Payment rails are the infrastructure that enables the transfer of money between banks, financial institutions, and individuals. For businesses, selecting the appropriate payment rail hinges on factors such as transaction speed, cost efficiency, geographical reach, and overall customer satisfaction.
RTGS (Real-Time Gross Settlement) and PesaLink are two prominent examples of traditional payment rails. RTGS facilitates the continuous, real-time settlement of funds, while PesaLink offers instant money transfers within Kenya. However, Lightspark is pioneering a new category by leveraging Bitcoin’s decentralized foundation to offer faster, cheaper, and more flexible payment solutions.
The Payment Rail Landscape
Payment rails are crucial for moving money between parties, but current systems can be slow, fragmented, and costly, often leading to inefficiencies and higher transaction fees for businesses and consumers alike.
Understanding RTGS and PesaLink
How RTGS Works
RTGS (Real-Time Gross Settlement) operates by allowing instantaneous transfer of funds and securities. Managed by central banks, it processes transactions individually without netting debits and credits. When a transaction is initiated, it is settled immediately upon receipt. The central bank electronically adjusts the accounts of the sending and receiving banks, making the transaction final and irrevocable. RTGS systems use secure, real-time electronic communication networks to ensure high-value, time-critical payments are processed efficiently. The typical transaction flow involves the sending bank submitting a payment instruction, which is processed in real-time, and the central bank adjusting the respective accounts instantly.
Strengths and Limitations of RTGS
Strengths
- RTGS enables instantaneous settlement of high-value transactions, reducing settlement risk.
- Payments are final and irrevocable, ensuring that once a transaction is completed, it cannot be reversed.
- RTGS systems are managed by central banks, providing a secure and regulated environment for large-value transfers.
Limitations
- RTGS can incur higher costs compared to net settlement systems, making it less suitable for small-value transactions.
- Transactions must be initiated during banking hours, limiting its availability compared to 24/7 systems like PesaLink.
- Once settled, RTGS transactions cannot be reversed, which can be problematic in cases of error.
How PesaLink Works
PesaLink, developed by Integrated Payment Services Limited (IPSL), is a real-time payments platform in Kenya. It enables instant money transfers between bank accounts using either the recipient's bank account number or linked mobile phone number. Accessible 24/7/365, PesaLink integrates with digital banking channels like mobile apps, USSD, and internet banking. The typical transaction flow involves selecting 'PesaLink' from the bank's menu, choosing to send money to an account or phone number, entering the recipient's details, specifying the amount (KSH 10 to KSH 999,999), and confirming the transaction. Both sender and recipient receive SMS notifications upon completion.
Strengths and Limitations of PesaLink
Strengths
- PesaLink offers real-time, 24/7/365 payment transfers, ensuring instant availability of funds.
- It supports a wide range of transaction amounts, from as low as KSH 10 to as high as KSH 999,999 per transaction.
- The service is accessible through multiple digital channels, including mobile apps, USSD, and internet banking, providing convenience and flexibility for users.
Limitations
- PesaLink only supports transactions in Kenyan Shillings (KES) and does not facilitate international transfers.
- Users must have their phone number linked to their bank account, which can be a barrier for some customers.
- Despite its high transaction limits, some banks impose their own limits, which can restrict the system's potential.
RTGS and PesaLink Compared
Transaction Speed
RTGS processes high-value transactions on a same-day basis, ensuring funds are settled immediately upon receipt. In contrast, PesaLink offers real-time, 24/7 transfers, completing transactions in as little as seven seconds. Lightspark, leveraging the Lightning Network, provides instant global money movement, making it a faster alternative.
Fees
RTGS can be costly, especially for smaller transactions, due to higher processing fees. PesaLink charges range from free for small amounts to a maximum of KES 250. Lightspark emphasizes low-cost transactions, offering a more economical solution for both small and large payments.
Cross-Border Capabilities
RTGS primarily supports domestic high-value transfers, with limited cross-border functionality. PesaLink is restricted to local transactions in Kenyan Shillings. Lightspark excels in this area, enabling seamless, low-cost international payments across 94+ countries and 75+ currencies.
Security Protocols
RTGS transactions are secure, managed by central banks with stringent regulatory oversight. PesaLink ensures safety through OTP verification and secure digital channels. Lightspark, built on Bitcoin’s decentralized foundation, offers robust security and compliance, enhancing trust in global transactions.
Operational Hours
RTGS operates during banking hours, limiting its availability. PesaLink, however, is available 24/7, providing continuous access to funds. Lightspark also supports 24/7 operations, ensuring money can be moved instantly and securely at any time, anywhere in the world.
How RTGS And PesaLink Are Used
High-Value Business Transactions
RTGS is ideal for high-value transactions over Sh1 million, ensuring same-day settlement. PesaLink, capped at KSH 999,999, is less suitable for such amounts. Lightspark offers instant, low-cost transfers for any amount, making it a superior choice for global business payments.
Peer-to-Peer Transfers
PesaLink excels in real-time, 24/7 peer-to-peer transfers within Kenya. RTGS is less convenient due to banking hour restrictions. Lightspark enhances this by enabling instant, cross-border peer-to-peer payments, providing flexibility and lower costs.
Property Purchases
RTGS is commonly used for large property transactions requiring immediate settlement. PesaLink can handle smaller property deals up to KSH 999,999. Lightspark offers a seamless, cost-effective alternative for both domestic and international property purchases, ensuring instant fund availability.
Emergency Payments
PesaLink’s 24/7 availability makes it suitable for urgent, local payments. RTGS is limited by banking hours, making it less ideal for emergencies. Lightspark’s always-on infrastructure and global reach provide a reliable solution for urgent payments across borders.
Time for a New Standard
Lightspark is a global payments platform leveraging Bitcoin’s decentralized foundation to offer faster, cheaper, and more flexible payment solutions compared to traditional systems like RTGS and PesaLink.
- Built on Bitcoin: Lightspark’s infrastructure is powered by Bitcoin, enabling instant, secure, and low-cost transfers.
- Instant Settlement: The platform supports real-time, global money movement for Bitcoin, fiat, and stablecoins.
- Lower fees: Lightspark offers payments at a fraction of today’s costs, eliminating barriers and reducing transaction expenses.
- Cross-border security by default: Built on Bitcoin’s open, decentralized foundation, Lightspark ensures secure, compliant-ready, and reliable cross-border payments.
A Modern Infrastructure
For businesses looking to transcend traditional payment systems like RTGS and PesaLink, here’s what Lightspark brings to the table:
- Wallets: Build advanced digital wallets with flexible custody options, supporting Bitcoin, Lightning, and stablecoins.
- Digital Banks: Connect to the Money Grid for real-time, global payments, enabling digital banks to expand and stay competitive.
- Exchanges: Seamlessly integrate with the Bitcoin Network to facilitate instant bitcoin movement and reduce transaction costs.
- Stablecoins: Launch and manage stablecoins on Bitcoin, providing fast, cheap, and user-friendly payment solutions.
Emerging technologies and evolving regulations are reshaping the future of payments. Lightspark offers real-time, low-cost global payments, bridging traditional finance with next-gen solutions. Don’t just choose between two outdated options—upgrade to a payment rail built for the internet age. Learn more or book a demo.
