How to Collect Payments in Kenya: M-Pesa, PesaLink and Cards

To collect payments in Kenya you need M-Pesa for everyday and small payments, bank transfers through PesaLink for larger ones, and a plan for Kenyan VAT and the Significant Economic Presence (SEP) tax if you are a foreign seller. Spotflow is a Merchant of Record that helps you collect payments locally, and settles you in your preferred currency. Spotflow handles the tax and compliance obligations, converts the currency and settles to you. This guide answers all important questions regarding expanding into Kenya.

What is the most common way to pay in Kenya?

M-Pesa. Safaricom's platform holds 89.1% of mobile money subscriptions, and in March 2026 its transaction value grew 8.9% to KES 41.68 trillion (about US$322 billion), with volumes up 25.1% to 46.41 billion transactions. Kenya has more than 53 million mobile money subscriptions.

For merchants, the relevant product is Lipa Na M-Pesa. Over 675,000 businesses received payments through it, worth KES 1.974 trillion in 2025. Customers usually pay with a prompt on their phone, and a checkout without M-Pesa will lose sales.

Which payment methods should a Kenyan checkout support?

PesaLink is operated by IPSL, a subsidiary of the Kenya Bankers Association, and had served 3 million users and processed more than KES 1 trillion by December 2024. Pricing has shifted in its favour: 19 banks rolled out sharply reduced PesaLink transfer charges, replacing tiers that could reach KES 250, and SBM made transfers below KES 1 million free from 1 May 2026. Card payments are real but small beside mobile money: one July 2026 report put point-of-sale transactions at KES 297 billion across 61.7 million transactions.

Do foreign companies pay VAT in Kenya on digital services?

Yes. Kenya charges 16% VAT on digital services, and non-resident suppliers of digital or marketplace services must register regardless of the KES 5 million threshold, through a simplified iTax process. The reverse charge on B2B supplies by non-resident digital providers was withdrawn in July 2022, so you charge VAT to business customers too.

What is the SEP tax in Kenya?

The Significant Economic Presence tax is an income tax on non-resident digital income. It replaced the 1.5% Digital Services Tax and works out to 3% of gross revenue from digital services in Kenya. Foreign providers who register for VAT are enrolled in SEP tax automatically, with returns due by the 20th of the month after the service.

Is VAT charged on payment processing fees in Kenya?

According to a tax guide on the Finance Act 2026, yes, from 1 July 2026. Money transfer, payment processing, merchant acquiring, gateway and aggregation services supplied through a digital platform were previously exempt and now carry 16% VAT, applied to the supplier's fee or margin. This raises the cost of collecting payments itself. Confirm how it applies to your processor agreements with a Kenyan tax adviser.

What does collecting payments in Kenya look like in practice?

Say you sell a project management tool to agencies in Nairobi. Small teams pay KES 5,000 a month through M-Pesa. A larger agency wants an annual plan at KES 300,000, which is above the M-Pesa per-transaction cap, so it pays by bank transfer. A third customer pays by card.

That is three rails, each with its own integration and reconciliation. You also need a KRA registration, monthly VAT and SEP tax filings, and a way to convert shillings into your home currency and settle them. Working with a Merchant of Record like Spotflow takes out the complexities, offering you access to all payment methods, with a single integration.

What is a Merchant of Record, and when does it make sense in Kenya?

A Merchant of Record is the legal seller on the transaction. It takes payment on the customer's preferred rail, handles the local tax and compliance obligations attached to the sale, converts the currency and settles to you. You get one relationship in place of several, and you can test whether Kenya is worth a local entity before you build one.

It suits software and digital product companies testing the market, and teams without payments and tax staff in Kenya. If you sell physical goods, plan to hire locally or expect Kenya to become a core market, you will want your own entity eventually. A common path is to start with a Merchant of Record and move to local setups where the numbers justify it.

Before you launch, check these

Work out your largest single payment and whether it fits M-Pesa's limits.

Identify which rails your customers use at your price points.

Confirm you are registered with KRA for both VAT and SEP tax. Check how processor fees are treated now that VAT applies to them.

Plan how you will reconcile and convert what you collect.

You can answer those yourself, or you can hand them to us. Spotflow sits between your product and Kenya's payment and tax rails, so your team keeps building the product.

FAQ

What is the maximum M-Pesa payment in Kenya?

KES 250,000 per transaction and KES 500,000 per day on Safaricom's published limits. Confirm business account limits with Safaricom.

Can I accept M-Pesa payments from outside Kenya?

Not directly without a local arrangement. You can use a payment provider or a Merchant of Record that collects M-Pesa locally and settles to you.

Do I need a Kenyan entity to sell digital services there?

Not to start, if you use a Merchant of Record. If you sell on your own, you must register for VAT and SEP tax as a non-resident.

What VAT rate applies to SaaS in Kenya?

16%, charged on both consumer and business customers, with no registration threshold for non-resident digital suppliers.

Is PesaLink cheaper than M-Pesa?

For medium and large transfers it generally is, following the 2026 bank fee cuts. M-Pesa charges rise with the amount sent.

Ready to launch in Kenya? Talk to us at hello@spotflow.one, or visit Spotflow to get started.