Banks in Kenya Plot Shift to Phone Number Payments

(NAIROBI, KENYA) – Banks in Kenya are preparing to let customers send money using mobile phone numbers instead of bank account numbers, in a change meant to match the ease that telecom operators have brought to mobile money transfers.

The new system will remove the need for customers to ask for or share bank account numbers when sending money, allowing a mobile phone number to serve as a simple payment identifier.

A person sending money from a bank or a savings and credit cooperative society, commonly known as a Sacco, will only need the recipient’s phone number, without knowing their financial institution or obtaining their account details.

PesaLink Chief Executive Gituku Kirika said in an interview that the product is ready for rollout and will target more than 200 financial institutions that use Pesalink, including banks, Saccos, financial technology firms and telecom operators. Pesalink is wholly owned by the Kenya Bankers Association.

“The idea is to have an alias, which is an identifier that is known to people and will be securely linked to a store of value. The platform is ready and what is remaining is for the participants to start the mapping,” Mr Kirika said.

The change follows similar moves in other instant payment markets such as India and South Africa, where proxy identifiers have been used to simplify payments.

The system will save customers from keying in or sharing bank account numbers, which run to as many as 16 digits, when they want to transact. This mirrors mobile money services such as M-Pesa and Airtel Money, where customers only need a phone number that can be easily remembered or retrieved from a contacts list.

The simplicity of using mobile numbers has helped telecom operators process trillions of shillings each year, including person to person payments. India’s Unified Payments Interface allows users to make payments using identifiers instead of sharing bank account details.

South Africa’s PayShap uses ShapIDs. A ShapID is a simple proxy identifier, usually a customer’s mobile phone number, linked to bank accounts in South Africa, allowing users to send and receive instant payments without sharing long account numbers.

In Kenya, a customer will ask their bank or Sacco to link their phone number to their account. The phone number will then become the customer’s PesaLink ID and can be used by others to send money to them.

For institutional customers, banks and Saccos will assign a random number as the PesaLink ID, which will then be linked to the relevant account. The system will also allow customers to change the account linked to their PesaLink ID without changing the identifier itself.

“For example, if I am your employer and I am paying you, all I need is the PesaLink ID,” Mr Kirika said.

A customer changing banks would only need to visit their new institution and remap the existing ID to the new account, without having to notify an employer or other regular payers of a new account number.

“The ID remains the same but the customer can change the store of value where it is mapped. We are changing the language of transaction from sending to an account number to sending to a PesaLink ID,” Mr Kirika said.

The expansion comes as PesaLink seeks to deepen interoperability across Kenya’s financial sector by bringing different types of institutions onto a common payments infrastructure.

Pesalink is also onboarding more institutions onto its “Lipa na Mbao” campaign, which has so far seen 25 banks, microfinance banks and Saccos cut fees for money transfers from as high as KES 250 ($1.93 / GBP 1.45) to a flat fee of KES 20 ($0.15 / GBP 0.12) for transactions above KES 1,000 ($7.74 / GBP 5.80) and up to KES 999,999 ($7,740 / GBP 5,800), with no charges for transfers below KES 1,000 ($7.74 / GBP 5.80).