Interview with Naman Kapoor, Managing Director and Stuart Keenan, Senior Vice President | Citi

20 Questions with Citi – Instant Payments in East Africa

 

1. What does “Instant Payments” mean in the context of East Africa’s evolving financial ecosystem?

East Africa prides itself in being the original home of mobile money wallets and payments, with strong uptake over the past 18 years since the launch of M-PESA and strong evolution from P2P payments to C2B, B2C and B2B payments currently. According to the GSMA’s Mobile Money Prevalence Index that considers mobile money adoption, activity and accessibility at country level, East African countries have an index above 0.8 (very high), much higher than other regions globally. Mobile payments introduced the concept of real-time payments to East Africa.

In more recent times, East African regulators and industry associations have introduced (or are planning to introduce, in the case of Uganda) Instant Payment (IP) schemes that deliver seamless interoperable payments between bank accounts and mobile wallets. This development will help harmonise the payments ecosystem and build on the gains first delivered by mobile wallet payments. Benefits include (i) transaction values under IP schemes are higher than those under wallets, (ii) more use cases for IP schemes for various industries and users, (iii) cost savings when IP schemes eliminate the need to move funds from bank accounts to mobile wallets before transacting, (iv) wider participation by users when all banks and mobile money schemes work under same scheme and rules, among others. Moreover, Instant Payments globally has become an enabler of economic growth (real-time payments are projected to boost global GDP by $286 billion in 2028 according to Centre for Economic and Business Research – CEBR), a facilitator for global commerce and a driver for digitisation away from paper-based instruments like cash. Instant Payments in East Africa has the potential to deliver all these same benefits.

 

2. Which East African markets are currently leading in the adoption of real-time payment systems?

Citi is a member of 3 real-time payments systems in East Africa participating in Kenya (PesaLink), Zambia National Financial Switch (ZNFS) and Tanzania Instant Payment System (TIPS) as well as a long-established bilateral integration with Safaricom.

In Tanzania and Zambia, the regulators have been successful in enforcing interoperability between mobile money and the bank accounts which has driven strong adoption of IP. For example, according to the Bank of Tanzania, TIPS despite still being a nascent scheme with new use cases (such as Pay to Government), processed 490+ million transactions since its launch in 2024.

The prevalence of M-PESA (constituting 98% of all transactions in Kenya according to the 2023 Bank Supervision Annual Report) and Safaricom’s non-participation in the IP scheme has resulted in PesaLink primarily being a bank account to bank account solution and dampened its growth. This situation is expected to change once PesaLink onboards M-PESA and other wallet providers soon. Additionally, the Central Bank of Kenya is working on developing a national financial switch where membership will be mandatory for banks, mobile money operators and other financial system players; this will also significantly ramp up uptake of real time payments in Kenya in the coming years.

 

3. How has the shift toward instant payments impacted traditional banking infrastructure in the region?

Instant Payments is a natural evolution for certain use cases (e.g. gig economy on-demand payouts) but not all use cases are the right fit. Recurring batch payments, such as corporate payroll, which are defined days in advance can continue to be processed through ACH and time critical high value treasury payments, above Instant Payments limits, still need to be processed via RTGS.

However, due to a natural overlap, we have seen certain banks in East Africa choose to route eligible payments to Instant Payments away from ACH.

We are seeing in the region’s regulators looking to extend operating hours including the weekends for the traditional infrastructures (such as the introduction of Saturday as a banking day in Zambia or extended cut-offs in Kenya). This contrasts with other parts of the world, where to satisfy additional use cases that require 24 x 7 processing the approach has instead been to increase the transaction value limits on the Instant Payments system (for example in the UK where you could now purchase the average house using Faster Payments).

 

4. What are the key challenges preventing widespread instant payment adoption in East Africa?

As mentioned to a previous question, the prevalence of mobile money and relatively high unbanked population in East Africa (particularly in rural areas) means that for Instant Payments to scale it needs to integrate with the mobile money operators which is only at the planning stage in Kenya.

Furthermore, migrating from batch-based processing to 24 x 7 individual processing also requires significant technology investment from the banking community to have the platforms that are operational around the clock and can handle the miniaturisation of payments.

 

5. How are mobile money platforms integrating with instant payment systems?

As mentioned previously, it is being driven by the regulators. Safaricom is widely expected to join the upcoming national switch in Kenya, whereas in Tanzania and Zambia, the regulators have already succeeded in creating that interoperability between mobile money and the traditional banks which drives adoption.

