Kenyan fintech, Virtual Pay secures a license from CBK to operate

According to several technology experts, licensing is the bane of technological innovations in Africa. Numerous technology firms, especially fintechs, have had to struggle to have their business activities halted due to licensing battles. In the midst of a typical licensing saga in Kenya that saw the Central Bank of Kenya (CBK) break out two unicorns from the payments market, Kenyan-based Virtual Pay has secured the 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 perform payment services in Kenya, in line with Kenya’s National Payment System (NPS) Act, 2011.

In particular, Kenya’s NPS Act of 2011 has existed more in theory than in practice. Several fintechs have been operating as payment service providers for decades in the country without any kind of licensing. For example, Cellulant has been operating 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 payment 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 allegations, claimed 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 that the license was issued. Yet the Nigerian fintech was yet to be issued an operating license, despite 6 years of operation in Kenya.

Experts have theorized CBK’s recent actions related to the implementation 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 payments infrastructure.

Considering that Virtual Pay is a Kenyan-owned fintech, and NPS’s vision is to strengthen Kenya’s global leadership in digital payments, there is the possibility that CBK will focus on issuing payment licenses to businesses of Kenyan origin. If this is the case, then Cellulant’s 19 year wait and Flutterwave’s 6 year wait becomes more understandable, as opposed to 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 CEO, David Morema, claimed 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 of 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 expectations of the CBK on regulations and compliance. We shall continue to comply all regulations and compliance directives, while offering innovative, exciting and state-of-the-art services to all our partners.”