National Payment System Act, 2011

The National Payment System Act, No. 39 of 2011, is the primary legislation governing payment systems and payment service providers in Kenya, and the umbrella statute under which Kenya's more specific payments and e-money rules are made. It empowers the Central Bank of Kenya (CBK) to regulate, supervise and oversee the national payment system in order to ensure that it is safe, efficient and effective. The Act applies to operators of payment systems and to payment service providers (PSPs), including the mobile money operators that dominate Kenya's market. It gives the CBK power to designate payment systems and payment instruments that are of systemic or system-wide importance, to authorise persons to operate payment systems or provide payment services, and to attach conditions to such authorisations. The Act prescribes the CBK's powers to make regulations, issue directions, conduct oversight and inspections, and impose sanctions for non-compliance, including the suspension or revocation of authorisation. It establishes the principle of finality and irrevocability of settlement for designated systems, protecting completed payments from being unwound, and addresses netting arrangements and the priority of collateral, which are important for systemic stability. It also requires PSPs to safeguard customer funds and to meet standards set by the CBK, and provides the statutory basis for anti-money-laundering and consumer-protection obligations that the subsidiary regulations elaborate. The Act underpins the operation of M-PESA and the broader mobile money ecosystem, the retail payments infrastructure and interbank settlement in Kenya. Because it is enabling legislation, much of the operational detail is contained in the National Payment System Regulations 2014 and the E-Money Regulations 2013, which are made under the Act; those instruments cite back to it for their authority. As the statutory foundation of Kenyan payments regulation, the Act is the reference point against which all PSP authorisation, oversight and enforcement is conducted.

1. 1Empowers the CBK to regulate, supervise and oversee the national payment system
2. 2CBK may designate systemically important payment systems and payment instruments
3. 3Authorisation regime for payment system operators and payment service providers, with conditions
4. 4Settlement finality and irrevocability for designated systems; treatment of netting and collateral
5. 5CBK powers to make regulations, issue directions, inspect and sanction (including suspension/revocation)
6. 6Statutory basis for customer-funds safeguarding, AML and consumer protection elaborated in subsidiary regulations