 

6. Can you discuss any notable cross-border instant payment initiatives within the EAC (East African Community)?

Citi with its vast Global Network (offering Instant Payments in 65+ countries) has already integrated these domestic payout capabilities into its global cross-border payments offering WorldLink®.  Clients of WorldLink can now make cross-border Instant Payments into 41 Markets via 7 schemes* as well as to MPESA wallets in Kenya.

On the regulatory side, there are proposed plans to link schemes to facilitate cross- border payments as we have seen in other parts of the world like Project Nexus in South East Asia.

*Market and technical availability subject to change in Citi’s sole discretion

7. How do real-time payments support financial inclusion for the unbanked or underbanked populations?

M-PESA (increasing financial inclusion from 26% in 2006 to 85% in 2024 as per the same CEBR report referenced earlier) demonstrated the transformative power of real-time payments in driving broader economic participation. Scheme interoperability of the real-time infrastructures with mobile money operators is driving inclusion. Whilst Mobile money operators onboard these individuals, it is the connection through the real-time schemes that facilitates these individuals to pay and receive from corporate and public sector institutions who traditionally only hold bank accounts.

 

8. What role does government regulation play in enabling or slowing Instant Payments?

At Citi, we have been observing the correlation between adoption and regulatory mandated participation. African regulators have typically brought all stakeholders to the table around a common implementation timeline which create a critical mass of users to kick-start the network efforts at the time of launch. Alternatively, in the USA (FedNow) or in nearby South Africa (PayShap) participation has been left voluntary.

Regulating pricing- whether on the amount that can be charged for transactions between individuals or the amount that acquirers can charge merchants- can also drive adoption. For example, in Tanzania and Zambia the regulator has capped the fees that can be charged.

 

9. How is Citi working with local banks or fintechs to drive Instant Payments in Africa?

In Kenya, Citi integrated with Safaricom over 16 years ago in Kenya to enable Instant Payments and collections to and from M-PESA wallets.

More recently, we have also collaborated with fintechs where their offerings complement and enhance the ability to provide the 24×7 services required by our corporate customers.

Another example is Citi has made an investment in Icon Solutions, a leading fintech provider of payments technology and consultancy services. In addition to the investment, Citi plans to expand its use of the Icon Payments Framework (IPF) to enhance its micro-services orchestration architecture. This investment and relationship with Icon Solutions demonstrates Citi’s strategy of working with fintechs to strengthen its technology and payments capabilities.

 

10. Are there differences in how Instant Payments are being rolled out in urban vs. rural areas?

The clearing of an instant payment doesn’t change based on the location. However, in urban areas use cases ideally suited for Instant Payments, such as gig economy payouts to riders/drivers, only really exist where there is the scale for these platforms to operate.

 

11. What are some key use cases driving consumer demand for real-time payments in East Africa?

Citi is a Corporate Bank only in East Africa so we are unable to comment on this.

 

12. How are businesses, especially Small or Midsize Enterprises (SMEs), benefiting from faster settlement systems?

Real-time payments, once primarily a consumer-facing innovation, are now becoming essential for corporates – driven in part by rising consumer expectations of our corporate clients.

1. Real-time payments are transforming the gig economy, providing workers with instant access to their wages, supporting a more agile lifestyle, and helping fuel consumption. At scale, this can help boost economic activity by increasing labour market participation and helping support micro-entrepreneurship.

2. The Non-Bank Financial Institution sector is also another good example where speed of disbursing insurance claims (especially in urgent cases) or instant disbursement of loans can be a competitive differentiator.

3. For physical collections, Instant Payments provide an alternative to traditional payment methods at the point of sale, given that Instant Payments can be reconciled instantly and thus provide near-instant payment confirmation even prior to the individual leaving the point-of-sale

4. For e-commerce online collections – Instant Payments can be an alternative to card payments when provided as a payment type at checkout.

Collecting cash or acquiring cards both have an underlying cost that typically exceeds the bank charge for an incoming instant collection direct to the merchant’s bank account. Adoption of Instant Payments can therefore help reduce the cost of collections whilst at the same time potentially accelerating available funds.

