Grace Ashiru
PrivPay, a Kenyan fintech that enabled customers to carry out M-PESA transactions without exposing their personal information, was forced to shut down in May 2023 after Safaricom revoked its access to M-PESA APIs. According to two individuals with direct knowledge of the situation, Safaricom’s decision was linked to concerns that PrivPay’s service might breach several compliance regulations.
PrivPay, which launched in 2022, had promoted the idea of privacy, allowing users to keep their names and phone numbers hidden during transactions. These details are often shared with merchants for marketing purposes. The startup’s solution relied on Daraja, M-PESA’s free payment APIs.
The company asserted that it had engaged in discussions with Safaricom about its business model and had secured approval before its launch. However, PrivPay claimed that the telecom giant reversed its stance once the fintech began to garner media attention.
In a letter dated May 2023, which was seen by TechCabal, Safaricom stated, “Your business model is not permitted by Safaricom.” The letter highlighted that M-PESA forbids third-party transactions.
In May 2023, Safaricom suspended the pay bill account of a fintech company called PrivPay. This pay bill account, a cash collection number integrated with M-PESA, enabled the startup to process transactions. Safaricom stated that PrivPay, which claimed to have a user base of 30,000, violated Kenya’s Anti-Money Laundering regulations. As a result, the telco required PrivPay to obtain a payment service provider (PSP) license from the Central Bank of Kenya (CBK), a process that can take up to six months.
In response, PrivPay emphasized that it meticulously records every transaction and ensures that these records are maintained and stored for at least seven years, allowing for the detection of any suspicious activity. Despite a request for comments, Safaricom did not respond. PrivPay’s response to Safaricom was obtained by TechCabal.
For Safaricom, without a license, only a letter of no objection from the Central Bank of Kenya would be sufficient.
“We didn’t pursue a PSP license at the time due to the resources it would have required. Additionally, it was going to be a time-consuming process,” a former PrivPay executive shared with TechCabal.
As PrivPay aims for a return, it’s essential to remember that good intentions alone won’t be enough to satisfy regulatory demands.
