In a bold regulatory shake-up, the National Bank of Ethiopia (NBE) has issued a new directive — Licensing and Authorization of Payment Instrument Issuer (Amendment) Directive No. ONPS/10/2025 — aimed at tightening oversight, improving consumer protection, and accelerating interoperability in the country’s digital finance ecosystem.
The directive updates and amends the earlier Directive No. ONPS/09/2023, reinforcing NBE’s mission to promote a safe, inclusive, and innovation-driven payment landscape.
Stronger Definitions, Tighter Controls
The amendment begins by adding several new legal definitions to clarify the fast-evolving financial landscape:
- Two-factor authentication becomes a requirement, defined as a dual-layer verification process using tools like PINs, OTPs, or biometrics.
- It clearly defines direct and indirect shareholding to improve transparency and limit concealed ownership structures.
- Instant Payment System is introduced as a real-time, low-value fund transfer mechanism distinct from traditional clearing systems like ACH.
- Interoperability is legally defined, emphasizing system compatibility between players in the digital finance space.
Capital and Ownership: Higher Bar for Market Entry
One of the most critical changes is a sharp increase in the minimum paid-up capital requirement:
New applicants must now contribute at least Birr 100 million (or its equivalent in acceptable foreign currency) in cash, deposited into a blocked bank account under the name of the forming entity.
Additionally, the directive introduces ownership caps:
- No entity other than the government, telecom operators, or payment system operators may own more than 40% of a payment instrument issuer.
- Total direct and indirect ownership by any one person is capped at 60%, ensuring broader ownership and avoiding market monopolies.
Executive Experience: Raising the Leadership Bar
NBE has tightened fit-and-proper criteria for executives:
- CEOs must have at least 7 years of work experience, including 3 years in a managerial role.
- The same applies to senior executives of government-owned enterprises that are licensed as payment instrument issuers.
Mandatory Security for Large Transactions
To protect users and strengthen trust:
All transactions above Birr 5,000 must now be authenticated using two-factor methods, adding an extra layer of fraud protection.
Account Limits: More Clarity, New Flexibility
Level 2 electronic money accounts — commonly used by individuals and small businesses — are subject to revised limits:
- Daily account balance cap: Birr 150,000
- Aggregate daily transaction limit: Birr 300,000
- Daily person-to-person transfer cap: Birr 75,000
- Daily merchant payments (e.g. QR code): Capped at Birr 250,000
However, the directive allows special exemptions — upon written request — for use cases like international remittances, government payments, bulk disbursements, taxes, airline tickets, and fuel purchases.
Interoperability Now Mandatory — No More Walled Gardens
A key shift in strategy is the full embrace of wallet-to-wallet and system-wide interoperability:
- All payment instrument issuers must enable transfers to and from other providers via the national switch or a licensed switch operator.
- QR code payments must comply with the Ethiopian Interoperable QR Code standard, ensuring that customers can use a single code across multiple platforms.
- All financial institutions offering payment or digital services are required to participate in the instant payment system.
Importantly, the directive prohibits bilateral interoperability agreements that bypass the national switch, reinforcing centralized oversight.
Smarter Risk Management for Wallet-to-Bank Transfers
To curb fraud and improve reliability in wallet-bank and bank-wallet transfers, institutions must now implement:
- Two-factor authentication
- Real-time KYC validation, including verification of the recipient’s full name
- Identity visibility, allowing senders to confirm the recipient before completing a transaction
- Risk-based transaction limits
The Bigger Picture
These sweeping reforms mark a decisive move by the NBE to strengthen regulatory clarity, support competition, and drive digital inclusion across Ethiopia. With growing fintech participation, cross-platform payments, and global partnerships, these rules are set to level the playing field while safeguarding the financial system.
