Kenya is considering new rules that would raise the capital threshold for payment companies and establish an open-banking framework allowing customers to authorise licensed fintechs to access their financial data and initiate payments.

The proposed National Payment System Bill would require payment providers to hold core capital ranging from KES 5 million ($39,000) for basic data services to KES 250 million ($1.93 million) for electronic-money issuers.

The capital would have to come from fully paid-up shares and disclosed reserves. Founder loans, borrowed funds and convertible debt would not qualify, according to the bill as reported by TechCabal.

An electronic-money issuer that also operates an electronic wallet could face a potential capital requirement of KES 275 million ($2.1 million). Existing payment providers would have one year to meet the proposed requirements if the legislation is passed.

Different routes for banks and startups

The proposal would allow commercial banks, microfinance institutions and state-owned enterprises to provide payment services with authorisation from the Central Bank of Kenya, rather than a full payment licence, provided they satisfy existing capital requirements.

Startups would also be able to test payment products in a regulatory sandbox before taking on full licensing obligations. However, the proposed reliance on fully paid-up equity and disclosed reserves could make fundraising more difficult for early-stage companies that depend on founder loans or convertible instruments.

The bill remains proposed legislation, and it is not yet clear whether the capital thresholds will take effect in their reported form.

Proposed open-banking framework

The legislation would create separate licences for two services: accessing information held in bank or mobile-money accounts, and initiating payments on behalf of customers.

Under the proposed system, customers could authorise licensed fintechs to retrieve information from their bank or mobile-money accounts. The Central Bank of Kenya would also have the power to require providers to make data access possible.

Important implementation details have not yet been settled. These include the scope of data sharing, access procedures and any fees that may apply. The Central Bank has not fully developed the regulations that would govern the proposed open-banking system.

If enacted, the framework would place banks, mobile-money companies and fintechs within a new structure for sharing account information and processing customer-authorised payments. The effect on competition will depend on the final capital rules and the regulations governing access to customer data.

Kenya’s payments market has developed around infrastructure built by M-PESA and banks, enabling companies to launch, raise funding and expand their services. The proposed bill would introduce additional distinctions between licensed payment providers, entities authorised by the Central Bank and startups operating in the sandbox.