In recent years, Kenya has witnessed a surge in the digital payment landscape, driven by the growing demand for innovative and simple financial solutions.

Kenya is largely a digital economy with over 3400 goverment services online, a thriving e-commerce envoronment, on an economy that runs mainly on digital payments like Mpesa.A decision to explore the establishment or acquisition of a Payment Service Provider (PSP) in Kenya is indeed a strategic move.
This article is a guide outlining the detailed process of applying for a PSP license in Kenya under regulations of the Central Bank of Kenya (CBK)

1. Preliminary Engagements/Requirements

• Determine Eligibility:

  Before embarking on the application journey, it's crucial to confirm your eligibility as a PSP under the National Payment System Act 2011. Understand the classification under PSP classes defined in the National Payment System Regulations, 2014.

• Request Meeting with CBK:

  Initiate a meeting with CBK by sending a request through nps@centralbank.go.ke. Simultaneously, apply for name approval, presenting three names in order of preference.

• Submission of Application Form 1:

  Complete and submit Application Form 1 from the First Schedule to the Director, Banking and Payment Services at CBK. Accompany it with a sworn affidavit following Annex 1 template in NPS Regulations 2014. Include a non-refundable application fee of Kshs. 5,000.00 via Banker’s Cheque or RTGS to CBK's A/C No. 1472200020001.

2. Company and Product Name Approval Documents

• Submit Proposed Names:

  Submit proposed names along with preliminary documents for review. These documents should encompass your business model, proposed objects, ownership structure, capital evidence, financial projections, legal compliance, infrastructure, risk management outlines, and marketing strategy.

3. Company Documents

• Certified Copies:

  Provide certified copies of the Company certificate of incorporation, memorandum/articles of association, relevant licenses, tax compliance certificate, credit rating report, and the physical/PO Box address of the head office. Include audited statements for the last three years (if applicable).

• Foreign Company Requirements:

  If your entity is foreign, submit a letter of no objection, notarized board resolution, background information, and an undertaking to adhere to Kenyan regulations. Ensure an understanding of supervisory information exchange with CBK.

4. Evidence of Capital

• Present Evidence of Requisite Capital:

  Present evidence of the requisite capital through bank statements or Government of Kenya Treasury Bills and Bonds. Specify the distribution of core capital to shareholders and provide details on the source of funds/capital. Include a sworn declaration by significant shareholders confirming the legality of the proposed capital.

5. Business Plan

• Craft a Detailed Business Plan:

  Craft a detailed business plan covering your business concept, services, operations program, financial projections, public interest, business strategy, products, delivery channels, and relevant data. Adhere to the business plan guideline in Annex 2 of the First Schedule to NPS Regulations 2014.

6. Program of Operations

• Define Terms and Conditions:

  Define terms and conditions for customers, agents, and cash merchants. Draft standard contracts for agents and cash merchants. Provide a draft master agreement with commercial banks. Establish policies and procedures for various operational aspects.

7. Governance and Internal Control Mechanisms

• Identify Key Personnel:

  Identify directors, senior managers, custodial trustees, and significant shareholders. Submit "Fit and Proper Form" for relevant persons. Include up-to-date CVs, contact details, PIN, identification documents, tax compliance certificates, credit reports, and certificates of good conduct. Describe shareholding, group structure, organizational structure, and internal control mechanisms.

8. Safeguarding of Customer Funds

• Establish a Trust:

  Establish a trust and provide a copy of the trust deed. Include a certified copy of the management agreement for custodial trust relationships. Specify details of the bank(s) where the trust fund will be held. Detail risk mitigation strategies for diversified and protected trust funds.

9. Risk, IT Audit, and Business Continuity Practices

• Present a Risk Assessment:

  Present a risk assessment report and risk matrix. Include risk management policies, IT system audit reports, vulnerability assessments, internal audit reports, and business continuity plans.

10. Access to Sensitive Payment Data

• Detail Sensitive Payment Data Access:

  Detail sensitive payment data classification, access policies, IT system security measures, breach detection, and compliance with the Data Protection Act 2019.

Final Step

• Provide Additional Information:

  Provide any additional information as requested by CBK to complete the authorization process.

Consider consulting with Biz Brokers Kenya to keep a keen eye on updates from the Central Bank of Kenya for a smooth and successful application process.