 

13. What security protocols must be in place to support instant payment infrastructure in developing markets?

With Instant Payments in their nature being irrevocable, there needs to be the correct controls and security protocols to ensure the payments are not fraudulent prior to release to the scheme. For corporate payments, the integration between the client and the bank needs to ensure there is no tampering of the payment messages and on the client side the correct processes (maker/checker, segregation of duties etc.) prior to payment release to avoid internal fraud.

 

14. How are banks approaching interoperability between instant payment systems and legacy platforms?

As highlighted earlier, Instant Payments requires technology that is scalable, always-on and able to handle high volume individual transactions. Leveraging legacy technology to process Instant Payments often creates availability and scalability issues which can prevent the migration from batch processing.

Citi is working on a multi-year modernisation effort of its payments platforms. As mentioned earlier and as part of this programme, Citi is working with and has invested in Icon Solutions to expand its innovation toolkit and future-proof its payments services.

Citi’s new payment platform will prioritise flexibility and help support the bank’s ability to respond to the exponential pace of change in payment infrastructure and the regulatory environment, as well as evolving client demands in an increasingly 24/7, real-time, digital-first environment.

 

15. What role does ISO 20022 or other standards play in harmonizing Instant Payments across African markets?

ISO20022 can ensure consistency for Instant Payments across the initial domestic rollouts of the payment schemes. This has the potential for multiple benefits. Firstly, consistency in specifications reduces costs for banks to implement the same global platform across multiple countries without the need for expensive local development. Secondly, as Instant Payments use cases expand to cross-border, then it will create interoperability with SWIFT MX messages which avoids truncation and the need for transformation. Finally, structured data can create efficiencies in transaction processing by helping reduce time taken to meet compliance requirements.

 

16. What lessons can East African countries learn from other emerging markets in Asia or Latin America?

A notable example from Latin America is Brazil’s real-time payment scheme, Pix, which launched in 2020. Pix was designed to enhance efficiency, increase competition, and promote financial inclusion. Unlike conventional payment systems, Pix enabled participation without the need for credit cards or extensive financial infrastructure. It offers free peer-to-peer transactions and low-cost merchant payments. As a result, over 67% of Brazil’s adult population either made or received a Pix transaction in its first year according to BIS Bulletin No.52. Today, Pix is the most widely used payment method in Brazil, with 159 million registered individuals according to the Central Bank of Brazil’s data, equivalent to 75% of the total population or nearly all adults. Pix’s success can be attributed to several factors, including mandatory participation, the central bank’s dual role as both infrastructure provider and rule setter, combined with the use of open APIs.

Similarly, India’s Unified Payment Interface (UPI), introduced in 2016, was among the first real-time payment schemes to allow customers to choose between phone numbers, account numbers, and domain-based aliases as a form of identification for receiving payments. Even fintechs that do not directly participate in UPI can access the system indirectly through a participant. UPI enables immediate money transfers through pull and push payments, merchant and utility payments, and QR code-based transactions. This versatility has significantly increased adoption, with the contribution of UPI to the cumulative digital payments ecosystem more than doubling in five years, from 34% in 2019 to 83% in 2024 according to the Reserve Bank of India’s Payment System Report. Notably, much of this growth stems from greater participation by previously unbanked and underbanked populations.

 

17. How is Instant Payments innovation addressing remittances and diaspora transactions in East Africa?

Citi doesn’t support remittances or p2p payments in East Africa so we are unable to comment on this

 

18. Do you foresee Instant Payments overtaking card-based payments in certain segments?

The cost involved in acquiring from cards especially for smaller merchants is high both at the point-of-sale and online. We will continue to see Instant Payments and Wallet payments grow relative to cards and cash in the SME segment for online collections.

 

19. What’s your outlook for Instant Payments growth in East Africa over the next 5 years?

The proposed integration of M-PESA into the National Switch in Kenya, the planned launch of a national switch in Uganda, as well as the continued growth/maturity of TIPS and ZNFS all mean that Citi’s outlook for Instant Payments in East Africa is for sustained growth over the next 5 years.

 

20. Finally, how does Citi envision its role in shaping the Instant Payments future of East Africa?

As a leading global bank for Corporates, Payment Intermediaries and Public Sector institutions that participates in a vast number of instant payment schemes globally (currently offering Instant Payments in 65+ countries), Citi is well suited to guide its clients and collaborate with scheme operators in East Africa on how they can unlock the benefits of Instant Payments.

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