The Central Bank of Kenya (CBK) has announced plans to issue payment licenses to Fintech firms that operate in the country, following the amendment of the National Payment Act.
The move signifies a huge shift from CBK’s previous stance, opening up Kenya’s payment market. Recall that in 2022, CBK via a circular ordered local financial institutions including banks and mobile money service providers to cut links with fintechs, citing unspecified threats to the country’s financial systems. The regulator emphasized that the firms were operating without authorization.
Part of the circular reads,
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“It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Limited (Flutterwave) and Chipper Technologies Kenya Limited (Chipper) have been engaging in Money Remittance and Payment Services without licensing and authorization by CBK. You are therefore directed to immediately cease and desist from dealing with Flutterwave and Chipper”.
However, the latest amendment is poised to unlock opportunities for fintech companies, streamlining their operations and enhancing their ability to innovate and expand.
Speaking on the amendment, CBK’s governor Kamau Thugge disclosed that the regulator is working to amend the National Payment Systems Act of 2011. This is aimed at establishing a legal framework that will allow fintech firms to operate legitimately.
In his words,
“We are in the process of updating and amending the Payments Act, basically coming up with a new act. We hope to be able to finish that soon and also the regulations and that would guide our way forward in terms of payments service providers space”.
The proposed changes are poised to be a big win for remittance and payment providers who have faced investigations by Kenyan authorities on allegations of money laundering.
Also, CBK’s proposed changes to the National Payment Systems Act to allow the registration and licensing of fintech startups could solve a legal gray area that has slowed down the expansion of fintech in the country.
Notably, the amendments to the National Payment Systems Act will no doubt introduce a more flexible and comprehensive regulatory framework for payment services. Key aspects of these changes include; a streamlined licensing process, Enhanced regulatory clarity, and consumer protection.
Streamlined Licensing Process:
The revised will simplify the licensing process for fintech companies, reducing bureaucratic hurdles and accelerating the time to market for new payment solutions. This move is expected to attract both local and international fintech firms to Kenya, fostering a competitive and innovative financial ecosystem.
Enhanced Regulatory Clarity:
By providing clear guidelines on compliance requirements, the CBK aims to reduce ambiguity and improve regulatory transparency. This clarity will help fintech companies better understand their obligations, reducing the risk of non-compliance and associated penalties.
Consumer Protection:
The act will ensure that users of payment services are safeguarded against fraud and other risks. This focus on consumer trust is crucial for the widespread adoption of digital payment solutions.
The amendments to Kenya’s National Payment Systems Act represent a significant breakthrough for the fintech sector. By creating a more conducive regulatory environment, the CBK is paving the way for innovation, growth, and increased investment in digital payment solutions.