Kenya seeks power to take over failing payment firms under new bill

Kenya’s central bank wants the power to take control of struggling payment companies and sell their businesses, in a proposed law aimed at protecting customer funds and limiting disruption when providers run into financial or regulatory trouble.

The draft National Payment System Bill, 2026, would allow the Central Bank of Kenya (CBK) to intervene when a payment service provider fails to meet its obligations to customers or other financial institutions, breaches regulatory requirements or poses a threat to financial stability.

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The proposal would give the regulator greater control over how failing firms are managed, including the power to appoint a statutory manager, remove company officials and oversee the sale of a business. It could also force owners and investors to surrender control before a company reaches liquidation.

“The Central Bank may intervene in the management of a payment service provider or a payment system operator where … the payment service provider or payment system operator fails to meet its obligations to customers,” the draft bill states.

The proposed powers reflect the growing importance of payment companies in Kenya’s financial system, where businesses and individuals rely on private providers to transfer, receive and hold money.

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A provider’s failure to settle payments can leave customers waiting for transfers, merchants without sales proceeds and other financial institutions exposed to unpaid obligations.

CBK could remove company officials

Under the draft law, the central bank could remove officials it considers responsible for a company’s deterioration and appoint a director who could not be dismissed without its approval.

It could also restrict a troubled provider from accepting new payment business or appointing additional agents, potentially limiting the amount of customer money exposed while the regulator assesses the company’s position.

The bill states that “all the powers of the directors, significant shareholders, senior officers or trustees” would cease once a statutory manager is appointed, unless the manager allows them to continue exercising those powers.

The provisions would give CBK significant authority over a company’s operations and ownership structure during an intervention, reducing the influence of its existing leadership over decisions about its future.

However, intervention would not necessarily guarantee customers immediate access to their money. The proposed law would allow a statutory manager to suspend payments to customers and other creditors while managing the company’s affairs.

That creates a distinction between protecting customer funds over the longer term and ensuring customers can withdraw or transfer their money without interruption during a crisis.

Previous intervention in payment sector

CBK has taken action against a payment provider before. In October 2021, it revoked the authorisation of Mobile Pay, which operated under the Tangaza brand, citing regulatory breaches that put customer funds at risk.

The regulator said the company had failed to submit audited accounts for its business and trust fund, as well as security audits and other required reports.

The proposed bill would establish a more detailed statutory management framework, setting out how the regulator could replace a company’s management and arrange the sale of its business.

CBK has used similar intervention powers in the banking sector. It placed Imperial Bank into receivership in October 2015 before announcing its liquidation in December 2021.

Chase Bank, which entered receivership in April 2016, reopened that month under the management of KCB. In 2018, a deal transferred 75 percent of the value of its deposits to SBM Bank, while the remaining business went into liquidation in 2021.

The cases illustrate the range of options available to regulators when a financial institution encounters serious problems, from transferring parts of its business to winding it down.

Bill targets fintech licensing gaps

The proposed legislation would repeal and replace Kenya’s National Payment System Act of 2011. It would also introduce provisions for registering and licensing fintech startups, addressing a legal grey area that has reportedly slowed the sector’s expansion.

The existing framework has left commercial banks and telecommunications companies with a dominant position in payment services, while newer financial technology firms have faced uncertainty over their regulatory status.

A clearer licensing framework could give startups a more defined route into the market, although the effect would depend on how the new requirements are implemented.

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The bill’s proposed intervention powers would also give the regulator a more explicit framework for dealing with payment firms that fail, while placing greater responsibility on providers to meet their obligations and comply with regulatory requirements.

For customers, the central question will be whether the new safeguards can reduce the risk of losing access to funds when a provider runs into trouble. For companies, the legislation could bring greater regulatory clarity alongside stronger oversight and the possibility of losing control of their business if they fail to meet the required standards.