In this month’s legal briefing, we set out the additional requirements imposed on payment system providers by the Bank of Tanzania (the BoT). In exercising the powers conferred to it under Section 15 of the National Payment System Act 2015 (the Act) and Regulations 22 and 29 of the Payment Systems Licensing and Approvals Regulations 2015 (the Regulations), the BoT has prohibited payment system providers from engaging, partnering or entering into agreements with other entities prior to obtaining approval or a licence from the BoT. The additional requirements are set out in the BoT's notice, number LB.178/179/01/8 which was issued on 15 October 2019 (the Notice).
The Notice follows the enactment of the Act for which we provided an updater on 01 June 2016. Please refer to our previous updater here.
In summary the Notice:
- requires all payment system providers in Tanzania to apply in writing to the BoT to obtain approval or a licence from the BoT prior to engaging, partnering or entering into agreements with other entities to operate payment systems
- prohibits all operations of any payment system instruments which have not been approved by the BoT
Key definitions under the Act
- A payment instrument is an instrument in electronic or written form used for ordering the transmission or payment of money
- A payment system is a facility consisting of payment instruments, banking and transfer of money procedures, interbank funds transfer systems or payment system provider’s systems that ensure the circulation of money
- A payment system provider is a body corporate that provides electronic payment services licensed under the Act
Criteria for obtaining approval or licence for a payment system
A person eligible to operate a payment system shall be a body corporate incorporated under the laws of Tanzania either as a bank/financial institution (by obtaining approval from the BoT under Section 15(2)(a) of the Act) or a non-bank/non-financial institution (by obtaining a licence from the BoT under Section 15(2)(b) of the Act). To be eligible for approval by or a licence from the BoT a payment system must have as its object one or more of the following (Section 6 of the Act):
- settling obligations arising from the clearing of payment instructions
- clearing payment instructions between financial and non- financial institutions
- transfer of funds from one account to another using any electronic device
- provision of technological services to facilitate switching, routing, clearing, data management for and on behalf of a payment system provider
- facilitation of interoperability of payment systems and services between payment system providers and consumers
- provision of electronic payment services to the unbanked and under banked population
- establishing a payment clearance house
- provision of financial communication network
- any other object that may be prescribed and directed by the BoT for the payment system provider to incorporate
Eligibility of an electronic payment instrument to obtain an approval or a licence
An electronic payment instrument shall be eligible for approval by or a licence from the BoT, if it is capable of performing one of the following (Section 16 of the Act):
- ordering or transmitting payment instructions
- storing information on a device for the purpose of effecting payments
- fulfilling payment obligations on point of sales, merchants outlets or over the internet
- having any other ability that the BoT may prescribe
Approval / Licence of payment systems
The Notice specifically serves as a reminder to all payment system providers to obtain the necessary approval or licence as set out under Regulations 22 and 29 of the Regulations.
We set out below the procedure for obtaining a payment instrument approval/licence, as referred to in the Notice:
For ease of reference, the procedures for obtaining additional approvals/licences in respect to payment systems are summarised below. This table is applicable to those entities which, for example, require a payment system approval/ licence as this is a prerequisite for the payment instrument approval/licence, as set out in the table above.
Fees for the payment system and the payment instrument approvals or licences (First Schedule of the Regulations)
Please note that an approval/licence is valid for five (5) years unless otherwise suspended or revoked by the BoT (Section 7(6) of the Act).
Approval / Licence fees for the electronic money issuance licence (First Schedule of the Electronic Money Regulations 2015)
Penalties for operating payment system instruments without an approval or a licence
Payment system providers who operate payment system instruments without an approval or licence from the BoT shall be liable for:
a fine of not less than TZS 50 million (equivalent to USD 21,800) or imprisonment for a term not exceeding five (5) years, or both for natural persons
a fine not less than TZS 500 million (equivalent to USD 217,391) for body corporates (Section 20(a) and (b) of the Act respectively)