging cross-border partnerships to drive financial inclusion.
