The National Treasury, in collaboration with the Central Bank of Kenya (CBK), has published the Draft National Payment System Policy (Draft Policy) and the National Payment System Bill, 2026 (Bill) for public consultation, with comments due by 9 October 2026. Public participation forums are being held across the country through that date.

If enacted, the Bill will repeal the current National Payment System Act, Chapter 491A of the laws of Kenya (Current Act), representing the most significant restructuring of Kenya’s payments regulatory framework since the Current Act commenced in 2014.

This article highlights the key changes that are most likely to affect payment service providers (PSPs), payment system operators (PSOs), banks, fintechs and their clients.

Granular licensing categories for PSPs and PSOs

The Current Act treats ‘payment service provider’ and ‘payment system operator’ as broad, unified categories. The Bill disaggregates these into 10 distinct licence categories under the two streams:

• Payment service providers: payment initiation service provider; account information service provider; merchant acquirer; electronic wallet provider; money remittance service provider; and electronic money issuer.
• Payment system operators: payment gateway; payment messaging system operator; card scheme operator; and payment switching and clearing system operator.

Existing market participants will need to map their current and planned operations to one or more of the new licence categories during the one-year transitional period.

The Bill also permits foreign companies to apply for a licence hence, opening the Kenyan payments market to international players operating through a registered branch structure.

PSP authorisation of banks and regulated financial institutions

Banks, microfinance banks, building societies, and government-owned enterprises need not apply for a licence but must obtain a separate CBK authorisation and comply with the Bill’s substantive provisions, including capital adequacy, market conduct, open finance, interoperability and material disclosure requirements. The Bill carves out these entities from CBK intervention in management, the statutory management regime and the insolvency regime, recognising their existing prudential oversight under sectoral legislation. This represents a notable change from the Current Act, which excludes these institutions from the PSP authorisation requirement altogether.

Higher capital requirements

The Bill introduces enhanced minimum capital requirements, ranging from KES 5 million to KES 250 million depending on the licence category. Where a person is licensed under more than one category, the Bill requires the licensee to hold the capital of the highest-capital category plus 50% of the capital for each additional category. The increased capital thresholds may encourage mergers and acquisitions among PSPs and PSOs, which will require CBK approval, as discussed further below.

Open finance and data sharing

The Bill introduces open finance provisions. PSPs and PSOs will be required to maintain systems capable of securely sharing customer data for open finance purposes. CBK may also mandate the implementation of secure data-sharing mechanisms with third parties, provided customer consent has been obtained.

Cross-border payments: Transparency and traceability

The Bill imposes detailed transparency and traceability requirements on all payment transactions. PSPs must ensure that payments carry complete originator and beneficiary information throughout the payment chain. Specific additional obligations apply to cross-border payments, including the provision of originator identification details such as national identification numbers or dates of birth for transactions above prescribed thresholds. Intermediary and beneficiary PSPs face new risk-based obligations to identify and reject or suspend non-compliant payments.

Expanded CBK oversight and enforcement powers

The Bill substantially expands the CBK’s supervisory powers. Key new powers include:

• Unannounced inspections: Authorised officers of the CBK may enter and inspect PSP and PSO premises with or without prior notice, a departure from the current framework which contemplates inspection on reasonable written notice.
• Intervention in management: The CBK may intervene in the management of a PSP or PSO, including appointing directors and removing officers, where the entity fails to meet obligations or where intervention is necessary to safeguard financial stability.
• Statutory management: The CBK may appoint statutory managers for up to 12 months, extendable by court order, with sweeping powers over an entity’s assets and operations.
• Expanded grounds for suspension or revocation: The Bill’s grounds for suspension and revocation largely consolidate those already found in the current regulations into primary legislation, while adding new triggers such as failure to maintain minimum capital requirements, failure to meet infrastructure requirements, failure to take corrective action when required by the CBK and transfer or encumbrance of a licence without CBK approval.

Cybersecurity and operational resilience

While the Current Act is silent on cybersecurity, the Bill’s material disclosure provisions require immediate reporting of material data breaches and cyber-security incidents.

Regulatory sandbox

The Bill introduces a statutory basis for a regulatory sandbox, empowering the CBK to establish, by regulation, a framework under which persons may obtain limited access to the national payment system to test innovative payment services without necessarily obtaining a full licence.

Mergers, acquisitions, and change of ownership

The Bill requires CBK approval for any merger or acquisition of a PSP or PSO, and prior written approval for any significant change of ownership (defined as the acquisition of 10% or more of the shareholding). New significant shareholders must undergo the same vetting as existing shareholders.

Insolvency

The Bill provides for an insolvency regime for PSPs and PSOs, requiring CBK approval for voluntary liquidation and prioritising the discharge of customer liabilities over other creditors. The CBK may also apply for liquidation where either a licence has been revoked, debts remain unpaid or liquidation is just and equitable. The Bill also proposes to amend section 529 of the Insolvency Act to bring PSPs and PSOs within the administration regime. Collectively, these provisions seek to strengthen customer protection in insolvency and expand CBK’s role in insolvency proceedings.

Consumer protection

The Bill introduces express customer protection obligations requiring PSPs and PSOs to provide clear, accurate, timely and accessible information on their products and services, including applicable terms, fees, risks and limitations; design and provide services having regard to users’ needs and circumstances; safeguard customer funds; maintain accessible and efficient complaints-handling mechanisms; and protect customer data and information from loss, unauthorised use or disclosure.

Transition

While the Bill proposes a one-year transitional period, it does not deem existing licences under the Current Act to be valid under the new framework. This suggests that current licence holders may need to re-apply under the new licence categories rather than being automatically grandfathered.

Next steps

The public consultation period closes on 9 October 2026. PSPs, PSOs, banks, fintechs and other stakeholders should consider submitting comments through the CBK’s designated channels or attending the remaining public participation forums.

The Bill represents a welcome and comprehensive effort to modernise Kenya’s payments regulatory framework. That said, it raises several aspects worth considering, including mandatory interoperability requirements, open finance and data-sharing obligations, broad CBK inspection and intervention powers, prior approval requirements for outsourcing and system rules, stacking of capital requirements for multiple licence categories, trust fund concentration limits, potentially duplicative compliance obligations for banks, microfinance banks and building societies, and the absence of a deeming provision for existing licences under the transitional arrangements.

Businesses operating in the payments sector should assess these issues and their current and proposed activities against the proposed framework, provide comments on desired changes to the CBK and prepare for compliance readiness should the Bill be enacted.

We are monitoring developments closely and are available to assist clients in preparing for the transition to the new regime.

Written by Dominic Indokhomi, Partner, and Wambui Kelemba and Fredrick Obago, Associates, Bowmans Kenya