As part of efforts geared towards promoting a strong and credible payment system in the country, the Central Bank of Nigeria, CBN, has approved new license categorization for payment systems in Nigeria.
The apex bank made this known in a press release signed by Director, Payment System Management Department, CBN, Musa Jimoh and published on its website and dated 9th December 2020.
According to the CBN, the license categorization is meant to help promote a strong and credible payment system and offers “clarity for new and existing market participants, given the significant evolution and innovation in the Nigerian payments system.”
It went on to note that the payment system has been streamlined according to permissible activities in four broad categories, which include: switching and processing; mobile money operations (MNOs); payment solution services (PSSs); and regulatory sandbox.
“CBN in line with its commitment to promote a strong and credible payment system has approved new licence categorisations for the payments system,” the statement read in part.
“The new licensing framework offers clarity for new and existing market participants given the significant evolution and innovation in the Nigerian payments system.
“All payment service providers and other stakeholders are invited to note the following in this regard that payments system licensing has been streamlined according to permissible activities in four broad categories: Switching and Processing; Mobile Money Operations (MMOs); Payment Solution Services (PSSs); and Regulatory Sandbox.”
According to the regulator, the minimum capital requirement for operating MMO is N2 billion, Switching and Processing N2 billion, PSS N250 million, Super Agent N50 million, Payment Solution Service Provider (PSSP) N100 million and Payment Terminal Service Provider (PTSP) N100 million.
However, no minimum capital requirement is applicable for the operating of a Regulatory Sandbox.
The central bank appears to be updating its regulations amidst the new wave of FinTechs in the country offering varying but often nuanced services.
According to the new guidelines, Payment Systems are now to operate within 4 broad categories.
a. Switching and Processing
b. Mobile Money Operations (MMOs)
c. Payment Solution Services (PSSs)
d. Regulatory Sandbox
It further clarified that “only MMOs are permitted to hold customer funds. Companies with licenses within any of the other categories are not permitted to hold customer funds,” meaning operators who offer Payment Solution Services cannot for any reason hold customer funds or deposits.
What this means: The CBN has now clearly demarcated the often thin lines within which various service providers in the FinTech space currently operate in the country.
For example, merchant payment transfer apps that are used for POS transactions or internet-based transactions will not be allowed to be used for Peer to Peer transactions (transfers between persons).
