Aspen Sahel Legal Aspen Sahel Legal
  • HOME
  • Sector Areas
    • Corporate and Commercial
    • Technology
    • Private Funds, Investments and Finance
    • Media and Entertainment
    • Intellectual Property
    • Energy & Extractives
    • Projects and Infrastructure
    • Real Estate
    • Dispute Resolution and Avoidance
  • Insight
  • The Firm
  • Contact Us
  • September 10, 2021
  • Emmanuel Inyada
  • 0 Comments
  • Banking and Finance, Regulatory Action, Technology

New License Categorisations for the Nigerian Payments System

On December 10 2020 the Central Bank of Nigeria (CBN) sent a circular dated December 9 2020 to all Payment Service Providers, Banks and Other Financial Institutions on the new License Categorisations for the Nigerian Payment System (the “Circular”). With increased innovation in the Nigerian payments space, the Circular provides clarity for new and existing market participants given significant changes in the payments sub-sector.

In this intel, we have highlighted the provisions of the Circular for your information.

The new Circular introduces a framework whereby payments system licensing is streamlined into 4 (four) broad categories. The categories are:

w) Switching and Processing

x) Mobile Money Operations (MMOs)

y) Payments Solution Services (PSSs)

z) Regulatory Sandbox

The Circular further provides that, amongst the licenses granted in the above categories, only MMOs are permitted to hold customers’ funds. Companies with licenses in the other categories above are not permitted. 

Where companies under the PSS category can hold any or a combination of a Payments Solutions Service Provider (PSSP) License, Payment Terminal Service Provider (PTSP) License or a Super Agent License, companies seeking to combine activities in the Switching and Processing and the MMO category, on the other hand, must operate under a holding company structure (with a license granted by the CBN to operate as a Payment Service Holding Company) with subsidiary entities clearly delineated to prevent commingling. 

Furthermore, if a licensed payment service provider in any of the above listed categories seeks to get additional licenses from the CBN, such entity must obtain a no-objection letter or notice from the Payments System Management Department of the CBN. Also, if a licensed payment company is seeking collaboration with another payment company, banks or other financial institutions the prior approval of the CBN must be obtained before such collaboration takes effect. 

The Circular also provides that the object clause of the Memorandum and Articles of Association (MEMART) of companies must be limited to permissible activities under the licensing authorisations. It then made provisions for the minimum share capital for Payment Service Providers in the license categories.

Permissible Activities and Minimum Capital Requirement

The Circular went further to highlight the permissible activities for companies listed in the above categories. It also goes further to provide for a minimum capital requirement. It is instructive to note that the CBN through this Circular significantly reduced the minimum capital requirement from the earlier position as contained in the exposure draft on the licensing regime for payment service providers issued in 2018.

Regulatory Sandbox: The permissible activities for companies under the regulatory sandbox category will be determined by the regulatory sandbox. Looking at the CBN Guidelines on Regulatory Sandbox Operations, the regulatory sandbox is set up essentially to promote innovation and deepen financial inclusion. The CBN therefore will be responsible for the review of the products and solutions of eligible applicants which includes licensed institutions, innovators, fintechs and researchers during its implementation. The Circular does not provide a minimum capital requirement for regulatory sandbox operations. 

Payment Solution Services (PSSs): Companies in the PSSs category are permitted to operate as Super-Agents, PTSPs and PSSPs. The minimum capital requirement is set at N250 million.

Super-Agent: The permissible activities for companies with a Super-Agent license is as provided in the CBN Framework for the Licensing of Super Agents in Nigeria. These activities amongst others include agent recruitment management and other activities stated in the Regulatory Framework for Licensing Super Agents in Nigeria. The minimum capital requirement is set at N50 million.

Payment Terminal Service Provider (PTSP): The minimum capital requirement for PTSP is set at N100 million. The permissible activities include POS Terminal deployment and services, POS Terminal ownership, PTAD, merchant or agent training and support.

Payment Solutions Service Provider (PSSP): Companies in the PSSP category are permitted to operate as payment processing gateways and portals, payment solution or application development, merchant service collection and aggregation. The minimum capital requirement is set at N100 million.

Mobile Money Operation: For MMOs the permissible includes e-money issuing, wallet creation and management, pool collection and management. They are also allowed to carry out all the activities in the Super-Agent category. The minimum capital requirement is N2 billion.

Switching and Processing: For switching and processing companies the permissible activities are switching, card processing, transaction clearing and settlement agent services and non-bank acquiring services. They are also allowed to carry out activities as permissible under Super-Agents, PTSP and PSSP. The minimum capital requirement is N2 billion.

Conclusion

The Nigerian Fintech system is evolving at a fast rate being one of the most competitive in Africa and attracting global attention and investment. The CBN as regulator must play its role to provide clarity for the players in the space and also provide direction on what is permissible. 

The issuance of the Circular is in line with the CBN’s commitment to promote an efficient and credible payments system and is, indeed, a welcome development

This image has an empty alt attribute; its file name is Aspen-Sahel-Contact-Us.png
Tags:
Aspen SahelAspen Sahel LegalCBNLicenceLicensePSPPSSPPTSPRegulatory SandboxSwitching And Processing
Prev PostExamining the CBN Guidelines on Payment Service Banks
Next PostLegal and Market Entry Considerations For Investment in the Nigerian Mining and Solid Minerals Sector

Recent Posts

  • The CBN Launches the Licensing, Approvals and Other Requests Portal (LARP)
  • Registering Foreign-Owned Businesses in Nigeria: Legal and Commercial Considerations
  • Cash-In-Transit and Cash Processing Companies in Nigeria: Some Market Entry Considerations
  • Venture Capital Participation in the African Entertainment Value Chain
  • Launching Your Startup? Legal and Commercial Considerations for Beginners

Recent Comments

    Popular Posts

    September 25, 2023 / Banking and Finance, Market Entry, Regulatory Action, Technology
    The CBN Launches the Licensing, Approvals and Other Requests Portal (L
    June 1, 2023 / Market Entry, Regulatory Action
    Registering Foreign-Owned Businesses in Nigeria: Legal and Commercial
    May 4, 2022 / Banking and Finance, Market Entry, Regulatory Action
    Cash-In-Transit and Cash Processing Companies in Nigeria: Some Market

    Tags

    AfCFTA Africa Aspen Sahel Aspen Sahel Legal Banks cash-in-transit CBN Entertainment GDP Guidelines Licence License Mining Nigeria Payment Service Bank PSB PSP PSSP PTSP Regulatory Sandbox Solid minerals Startup Switching and Processing Tech Technology Venture Capital

    Categories

    • AfCFTA
    • Banking and Finance
    • Energy and Extractives
    • Market Entry
    • Media and Entertainment
    • Mining
    • Regulatory Action
    • Startups
    • Technology
    • Technology
    • Uncategorized
    • Venture Capital

    We are creative in the legal solutions we provide accelerating progress through up-to-date legal knowledge and commercial insight.

    Our Services

    • Corporate and Commercial
    • Private Funds, Investments and Finance
    • Technology
    • Media and Entertainment
    • Intellectual Property
    • Energy & Extractives
    • Projects and Infrastructure
    • Real Estate
    • Dispute Resolution and Avoidance

    Useful Links

    • The Firm
    • Privacy Policy
    • Illegal Use Of Our Name
    • Legal Statements
    • Diversity Statement
    • FAQ
    • Terms of Use
    info@aspensahel.com Drop Us a Line
    (+234) 80 759 819 01 Call Us Now
    Lagos, Nigeria Get Direction
    Copyright © Aspen Sahel Legal. All rights reserved. Designed by: Digify Point Solutions