Kenyan Fintech PrivPay Shuts Down After Safaricom Revokes M-PESA API Access

In May 2023, PrivPay, a Kenyan fintech that allowed users to conduct M-PESA transactions without revealing their personal details, was forced to cease operations after Safaricom terminated its access to the M-PESA APIs. According to sources close to the situation, Safaricom’s decision stemmed from concerns that PrivPay’s services raised several compliance issues.

Launched in 2022, PrivPay marketed itself as a privacy-centric solution, addressing concerns that names and phone numbers shared with merchants are often used for marketing purposes. PrivPay empowered individuals to safeguard their own personal information, and to remind them that they have a responsibility to protect their personal information in mobile money transfers by choosing to take advantage of solutions that embody data privacy. The startup relied on Daraja, M-PESA’s free payment APIs, to power its platform.

PrivPay asserted that it had engaged in discussions with Safaricom regarding its business model and had received approval before launching. However, the startup claims that Safaricom withdrew its support once PrivPay began attracting media attention.

In addition to cutting off API access, Safaricom also suspended PrivPay’s pay bill account in May 2023. This account, which facilitated the startup’s transaction processing, was critical to its operations. Safaricom argued that PrivPay, which reported having 30,000 users, was in violation of Kenya’s Anti-Money Laundering regulations and suggested that the company obtain a Payment Service Provider (PSP) license from the Central Bank of Kenya (CBK). Acquiring this license typically takes up to six months.

PrivPay, in a response to Safaricom, emphasized that it meticulously records every transaction and stores these records for a minimum of seven years to monitor for any suspicious activity. Safaricom indicated that in the absence of a PSP license, a letter of no objection from the Central Bank of Kenya would be required for PrivPay to continue its operations.

A former PrivPay executive admitted to TechCabal, “We chose not to pursue a PSP license at the time due to the substantial resources required and the lengthy process involved.” As PrivPay considers a potential return, it must recognize that meeting regulatory standards will be essential, as good intentions alone won’t suffice.

Source: Techcabal