National Payment Systems Act, 2020 (Act No. 15 of 2020)

The National Payment Systems Act, 2020 (Act No. 15 of 2020) is Uganda's first dedicated payment systems statute, bringing payment systems, payment service providers and electronic money issuers under a single legal framework administered by the Bank of Uganda (BoU). Passed by Parliament in July 2020 and published on 4 September 2020, the Act ended the position whereby mobile money and other digital payments operated largely under guidelines and partnership arrangements with banks, and established direct BoU licensing and oversight. Scope and purpose: the Act regulates payment systems; provides for their safety and efficiency; sets out the functions of the central bank in relation to payment systems; prescribes rules for oversight and protection; provides for financial collateral arrangements; regulates payment service providers; regulates the issuance of electronic money; and provides for the oversight of payment instruments. It applies to any person operating a payment system, providing payment services, or issuing electronic money or payment instruments in Uganda. Licensing architecture: the Act creates three principal licence categories, operator of a payment system, provider of payment services, and issuer of payment instruments (including electronic money). The BoU has the mandate to license, modify licences, issue corrective actions, and revoke licences. An entity issuing electronic money must do so only after an equivalent amount of cash is deposited in a trust account or special account, securing the 1:1 backing of e-money by customer funds. The Act provides for the protection of customer funds, trust-account arrangements, and the segregation of those funds from the issuer's estate. Core obligations and oversight: licensees must meet minimum capital, governance, risk-management, technology and security standards, observe AML/CFT obligations, ensure interoperability where required, and report to the BoU. The Act protects settlement finality and the enforceability of netting and financial collateral arrangements, insulating completed settlements from insolvency. It empowers the BoU to make regulations (exercised through the 2021 Regulations on payment systems generally, agents, and a regulatory sandbox), to conduct oversight and inspection, and to impose administrative sanctions and penalties. Operating without a licence is an offence. The Act underpins Uganda's fast-growing mobile money and fintech sector.

1. 1Creates three licence categories: payment system operator, payment service provider, and issuer of payment instruments/electronic money
2. 2Bank of Uganda mandated to license, modify, take corrective action against, and revoke licences
3. 3E-money may be issued only against an equivalent cash deposit in a trust/special account (1:1 backing); customer funds segregated and protected
4. 4Minimum capital, governance, risk-management, technology, security and AML/CFT requirements for licensees
5. 5Protects settlement finality and enforceability of netting and financial collateral arrangements against insolvency
6. 6Empowers BoU to make regulations, conduct oversight and inspection, and operate a regulatory sandbox
7. 7Unlicensed operation is an offence; BoU may impose administrative sanctions and penalties