The National Treasury and Central Bank of Kenya (CBK) have proposed the National Payment System Bill, 2026. The Bill seeks to replace the existing National Payment System Act, 2011. Public participation on the proposed legislation concluded on 9th October 2026.
The proposed framework comes as Kenya’s payments ecosystem continues to expand. Digital wallets, payment gateways and merchant acquiring are now important parts of the financial system. Payment initiation and account-information services are also emerging.
The Bill seeks to establish clearer rules for these activities. These rules cover licensing, capital, governance, consumer protection and operational resilience.
For fintechs, the changes present both challenges and opportunities. Compliance costs could increase. However, clearer rules could strengthen consumer confidence. They could also make the sector more attractive to institutional investors.
A Wider Regulatory Framework
A key feature of Payment Regulation Kenya is the expansion of activities subject to CBK oversight. The Bill introduces distinct categories for payment service providers and payment system operators.
Payment service providers would include payment initiation service providers and account-information service providers. The category would also cover merchant acquirers, electronic wallet providers, money remittance providers and electronic money issuers.
Payment system operators would include payment gateways and payment messaging system operators. Card scheme operators and payment switching and clearing system operators would also fall within this category.
New Payment Models Come Under Oversight
The proposed framework also covers businesses supporting payment infrastructure. This includes entities involved in processing, storing or sharing payment-related data.
Virtual asset service providers that provide payment services would also fall within the proposed framework. This is significant as the boundaries between fintech, digital assets and payments continue to converge.
The wider scope reflects the increasing complexity of Kenya’s financial infrastructure. It also means fintechs will need to assess their business models against specific regulatory categories.
Capital Requirements Raise the Entry Bar
One of the most significant changes under the proposed Payment Regulation Kenya framework is the introduction of differentiated minimum capital requirements. The thresholds vary according to the type of payment service.
Payment initiation and account-information service providers would require minimum capital of Kshs 5.0 mn. Payment gateways would require Kshs 10.0 mn. Money remittance providers would require Kshs 30.0 mn.
Electronic wallet providers would require Kshs 50.0 mn. The same threshold would apply to merchant acquirers, card scheme operators and payment switching and clearing system operators.
Electronic Money Issuers Face the Highest Requirement
Electronic money issuers would face the highest requirement. The proposed minimum capital is Kshs 250.0 mn.
This is significantly higher than the Kshs 50.0 mn requirement under the existing framework. The change could have a material effect on the competitive structure of the sector.
Smaller fintechs may need additional equity funding to meet the new requirements. Others could pursue strategic partnerships or alternative business models.
Better-capitalised providers could gain an advantage as the market adjusts. Higher capital requirements may also improve the ability of payment providers to absorb financial and operational shocks.
Compliance Will Extend Beyond Capital
Capital adequacy is only one part of the proposed framework. The CBK would also assess an applicant’s financial position and ownership structure.
The regulator would consider the source of funds and management capacity. It would also assess technology infrastructure and data-handling capabilities.
Stronger Governance Requirements
The proposed framework introduces stronger governance expectations. Significant shareholders, directors and senior officers would be subject to suitability assessments.
Payment providers would also need appropriate risk-management systems. Consumer-protection and operational-resilience frameworks would form part of the regulatory environment.
This is important for fintech investors. Compliance would increasingly become part of the operating model.
A strong product would no longer be enough. Providers would also need the capital, governance and technology infrastructure required to operate within a regulated financial environment.
Protecting Customer Funds
Another important component of Payment Regulation Kenya is the protection of customer funds. Electronic money issuers and electronic wallet providers would be required to hold customer funds in trust accounts.
These accounts would be maintained with banks or microfinance banks. The proposed structure would separate customer funds from the provider’s own assets.
The separation is important if a payment provider experiences financial distress. It reduces the risk of customer funds being treated as ordinary assets of the provider.
For customers, this could strengthen confidence in digital wallets and electronic-money products. For investors, it provides greater clarity around how customer funds are protected.
Trust is particularly important in payments. Customers must be confident that their money will remain accessible even when a provider faces operational or financial difficulties.
Interoperability Could Change Competition
The proposed Bill places significant emphasis on interoperability. Payment service providers and payment system operators would be expected to support interoperability within the regulatory framework.
Greater interoperability could reduce dependence on closed payment ecosystems. Consumers and businesses could potentially move funds between different platforms with less friction.
For fintechs, interoperability could change the basis of competition. Providers may have less ability to rely on customer lock-in and closed networks.
Competition could instead centre on transaction pricing and reliability. User experience, cybersecurity and additional financial services could also become more important.
This could benefit consumers. However, it may also require payment providers to rethink how they build and retain their customer bases.
Regulation Versus Innovation
The central question surrounding Payment Regulation Kenya is whether stronger oversight could restrict innovation.
Kenya has developed one of Africa’s most advanced digital-payment ecosystems. The new framework therefore needs to protect consumers without creating excessive barriers for fintechs.
The draft framework is not solely focused on restriction. Its objectives include promoting innovation, competition, interoperability and financial inclusion.
Supporting New Payment Services
The framework also recognises newer services. These include payment initiation and account-information services.
This creates room for new business models within a regulated environment. However, the cost of compliance remains an important consideration.
A Kshs 250.0 mn capital requirement may be appropriate for an electronic money issuer handling substantial customer funds. Applying similar requirements to lower-risk payment businesses could discourage innovation.
A differentiated regulatory framework is therefore important. Requirements should reflect the risks associated with each business model.
Higher Costs Could Affect Returns
Regulation will also affect fintech economics. Higher capital requirements could increase funding needs.
Compliance, technology, cybersecurity and reporting costs could also increase operating expenses. This could extend the time required for startups to reach profitability.
The result could be greater consolidation. Smaller providers may seek partnerships or acquisitions. Some could integrate with established financial institutions.
Well-capitalised fintechs could benefit from this environment. Regulatory compliance could become a competitive advantage if it creates a stronger barrier to entry.
The proposed Bill represents a significant evolution of Kenya’s payments regulatory architecture. The sector is moving beyond a framework designed mainly around traditional payment systems.
The new framework recognises digital wallets and payment technology. It also addresses data-driven services and emerging financial models.
A More Formalised Payments Ecosystem
For consumers, stronger regulation could improve protection and confidence. Established financial institutions could gain opportunities to participate in a more formalised payments ecosystem.
For fintechs, however, the regulatory bar will become higher. The cost of compliance will need to be weighed against the benefits of operating within a more structured market.
The long-term outcome will depend on implementation. Excessive compliance costs could discourage smaller innovators. Effective supervision could instead create a more resilient payments ecosystem.
The proposed National Payment System Bill, 2026 would introduce new licensing categories. It would also establish differentiated capital requirements and stronger safeguards for customer funds.
For fintechs, these changes will increase the cost of operating in Kenya’s payments industry. However, they could also create stronger foundations for long-term growth and investment.
The key question is whether regulation can raise industry standards without making innovation too expensive. If that balance is achieved, the new framework could strengthen investor confidence while supporting Kenya’s digital payments industry through its next stage of development.
