Two licences for two activities
The National Payment Systems Act, Cap. 59 licenses two different activities. A payment system operator is the entity in charge of operating a payment system, the infrastructure over which payments are cleared and settled. A payment service provider is a person licensed under section 9 of the Act to provide a payment service, which is the movement of money for customers over that infrastructure. Section 6 prohibits the operation of a payment system, the issue of a payment instrument and the provision of a payment service without a licence, and the prohibition applies to each activity separately.
Many fintechs do both. A business that runs a wallet, settles between its own agents and merchants and connects to the national switch is operating a system and providing a service, and the first decision in an application is which licences it needs. The capital, governance and reporting conditions differ between the categories, and a business licensed for one activity while carrying on the other is unlicensed for the second, with the consequences the Act attaches to that.
What Bank of Uganda assesses
An application is made under section 7 of the Act and assessed against the eligibility requirements in section 8 and the National Payment Systems Regulations, 2021. Bank of Uganda assesses the applicant as much as the product. The application has to show the board and senior management and their fitness and propriety, the ownership of the applicant traced to the ultimate beneficial owner, the anti-money laundering and counter-terrorist financing programme, the information security arrangements, the business continuity plan, and the documents under which the service will run: the scheme rules, the merchant agreements and the terms on which agents are appointed. The capital requirement for the category applied for must be shown to be in place, and the source of the funds explained.
Where any of these is missing, Bank of Uganda raises a query and the application waits until it is answered. The applications that are granted in the shortest time are those in which the compliance documents were written for the business as it will operate on the first day of trading, with the policies, the registers and the reporting lines already in use, because Bank of Uganda's officers read them against the application form and the interview with management and notice where they diverge.
The first year under a licence
The grant of a licence under section 9 is the beginning of a supervisory relationship. Conditions attach to the licence, periodic returns fall due to Bank of Uganda, and section 23 requires the licensee to provide the information Bank of Uganda calls for. A change in the licensed activity requires a modification of the licence under section 10, and a change in the ownership or control of the licensee is a matter on which Bank of Uganda expects to be approached before it happens, since the fitness of the owners was a condition of the grant. Section 13 permits Bank of Uganda to suspend or revoke a licence where the conditions are not met.
Providers that assembled their compliance documents for the application often find in the first year that the documents do not describe how the business actually operates, and the first return exposes the gap. The usual points are agent oversight, where the agent agreements say one thing and the agent network does another; transaction monitoring, where the anti-money laundering programme describes thresholds that the system does not apply; and outsourcing, where a technology provider holds customer data under terms Bank of Uganda has not seen. Each is corrected more cheaply before the return than after the supervisory letter.
The firm's work under the Act
The firm has obtained and maintained payment service and payment system operator licences under the Act, and advises on the scheme documentation, the agent network terms and the intragroup data-sharing arrangements that go with them. It advises on remittance corridors into Africa, on the licensing of the same group in neighbouring markets, and on stablecoins and other digital assets, from the regulatory perimeter in each jurisdiction to the reserve, custody and redemption terms a serious issuer requires. Where Bank of Uganda has raised supervisory findings, the firm prepares the response and the remediation plan.