KenSwitch's Chief Finance and Operations Officer, Wacera Maina. /HANDOUT

Kenyan banks and merchants could cut the cost of processing online card payments by up to 60 percent under a new partnership between local payments switch KenSwitch and global payments technology provider Wipmo.

As the country moves to build domestic capacity for handling digital transactions, the partnership seeks to shift online card payment processing and fraud monitoring closer to home.

This will reduce reliance on foreign service providers while lowering the cost of handling transactions for financial institutions and businesses.

“The cost to the bank will reduce by approximately 50 to 60 per cent, which translates to the same cost reduction for the merchant, we wants to build a payment ecosystem in which consumers eventually pay less for goods and services as businesses benefit from lower transaction costs” said Maina.

“We are aligning our strategy to ensure that in the next two to three years, the cost that eventually ends up to the consumer is a lot less than what they are seeing.”

The partnership comes as businesses increasingly rely on online transactions to reach customers, creating demand for payment systems that are affordable, secure and reliable.

Most of the card transactions are currently acquired entirely outside Kenya, limiting the country's ability to monitor fraud locally and provide direct support to banks and merchants when payment problems arise.

According to a 2024 Central Bank report, card fraud hit Sh263.29 million surging roughly 16.9 times compared to 2023 when the losses were recorded at Sh15.6 million

By establishing domestic authentication capabilities, KenSwitch aims to strengthen local oversight of online card transactions while giving financial institutions access to technical support within the country.

The initiative will initially focus on online card payments rather than mobile money or account-to-account transfers, which Maina said already have locally managed security arrangements.

Wipmo chief executive Shailesh Paul said online transactions face greater fraud risks than payments made physically at shops because customers often transact with businesses they do not know.

Fraudsters can exploit stolen card details, compromised devices and social engineering to trick customers into authorising payments.

The new system will introduce stronger customer authentication, including biometric verification, alongside risk-monitoring tools that assess transaction locations, devices and customer behaviour to identify suspicious activity.

Mr Paul said the system would also help banks respond to emerging fraud methods by applying additional security checks when transactions appear risky.

He said adopting consistent authentication standards across the payments industry would make it harder for criminals to exploit weaknesses between different service providers.

Beyond security, the technology could allow banks to offer additional services during online transactions, including instalment payment plans and card activation prompts.

These services could create new revenue opportunities for banks while improving the customer experience, Paul said.

However, the extent to which consumers will benefit from the projected cost reductions will depend on whether banks and merchants pass their savings on through lower transaction charges or prices.