According to several tech experts, licensing is the bane of tech innovations in Africa. Numerous tech firms, especially fintechs, have had to grapple with the pains of having their business activities suspended due to licensing struggles. Amidst a typical licensing saga in Kenya that saw the Central Bank of Kenya (CBK) edge out two unicorns from the payments market, the Kenyan-based Virtual Pay has secured its license to operate as a payment service provider in the country.
This licensing announcement is a record milestone for Virtual Pay as it cements the startup’s ability to conduct payments services in Kenya, in line with Kenya’s National Payment System (NPS) Act, 2011.
Notably, Kenya’s NPS Act of 2011 has existed more in theory than in practice. Multiple fintechs have operated as payment service providers for decades in the country without any form of licensing. For example, Cellulant has operated in Kenya since 2003 but was only licensed earlier in February 2022. This pattern is consistent with several other fintechs in Kenya.
Just last month, Flutterwave and Chipper were ordered to cease payments operations in Kenya. The CBK governor, Patrick Njoroge, expressed that the two firms were not licensed to operate as remittance providers or payment service providers and should therefore cease operations. They were thus given a strict 7-week ultimatum, which expires in September 2022.
Flutterwave, in response to CBK’s claims, maintained that it entered Kenya via partnerships with licensed banks and mobile operators. It added that it had consistently engaged the CBK to ensure that all the requirements for the license were met and the license issued. Yet, the Nigerian fintech was yet to be issued an operating license, despite its 6 years of operations in the Kenya.
Experts have theorised CBK’s recent actions to be connected to the execution of Kenya’s National Payments System (NPS) Vision and Strategy for 2021-2025. The PDF document outlines a 5-year plan to establish regulatory standards and upgrade Kenya’s payment infrastructure.
Considering that Virtual Pay is a Kenyan-owned fintech, and the NPS’s vision is to enhance Kenya’s global leadership in digital payments, then there is the possibility that the CBK is focusing on issuing payment licenses to businesses with Kenyan origins. If this is the case, then Cellulant’s 19-year wait and Flutterwave’s 6-year wait become more understandable, as against Virtual Pay’s 4-year wait for a license.
Virtual Pay’s new license allows it to offer payment processing services to merchants in Kenya and beyond. The Group CEO, David Morema, maintained that the license would help the team contribute to the growth of Kenya’s financial sector and global economy.
He said in a post: “We are humbled by the approval from the Central Bank, to offer our services to the Citizens of Kenya and the global economy at large. We understand the importance of this license and the regulatory and compliance expectations from the CBK. We shall continue to steadfastly adhere to all regulations and compliance directives while offering innovative, exciting, and state-of-the-art services to all our partners.”