By Meshack Masibo
As we closed the year in 2023, the Central Bank of Kenya (CBK) issued a cautionary notice warning fintech companies from offering payment services without first acquiring a licence. This is not the first time that the Central Bank of Kenya has gone after fintechs, in July 2022, the Bank cautioned banks from dealing with FlutterWave and ChipperCash over the fact that they were not licenced.
This has caused anxiety in fintech circles as many companies try to determine whether they qualify as Payment Service Providers (PSPs) or not. The National Payment Systems Act 2014 defines a PSP as either a person, company or organisation acting as provider in relation to sending, receiving, storing or processing of payments or the provision of other services in relation to payment services through any electronic system.
The Act also states that any person, company or organisation which owns, possesses, operates, manages or controls a public switched network for the provision of payment services or processes or stores data on behalf of such payment service providers or users of such payment services is a PSP and needs to be licensed.
This definition was expanded by the Court in 2022 in the case of Kenya Commerce Exchange Service Bureau Limited (Kenex v Central Bank of Kenya (Constitutional Petition E181 of 2021) [2022] KEHC 13189 (KLR) (Constitutional and Judicial Review) (30 September 2022) (Judgment) where the Court added that any company that has systems that rely on access to the SWIFT banking infrastructure is a Payment Service Provider. The Judge said that a Payment Service Provider does not strictly refer to a company that sends or receives messages or processes payments or other messages on behalf of banks.
The reason that this is worrying is that getting a licence to act as a Payment Service Provider is not a walk in the park, it requires a substantial investment moneywise and can take a long time, sometimes even years especially for foreign companies.
However, this process can be simplified when fintechs align their application with CBK’s long term plan. This long term plan is outlined in the Kenya National Payments System Vision and Strategy, 2021-2025. Fintechs must ensure that their products are customer centric, affordable to the common mwananchi (citizen), secure and interoperable with the current banking infrastructure.
Additionally, foreign companies seeking the licence ought to demonstrate how issuing them the licence will benefit Kenyans in the long run, this can be done by incorporating Kenyans in their governance structures and workforce as well as setting aside a small part of their profits for corporate social responsibility.
Are you considering getting a licence with the Central Bank of Kenya?
The writer is a lawyer who specializes in offering legal services to people in technology, in case you need further assistance, don’t hesitate to contact him at info@masibolaw.co.ke
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