Kenyan Banks Cut PesaLink Transfer Fees to Challenge M-Pesa Dominance

Sending money between banks in Kenya just got dramatically cheaper. Whether that's enough to pull anyone off M-Pesa is a different question.

Nineteen Kenyan banks and microfinance lenders have dropped PesaLink transfer fees to zero for amounts under Sh1,000, and to a flat Sh20 for anything up to Sh999,999. The move is part of a coordinated campaign called "Tuma Direct na 20."

IPSL, the outfit that runs PesaLink for the Kenya Bankers Association, previously allowed tiered fees to reach up to Sh250 a transaction. IPSL CEO Gituku Kirika called the new flat rate a "drastic reduction" aimed at accelerating adoption. The network already routes more than one million transactions each month across more than 195 institutions, and five of Kenya's ten largest lenders are already on board.

Paying a till number on M-Pesa has always been free for the customer because the merchant eats that cost, so PesaLink isn't touching that battlefield at all. What it's going after is person-to-person and business transfers, where M-Pesa already charges Sh7 to send up to Sh500 and Sh33 for anything between Sh501 and Sh1,000, fees that add up fast for anyone transacting daily. At the top end, the fee caps out at Sh108 for anything above Sh20,000. Send Sh100,000 through M-Pesa and you lose Sh108 before it even lands. Send the same amount through PesaLink and it costs Sh20, a Sh88 difference on every transfer, no matter how many times a month you do it.

If you are a hardware dealer, wholesaler, or anyone paying suppliers in bulk, I want you to pay closer attention to the transaction ceiling. M-Pesa caps a single transfer at Sh250,000. PesaLink lets you move up to Sh999,999 in one go. For businesses paying suppliers regularly, that's not a small discount; it's an entirely different category of tool.

None of that erases muscle memory. Safaricom's green Buy Goods signage is bolted to the top of nearly every till in the country, and authenticating in a banking app still feels like friction when a queue is building behind you. To reduce that friction, IPSL is already rolling out phone-number linking and piloting a fuller ID-based routing system, aiming to replicate the exact convenience that made M-Pesa sticky in the first place.

The bigger obstacle is that the banking sector hasn't shown up as a unified front. Equity Bank, Co-operative Bank, Standard Chartered, NCBA, and I&M, five of the country's largest retail lenders, were not among the institutions announced as part of the flat-fee initiative, meaning many of their customers would not benefit from the new pricing. Until those giants join, PesaLink remains a sharp tool for deliberate users rather than a national default. Banks have finally erased much of M-Pesa's pricing advantage. Whether that translates into market share depends less on saving Sh88 than on persuading millions of Kenyans to break a payment habit built over nearly two decades.