The Central Bank of Nigeria (CBN), on Thursday, announced new licencing categories for the nation’s payment system, in what it believes will promote a strong credible operating environment.
Unlike the previous regime where a Payment Service Banking licence was set at N5bn, there are now five operating categories namely: Payment Solution Services (PSSs) licence which requires a minimum capital of N250m; and Super Agent, N50m. Also, while Payment Terminal Service Provider (PTSP), and Payment Solutions Service Provider (PSSP), have N100m minimum capital; Mobile Money Operations, N2bn; just like Switching and Processing licences.
The new licencing framework, according to the circular referenced PSM/CIR/GEN/CIR/01/22, signed by Musa I. Jimoh, director, Payment System Management Department of the apex bank, “offers clarity for new and existing market participants, given the significant evolution and innovation in the Nigerian payment system.”
According to the circular, only MMOs are allowed to hold customer funds, while companies seeking to combine activities under the Switching and MMO categories may operate under a holding company structure with a clear separation of the subsidiary entities to prevent comingling.
While existing operators are to comply with the new licensing requirements not later than June 30, 2021, all new licensing requests, including those with Approvals-in-Principle are to comply with the new requirement immediately.
Payments System companies in the PSS category, the CBN added, may hold any of PSSP, PTSP and Super Agents licence or a combination of the licences thereof, even as all licenced payment service providers in any of the categories covered by the framework holding, or seeking any other CBN issued licenses must obtain a no-objection from the PSMD.
“The object clauses in the Memorandum and Articles of Association of Payment Service Providers shall be limited to the permissible activities under their licenced authorizations.
Collaborations between licensed payment companies, banks and other financial institutions in respect of products and services will be subject to prior regulatory approval.
While super agents are responsible for recruiting, managing of agents and other activities specified in the regulatory framework; PTSPs are responsible for Point-of-Sale Terminal deployment and services, POS ownership; PTAD, Merchant/agents training and support.
PSSPs, on the other hand will handle the payment processing gateway and portals, payment solutions/application development, merchant service aggregation and collections.
MMOs are in charge of electronic money issuing, wallet creation ad management, pool account management, and other activities permissible under the super-agent category. Also, Switching and Processing licence allows the holder to engage in switching, card processing, transaction clearing and settlement agent services, non-bank acquiring services, in addition to other activities permissible under the super-agent, PTSP, and PSSP licences.
Perhaps for the situation that needed clarity as now provided by the apex bank, mobile telecommunications giant- MTN Group, had through its Chief Executive, Rob Shuter, announced plans, last year, to diversify its operations by seeking a payment service banking space in Nigeria from 2019.
“If all goes according to plan, we will also be launching Mobile Money in Nigeria probably around Q2 of 2019,” he was quoted as saying during an analysts call.
The CBN had set a minimum capital base of N5bn for PSB licence, which according to analysts, “may limit the playfield to only telecommunications companies, especially given that they are supposed to operate in the rural areas.”
The decision to rework the operating guidelines, may not be unconnected with arguments that the then structure will not make licensees operate profitably.
In a November 28, 2018 review of the CBN’s PSB proposed guidelines, Adebola Sobowale, Partner, Debt Recovery & Insolvency, at Olisa Agbakoba Partners, had argued that the restrictions, particularly restriction on advancing loans, and investment platforms, among others “appear to be disincentives to the establishment of a PSB is a worthy venture.
“As a corollary, the unavailability of some services including loan advancement may seem to defeat the purpose of establishing PSBs. This is because the low-income earners and unbanked segments of the society, who are the target market, are still left out of vital financial services thus defeating the primary purpose of establishing the PSB,” he added.
