E-Money Issuer or Electronic Retail PSP: Which CBK Licence?

A payments business that wants to operate in Kenya must first decide which authorisation to apply for from the Central Bank of Kenya (CBK). Under the National Payment System Regulations, 2014, the two most common categories for a new fintech are the electronic retail payment service provider and the e-money issuer. They carry different capital, different fees and different restrictions, and choosing the wrong one costs time and money. This article explains how the Regulations separate them, where the definitions overlap, and how the choice would change under the draft National Payment System Bill, 2026.

The categories CBK’s application form offers

CBK’s Form 1 lists the categories an applicant can apply for: provision of electronic retail transfers; small e-money issuer; e-money issuer; designation of a payment instrument; and designation of a payment system. The first and third are the focus here. The fees and capital for each are set in Table A of the First Schedule to the Regulations:

• Electronic retail payment service provider: application fee KES 5,000, authorisation fee KES 100,000, core capital KES 5 million.
• E-money issuer: application fee KES 5,000, authorisation fee KES 1 million, core capital KES 20 million.
• Small e-money issuer: application fee KES 5,000, authorisation fee KES 100,000, core capital KES 1 million.
• Designated payment instrument issuer: authorisation fee KES 5 million, core capital KES 50 million.

Regulation 11 requires core capital to be held at the time of authorisation and at all times afterwards. “Core capital” means issued and fully paid-up shares plus disclosed reserves, less goodwill and other intangible assets.

What each category does

The Regulations define an electronic retail payment service provider as a payment service provider providing electronic retail transfer services. An electronic retail transfer is a payment instruction from a payer to a payment service provider to debit a payment account and credit the payee’s account, or to make the funds available to a payee who has no account, within a value limit set by CBK. In plain terms, this is the business of moving money between accounts for others.

An e-money issuer is a payment service provider authorised to issue e-money. E-money is monetary value, represented by a claim on its issuer, stored electronically or magnetically, issued against receipt of currency, and accepted as a means of payment by persons other than the issuer. The business of an e-money issuer is issuing e-money against currency received, redeeming it, and providing closely related ancillary and operational services. The test is whether you hold customer value that can be spent with others. A mobile wallet that stores balances is the usual example; a service that only transmits a payment from one account to another is not.

Where the definitions overlap

The Regulations do not draw a clean line. The definition of the “business of an electronic retail provider” itself describes issuing and redeeming e-money and transferring it, alongside ancillary services. Read with the separate “e-money issuer” definition, a wallet business could arguably fit either label. CBK’s Form 1 treats them as distinct applications with different capital, which is the safer guide. Regulation 6(3) lets CBK invite an applicant to a preliminary meeting to understand its intended business and explain the application requirements. For a product near the boundary, such as a platform that holds funds briefly between payer and payee, we recommend using that meeting to confirm the category in writing before paying any fee.

The restrictions that follow the e-money label

Choosing e-money issuer brings extra rules. E-money is subject to an individual transaction limit of KES 70,000 and an aggregate monthly load limit of KES 1 million, although CBK may approve higher limits for specific categories of issuer (Regulation 43). E-money must be redeemed at par, and the issuer may not earn interest or any other financial return from the holder (Regulation 44). An e-money issuer other than an institution may not engage in lending or investment other than what the Regulations require (Regulation 45). Customer funds must be held in a trust under Regulation 25, which we explain in our article on trust accounts for payment service providers.

The small e-money issuer

A person who issues e-money on a limited scale applies to be registered as a small e-money issuer (Regulation 46). It is the lightest option, with an exemption from many of the Regulations, but Regulation 47 confines it tightly. The applicant must be a company incorporated in Kenya; individual transaction limits cannot exceed KES 20,000; total e-money liabilities cannot exceed KES 100 million; and the e-money may be accepted only by the issuer’s subsidiaries that perform related functions, or by other members of the same group. A product open to the public does not qualify.

How the choice changes under the Bill

The draft Bill replaces this structure. Its First Schedule lists six payment service provider categories, including separate licences for an electronic wallet provider and an electronic money issuer, with minimum capital of KES 50 million and KES 250 million respectively. A business that qualifies as an electronic retail payment service provider today at KES 5 million may need a different licence, and far more capital, under the Bill. Our overview of the Bill’s licences and capital sets out each figure, and our note on pending applications explains why the transition remains uncertain. The Bill is still a draft.

Choosing in practice

Describe the product in terms of what happens to the customer’s money. If the business only instructs and routes transfers, and never holds a stored balance the customer can spend with others, apply as an electronic retail payment service provider. If it issues balances against cash or bank funds, apply as an e-money issuer, and plan for the higher capital, the trust and the transaction limits. If the model is limited to a closed group, consider the small e-money issuer route. Do not let a lower fee drive the decision: CBK may revoke or suspend an authorisation where the provider engages in activities the Regulations do not permit (Regulation 10(1)(h)). Our guide to PSP licensing in Kenya today covers the wider process, and our financial services team at Clay & Associates Advocates can help you classify a product before you file. If your e-money is issued only within a corporate group, see our note on small e-money issuer registration.

Sources: National Payment System Regulations, 2014, regulations 2, 6, 11, 25, 43 to 47, Form 1 and Table A of the First Schedule (CBK); The National Payment System Bill, 2026, First and Third Schedules (CBK); National Payment System Act, 2011 (Cap. 491A).

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.