Rwanda's financial services sector is experiencing a major shift with the introduction of Regulation n° 74/2023 of 18/09/2023 Governing Payment Services Providers (the "New PSP Regulation"). This comprehensive regulation, issued by the National Bank of Rwanda ("BNR"), brings significant changes that will affect all Payment Service Providers ("PSPs") operating within the country.
Central to this new regulatory framework is the mandatory recategorisation of all existing PSPs. While the New PSP Regulation introduces various changes, one aspect demands immediate attention from all existing PSPs: the critical deadline for license recategorisation. With a deadline set for 18 September 2024, PSPs must quickly grasp, evaluate, and respond to these new requirements.
The BNR has issued a stark reminder to all PSPs alerting that those applications for license recategorisation must be submitted by 18 September 2024. This deadline, stemming from Article 60 of the New PSP Regulation, carries severe consequences. Failure to comply will result in license revocation, potentially ending operations for non-compliant PSPs.
While the recategorisation deadline is overriding, it is critical to understand the regulation's wider implications. The New PSP Regulation introduces a tiered licensing system with specific capital thresholds for each category, catering to several types of payment service providers. This structure aims to ensure the financial stability and sustainability of providers across different scales of operation.
Furthermore, the New PSP Regulation outlines robust operational requirements, including stringent risk management protocols and anti-money laundering measures. It also sets high standards for corporate governance, emphasising the qualifications of board members and senior management, thus promoting sound corporate governance.
Consumer protection is another key focus of the regulation. It mandates clear communication and fair practices, safeguarding consumer interests. Additionally, the regulation promotes interoperability among payment systems, fostering a more integrated financial ecosystem.
To ensure ongoing compliance and maintain the integrity of the payment services sector, the regulation institutes comprehensive reporting requirements and supervisory mechanisms.
At the core of the urgent recategorisation process lies Article 60 of the New PSP Regulation. In this article, our team outlines the key requirements and timeline for all PSPs in Rwanda. It mandates that all currently licensed PSPs must apply for license categorisation by September 18, 2024, exactly one year from the regulation's publication in the Official Gazette. This limited window for compliance highlights the urgency of the matter for all PSPs operating in Rwanda.
To comply with the recategorisation requirement, providers must submit a comprehensive package to the National Bank of Rwanda ("BNR"). This package should include:
- Their existing granted licenses
- A detailed description of their current payment services
- A description of the category under which their services fall according to the new regulation
This thorough documentation process ensures that the BNR can accurately assess each PSP's position within the new regulatory framework.
The recategorisation process has far-reaching implications for the payment services sector in Rwanda, demanding immediate and strategic action from all PSPs. They are required to promptly begin evaluating their current licenses and services against the new categories, conducting a comprehensive and prioritised assessment to ensure timely compliance. This process may lead to significant shifts in the market structure, potentially requiring some providers to adjust their business models or seek strategic partnerships to align with new requirements.
While challenging, this transition period offers PSPs a valuable opportunity to reassess their strategies, potentially innovating their service offerings and improving their compliance frameworks. However, the BNR's warning about license revocation for non-compliance point out the critical nature of this process. PSPs should view proactive engagement with the recategorisation as an essential risk mitigation activity.
The deadline of 18 September 2024 represents a watershed moment for Rwanda's payment services industry. It is not merely a regulatory hurdle but a catalyst for transformation in the sector. PSPs that approach this challenge strategically can emerge stronger, better aligned with regulatory expectations, and well-positioned in the evolving financial services sector.
In the months ahead, PSPs must prioritise their recategorisation efforts, involving a comprehensive review of current operations, understanding the nuances of the new categories, and preparing robust applications for submission to the BNR well before the deadline.
As Rwanda continues to position itself as a fintech hub in Africa, the successful implementation of this regulation will play a significant role. The proactive engagement of PSPs with this recategorisation process is not just about compliance – it is about contributing to and benefiting from Rwanda's vision for a modern, robust, and inclusive financial ecosystem.
The clock is ticking, and the stakes are high. PSPs that act swiftly and strategically in response to this regulatory change will be best placed to thrive in Rwanda's new financial services sector.
*Reviewed by Eustache Ngoga, an Executive in Rwanda.
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