The Central Bank of Kenya (CBK) is at the center of regulating digital banks and mobile wallets in Kenya. Its mandate, drawn from the Central Bank of Kenya Act (Cap 491) and Article 231 of the Constitution, focuses on ensuring monetary stability, expanding financial inclusion, and enabling innovation in the payments ecosystem. As the overseer of the National Payments System (NPS), CBK regulates digital banks and mobile wallets through a structured framework that blends prudential supervision, risk management, and adaptive policy interventions. This foundation, guided by the National Payments regulation of digital banks and mobile wallets in KenyaSystems Act (2011) and NPS Regulations (2014), has allowed Kenya to emerge as a global leader in digital finance, with mobile money services reaching more than 80% of adults.
Regulation of digital banks and mobile wallets in Kenya is built on a functional, institution-agnostic model. CBK authorizes both banks and non-banks, including mobile network operators, to issue e-money as payment service providers (PSPs). Under the NPS Regulations, these providers must ring-fence customer funds in trust accounts held at prudentially regulated banks. This ensures that customer deposits are protected from provider insolvency. CBK also enforces strict transaction and balance limits: KSh 70,000 per transaction, KSh 140,000 cumulative per day, and a maximum wallet balance of KSh 100,000. E-money issuers are prohibited from lending out pooled funds, aligning CBK’s approach with global standards from the Basel Committee and Financial Action Task Force (FATF).
Mobile wallets, led by M-PESA since its launch in 2007, have become the backbone of Kenya’s digital economy, processing more than 50% of the country’s GDP in annual transactions. To improve service accessibility, CBK enforces interoperability for peer-to-peer transfers through the Payment Service Provider Management Body (PSPMB), a self-regulatory body responsible for clearing and settlement. Interoperability became mandatory in 2018, enabling customers to send and receive money across different networks without restrictions.
The COVID-19 period marked a turning point for regulating digital banks and mobile wallets in Kenya. CBK temporarily waived fees on low-value transactions and raised daily transaction limits to KSh 150,000. This move drove a 114% increase in transaction volumes as more people turned to digital platforms during lockdowns. To address emerging risks, CBK introduced cybersecurity guidelines in 2019, requiring PSPs to report fraud cases and comply with PCI-DSS standards. It also introduced pricing principles in 2020 aimed at curbing high transaction costs and making digital payments more affordable. These measures addressed growing concerns around fraud, including SIM-swap schemes, while expanding access to underserved communities.
Digital banks, which operate without physical branches and rely on fintech platforms, fall under the CBK’s oversight through the Banking Act (Cap 488). These banks must be licensed to conduct deposit-taking and lending activities through digital channels. They are also required to meet prudential standards under the Prudential Guidelines related to good governance, ethics, integrity, and risk management. Unlike traditional banks, digital banks integrate directly with the NPS infrastructure, including the Kenya Electronic Payment and Settlement System (KEPSS), which supports real-time settlements.
The regulatory environment for digital lending changed significantly after the Central Bank Amendment Act (2021). The law expanded CBK’s authority to license and supervise digital credit providers, increasing oversight over embedded lending apps. As of October 2025, CBK has licensed 153 digital credit providers. These entities must comply with consumer protection measures such as transparent lending terms, responsible debt collection practices, and data protection requirements under the Data Protection Act (2019). CBK also supports innovation through regulatory sandboxes, allowing fintech firms to test solutions like electronic Know Your Customer (e-KYC) verification and AI-driven credit scoring. To encourage fair competition, exclusive agent agreements are prohibited.
Regulatory gaps and overlaps remain a challenge. There is continued fragmentation with other regulators such as the Communications Authority of Kenya, especially on telecom aspects of mobile financial services. Full interoperability for merchant payments is still limited, affecting the scalability of digital payment solutions. To address these issues, CBK’s NPS Vision 2021-2025 outlines several interventions, including adopting ISO 20022 standards for enhanced data flows, introducing tiered supervision to make it easier for fintechs to enter the market, and enforcing open APIs to enable third-party integration.
CBK has also intensified its monitoring of emerging risks linked to big technology companies entering the payments space. Its long-term objective is to achieve a cash-lite society by 2030.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.