Virtual Pay International has secured an operating license from the Central Bank of Kenya (CBK) to provide payment services. This comes amid strident regulatory hurdles that fintech companies struggle to contend with in the East African nation.
As official scrutiny increases, several companies have had their licenses suspended by Kenya’s regulatory body. As a Payment Service Provider (PSP), Virtual Pay is expected to comply with Kenya’s National Payment System (NPS) Act, 2011 provisions.
Virtual Pay Gets Official Nod
The Nairobi-based startup will offer payment processing services to businesses and merchants. In addition, it seeks to provide financial services to neighboring countries in Africa and beyond.
David Morema, the Group CEO of Virtual Pay, affirmed the firm’s mission to lead the sector’s expansion. The group intends to position Kenya’s economy among the best-performing ones in Africa.
Furthermore, Morema added that it is part of Virtual Pay’s drive to collaborate with other stakeholders in the financial sector. Banks and other financial institutions are the company’s focus as it attempts to scale its operations.
The CEO noted that the firm is excited about the license approval by the Central Bank of Kenya. The regulator has seen what Virtual Pay can do to help expand Kenya’s economy and bring financial services to people.
Meanwhile, Virtual Pay’s CEO emphasized the importance of the license to the company’s success. He pledges to guide the firm to comply with all the regulatory directives while providing innovative and competitive services.
Kenya’s Crackdown on Fintechs
The East African nation has had a history of halting the business of notable African unicorns in the country. In July, two African startups, Chipper Cash and Flutterwave, ceased operations in Kenya due to enforcement.
Patrick Njoroge, the Central Bank of Kenya governor, ordered that the two firms halt their operations immediately.
The central banker cited the absence of a license as the reason for the directives against the two entities. As a result, the CBK gave both a 7-week wait to seek a license or stop operating in Kenya. The deadline for the expiry of the request is September 2022.
In response to the CBK’s directive, Flutterwave reiterated that it started business in Kenya via partnership. According to Flutterwave, its partners include licensed banks and mobile money operators. However, it disclosed that it has previously engaged the regulator to ensure it met all regulatory requirements.
Meanwhile, the Nigerian startup is yet to be licensed by the Kenyan regulator even after spending six years in the country.
Analysts point to the provision of the National Payment System (NPS) as the reason for the CBK’s action. As a Kenyan-owned startup, Virtual Pay benefits from the vision of the NPS, which prioritizes local businesses.
For emphasis, it took Virtual Pay four years to obtain its license while Flutterwave had a 6-year wait. Similarly, it took another financial service provider, Cellulant, 19 years before being issued an operation license.
However, opinions differ on the practicality of the NPS as some people believe it only exists on paper.