The Requirements and Procedure for Obtaining Authorization as a Payment Service Provider

A Payment Service Provider is defined to include either a natural or juristic person that provides services related to the sending, receipt and processing of payments using an electronic system; or owns and/or controls a public switched network that provides payment services; or processes or stores data on behalf of payment service providers or the users of such services. 

Requirements for Becoming a Payment Service Provider

An entity that intends to become a payment service provider ought to meet the following requirements:

  1. The entity must incorporate a company using the name that it intends to run its PSP business;
  2. The entity must have the statutory initial capital of Kshs. 5,000,000 in case it intends to obtain approval as an electronic retail payment service provider; Kshs. 50,000,000 for designated payment instrument issuer approval; Kshs. 20,000,000 for e-money issuer approval; and Kshs. 1,000,000 for small e-money issuer approval.
  3. The entity must obtain a license from the Communications Authority of Kenya in case it intends to provide mobile or e-money services;
  4. The entity must be compliant with all its tax obligations and obtain a current tax compliance certificate;
  5. The entity must prepare a business plan that complies with the specifications required by the Bank;
  6. The entity must establish a trust with any of the bank’s duly licensed by the Central Bank of Kenya to ensure the customers funds are safeguarded;
  7. The entity must carry out an audit as to the risk and the continuity of its business practices and prepare a report on the same;
  8. The entity must register the data controller and processors, prepare a privacy policy and prepare a report that shows how its systems will safeguard the customers’ sensitive data, the measures for detecting and remedying potential breaches and compliance with the Data Protection Act;
  9. The entity must assess the intended company’s ownership structure and shareholding, their qualifications, and reputation to ensure they meet the test under the Fit and Proper Form set out under the Second Schedule of the Regulations;
  10. The entity must develop an elaborate operational program and prepare a report to that effect. The report ought to provide for:
    • Terms & Conditions applicable to the customers and/or agents and cash merchants;
    • Drafts of the standard contracts between the prospective PSP and the customers and/or cash merchants;
    • A draft copy of the master agreement between the entity and the commercial banks;
    • Operational policies and procedures;
    • A draft outsourcing contract, in case the entity intends to outsource third party services; and
    • A due diligence report on the proposed third parties.

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Steps and Procedures in Obtaining Approval

(a) Preliminary Engagement

The prospective applicant sends an inquiry on whether they meet the threshold of becoming a PSP either via the email: or a letter addressed to the to the Assistant Directors, Payment Services of the CBK. The CBK responds to the inquiry within a week by attaching links to the National Payment System Act, 2011, the National Payment System Regulations, 2014 and the A-Z PSP Authorization checklist. The Bank may also invite the prospective applicant to a preliminary meeting with an objective of understanding their business intention and enlightening the prospective applicant on the application requirements.

(b) Company and Product Name Approval

The Applicant is required to propose and book at least three business names with the registrar of companies. The applicant subsequently submits the proposed names to CBK in the order of preference. The following documents must accompany the application:

(i) the prospective PSP’s business model including the scope of proposed business activities and
marketing strategy;

(ii) the company’s proposed objects; 

(iii) the company’s ownership structure and governance;

(iv) evidence of sources and availability of capital;

(v) proposed financial projections for 3 years;

(vi) legal and regulatory compliance function;

(vii) high level outlines of proposed infrastructure and internal controls; and

(viii) high level outlines of the proposed risk management policies and procedures and internal control systems manual.
The name becomes valid for a period of 12 months from the date of approval.

(c) Application for Authorization Certificate

The Applicant makes the application through Form I set out in the First Schedule accompanied by a sworn affidavit consistent with Annex 1 template of the National Payment System Regulations, 2014. The application is to accompanied by a non-refundable fee of Kshs. 5,000. The application should contain information on the items set out under part (B) of this guide. 

(d) Issuance of Authorization Certificate

The CBK will assess the application to ascertain whether the Applicant meets the requirements for approval. The Bank subsequently issues the applicant with a letter of intent requiring them to pay the authorization fee of Kshs. 100,000. Upon receipt of the payment, the CBK issues the Applicant an Authorization Certificate to commence and run the PSP business. 

In case the CBK rejects the application, it issues a communication to that effect with reasons for the decision. The Bank’s decision may lay out the conditions that the Applicant ought to satisfy prior to the re-submission of the application for consideration. Once the Bank is satisfied that Applicant has satisfied the conditions set out in its decision, it proceeds to approve the re-submitted application.

(e) Renewal of the Authorization Certificate

An applicant is required renew the Authorization Certificate for a further period of twelve months. An application for renewal must be lodged within 2 months prior to the expiry of the formerly issued certificate. The application ought to be made in Form 2 set out in the First Schedule to the Regulations, and such information as may be required by the CBK. The renewal application should also be accompanied by the renewal fees set out in the First Schedule. The schedule for the fees is as follows: 

The PSP’s Gross Annual Value (Kshs)

Annual Renewal Fess (Kshs)

Less than 1 billion

20,000.00

1 billion – 10 billion

100,0000.00

11 billion – 50 billion

500,000.00

51 billion – 100 billion

1,000,000.00

101 billion – 500 billion 

5,000,000.00

501 billion – 1000 billion 

10,000,000.00

Above 1000 billion 

15, 000,000.00

About Lexserve & Our Partnership with Muma & Kanjama Advocates in Offering the Relevant Services Required to Obtain a Payment Service Provider Authorization Certificate

The process for obtaining PSP Authorization Certificate is rigorous and complex. This tends to consume so much time and expenses and requires technical expertise. That’s where we come in. Lexserve Commercial is a one stop online legal tech company with an objective of offering high quality and professional legal services on a convenience basis. We also work in partnership with Muma & Kanjama Advocates, a law firm with over 18 years of experience, who handle services that can only be provided by qualified legal practitioners. 

Through our partnership with Muma & Kanjama Advocates, we will help you handle the entire process and ensure that you successfully obtain your PSP Authorization Certificate. Our partnership will also offer you the other required legal requirements that include: 

  • incorporation of the company required for running a PSP business;  
  • obtaining CAK’s license in case you intend to offer mobile or e-money payment services;
  • filing your returns and complying with all tax obligations and obtaining a tax compliance certificate;
  • preparing a business plan that complies with the CBK’s requirements; 
  • drafting a trust deed and incorporating the trust required under the NPS Act;
  • carrying out a legal audit to ensure that you are compliant with all the legal requirements under the Data Protection Act, Proceeds of Crime and Anti-money Laundering Act, the National Payment System Act and Regulations and the Consumer Protection Act;
  • drafting a Privacy Policy and standard engagement contracts for your agents and customers; and
  • drafting policies and procedures required by the CBK

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