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central bank of nigeria

The Central Bank of Nigeria (CBN) is planning to roll out a new payment licence for fintech companies.

In late 2018, the regulator released an exposure draft detailing a new licence framework for payment companies.

The framework will reorganise licences for payment companies.

Currently there are alphabet soups of licences including Payment Terminal Service Providers (PTSPs), Mobile Money Operators (MMOs), Payment Solutions Service Provider (PSSP), switches, super agents and a few others.

The proposed framework will categorise all these under the name: Payments Services Providers (PSP) licence. It will also re-organise all previous licences under three categories:  PSP Super License, PSP Standard License and PSP Basic License.

However more than one year after releasing the PSP draft the proposal is yet to become active.

But according to Mr Bukola Akinwunmi, the PSP proposal could become active “soon”, although he didn’t give a timeline.

Akinwunmi is the Assistant Director at the Payments System Management Department of the CBN. He made the disclosure on the sidelines of a recent fintech roundtable organised by Banwo and Ighodalo, a law firm representing a number of fintechs in Nigeria.

“After the Payments System Vision was released in 2007, payments became the thing,” Akinwunmi explained to members at the roundtable. “Add the Cashless Policy of 2012 to it, it boomed,” he added.

The PSP framework is one major attempt by the CBN to streamline the licencing regime for fintechs in Nigeria. However, it is a bit different from what many startups would prefer.

On the one hand, the capital requirement for the licences imposes a funding constraint for startups. While the licence fees cost between ₦50,000 and ₦2 million, two licences have capital requirements of ₦3 billion ($8.207 million) and ₦5 billion ($13.679 million).

On the other hand, the PSP framework only addresses concern of payments companies. Some startups would prefer to have dedicated licences that support digital banks.

The CBN has no plans to roll out a digital banking licence anytime soon, a source at the regulator told TechCabal. The focus for now is on payments.

“Whatever we are doing now, payment remains at its core. So if there is that need to ensure this core is well protected to serve us, I think it is just the right thing to do. Because if it fails at that point, for any financial system, if that infrastructure goes down, nobody has trust in the system again.”

To support this focus on payments, the CBN created the Payments System Management Department in 2018.

While payment is at the core of fintech service, many startups would like to do more. To pursue this aspiration, a number of startups have acquired microfinance banking (MFB) licences.

Unlike the regular commercial bank licence, the MFB licences are a low-cost, quick fix for startups. It allows them to accept deposits and provide lending services; the most basic banking services.

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