Interoperability + Payment Rails: Compliance Challenges and How to Navigate Them

Every fintech founder dreams of a seamless ecosystem — one where customers can send, receive, and spend money across platforms without friction. In Kenya, interoperability between payment rails isn’t just the future; it’s already taking shape. Banks, mobile wallets, and remittance firms are connecting like never before.

But behind this convenience lies a growing compliance puzzle. When systems talk to each other, so do their risks. One platform’s weak KYC controls can easily expose another to money laundering threats. Differing transaction limits, record-keeping practices, and data-sharing protocols often create gaps regulators won’t overlook.

And here’s the dilemma: the very innovation that makes interoperability possible can also make compliance harder to manage. The more connected your ecosystem, the more complex your AML and regulatory obligations become.

So, how can fintechs and payment firms balance growth and compliance in this interconnected world?

In this article, we’ll explore the key compliance challenges behind interoperability — from mismatched KYC standards to transaction monitoring blind spots — and outline practical ways to navigate them without slowing down innovation.

Kenya’s payment landscape is entering a new era of interoperability. Banks, mobile wallets, SACCOs, and fintechs are no longer competing in silos — they’re building bridges. From PesaLink to M-PESA’s integration with bank accounts, and now new API-driven payment rails, customers can send and receive money across multiple platforms in seconds. It’s great for convenience, inclusion, and growth. But with every new bridge built, the risk surface widens — especially when compliance frameworks between those platforms aren’t aligned.

Challenge 1: Uneven KYC and Customer Data Standards

Interoperability means that customers can move funds across systems that don’t always speak the same compliance language. One platform may verify users with full biometric data, while another accepts only ID numbers and phone contacts.

When those users transact between systems, the weakest KYC standard becomes the risk point for all. I’ve seen fintechs assume that because a customer has been “verified” elsewhere, they’re automatically safe — until a regulator asks for audit trails, and gaps appear.

To navigate this, payment firms should align KYC requirements with industry peers, use tiered KYC frameworks that match transaction risk levels, and participate in shared verification databases where possible.

The goal is not just onboarding users, but knowing them consistently across rails.

Challenge 2: Transaction Monitoring Across Systems

When transactions flow across multiple institutions, no single entity has full visibility of the money trail. That’s where “smurfing” or layering across platforms becomes a serious AML concern. A customer might split suspicious transfers across several wallets and banks — none of which individually breach reporting thresholds. Regulators are becoming increasingly alert to this.

To manage the risk, interoperable platforms should establish mechanisms for shared transaction alerts or harmonized red flag indicators. Even a basic agreement on what qualifies as unusual activity can make a difference.

For firms using manual tools, ensure that your monitoring rules reflect the new transaction patterns interoperability brings. Don’t wait for an audit to discover that your rules only cover in-system transfers.

Challenge 3: Regulatory Overlaps and Unclear Accountability

When transactions cross multiple regulated environments, accountability blurs. Who reports a suspicious transaction — the sending platform, the receiving one, or both? Who owns the customer data if something goes wrong?

In Kenya, the Central Bank, the Financial Reporting Centre (FRC), and the Office of the Data Protection Commissioner may all have oversight — each with different reporting timelines and expectations.

Fintechs can reduce confusion by developing formal Memorandums of Understanding (MOUs) with partner institutions. These should clarify who performs due diligence, who reports, and how escalation works when a compliance concern arises. Regulators appreciate proactive coordination more than reactive blame-shifting.

Challenge 4: Data Privacy and Cross-Border Transfers

As interoperability expands regionally — for example, through the Pan-African Payment and Settlement System (PAPSS) or regional mobile money corridors — data crosses borders more frequently. That creates friction between AML obligations and data protection laws.

You can’t monitor transactions effectively without sharing data, but you can’t share indiscriminately either. To strike the balance, payment firms should adopt data minimization practices, encrypt sensitive information, and obtain explicit user consent where applicable.

Engage legal counsel early to interpret how Kenya’s Data Protection Act aligns with your AML obligations — especially if you’re working with partners outside Kenya.

Challenge 5: Operational Readiness and Culture Alignment

Compliance frameworks can look perfect on paper, but interoperability will expose gaps in execution. Different institutions often have different compliance cultures — one may prioritize speed, another precision. If your partner doesn’t escalate suspicious activity with the same urgency you do, risks multiply.

The solution lies in people and processes. Conduct joint compliance workshops, align escalation workflows, and ensure that both teams understand how decisions in one system affect risk in the other. When compliance officers collaborate before integrations go live, operational surprises become easier to prevent.

The Way Forward: Building Compliance into Interoperability Design

Interoperability is not just a technology project — it’s a compliance project, too.

The biggest mistake fintechs make is bringing compliance into the conversation after the APIs are already live. Instead, compliance should sit at the design table from day one.

Build systems that can talk securely, share data responsibly, and detect anomalies across networks.

Regulators in Kenya are already moving toward integrated oversight — where compliance will be judged not by how well one platform performs, but by how responsibly the entire ecosystem functions.

Payment firms that embrace this early — by aligning KYC, harmonizing monitoring, and defining accountability — will not only reduce risk but also build a competitive edge grounded in trust and reliability.

Conclusion

Interoperability is no longer just a technical goal — it’s a compliance reality. When payment platforms, PSPs, and remittance firms connect, they don’t just share data or customers; they share risks, responsibilities, and reputational outcomes. That’s why building a framework that grows with your business isn’t optional — it’s essential.

For fintechs looking to scale sustainably, success will depend on how well compliance aligns with innovation. That means having clear governance structures, consistent reporting standards, and mutual accountability between partners. Because in a connected payments ecosystem, one weak link can compromise everyone.

At WQ Consulting, we help fintechs, remittance firms and PSPs develop compliance frameworks that are not only regulator-ready but built to adapt as partnerships expand and technology evolves. The goal is simple — to help you operate confidently in an increasingly complex payments environment, where growth and compliance move in step, not in conflict.