Fintech, which is an abbreviation for financial technology, pertains to the utilization of technology for the provision of financial services and products. As fintech companies expand and disrupt the conventional financial sector, regulatory frameworks globally are facing challenges in keeping up with the rapid pace of innovation. In recent times, numerous countries have implemented fresh laws and regulations to tackle the distinct risks and opportunities presented by fintech. Nigeria obviously will not be left out with the expeditious increase in Fintech establishment. This write-up shall guide intending fintech operators and existing ones on the regulatory requirements by the main regulator which is the Central Bank of Nigeria. The CBN in taking control of this gold mine published the new requirements to obtain a license to operate a Financial Technology (Fintech) Company in Nigeria on May 24, 2021.
For the sake of clarity, the requirement is divided into six categories namely;
- Switching And Processing License
- Mobile Money Operator License
- Payment Solution Services (PSS)
- Payment Terminal Service Provider (PTSP) License
- Payment Solution Service Provider (PSSP)
- Super Agent License
This write-up shall guide investors on the capital and comprehensive regulatory requirements.
Switching and Processing License
A switching and processing license allows its bearer to facilitate transactions between financial service providers, merchants, customers and other stakeholders. Companies like Flutterwave and Paystack are examples of switching and processing companies in Africa.
Capital Requirement
- N100,000,000.00 (shareholders’ funds unimpaired by losses)
- Preceding 3-years audited financial statements of the company (If applicable)
- Escrow of refundable N100m into CBN PSP Share Capital Deposit Account No. 1000014009 . Deposit for escrow must be in full (one lump sum). It must be made in the name of the company applying for license (not an individual or related company). It is very important to note that Escrowed funds are invested in treasury bills, subject to the availability of treasury instruments, which would be refunded accordingly.
Mobile Money Operator License
Mobile money is a technological solution that enables individuals to conveniently save, receive, and spend money using their mobile phones. Examples are Firstmonie, MTN Momo.
Capital Requirement
- N2,000,000,000.00 (shareholders’ funds unimpaired by losses)
- Preceding 3-years audited financial statements of the company (If applicable)
- Escrow of refundable N2bn into CBN PSP Share Capital Deposit Account No. 1000014009
Payment Solution Services (PSS)
Payment Service Solution Providers (PSSP) are companies permitted by the Central Bank of Nigeria to provide end-to-end electronic payment solutions, systems, and services. Examples include PAYU, e transact and Interswitch
Capital Requirement
- N250,000,000.00 (shareholders’ funds unimpaired by losses)
- Preceding 3-years audited financial statements of the company (If applicable)
- Escrow of refundable N250m (for entities applying for the three (3) licenses at a time: PSSP – N100m, PTSP – N100m, and Super Agent – N50m) into CBN PSP Share Capital Deposit Account No. 1000014009
- Applicants may take up any or all of the above listed licenses.
Payment Terminal Service Provider (PTSP) License
A PTSP, or Point of Sale Service Provider, is an authorized entity responsible for deploying, maintaining, and ensuring the efficiency of Point of Sale (POS) operations. Examples are Moniepoint and Opay
Capital Requirement
- N100,000,000.00 (shareholders’ funds unimpaired by losses)
- Preceding 3-years audited financial statements of the company (If applicable)
- Escrow of refundable N100m into CBN PSP Share Capital Deposit Account No. 1000014009
Payment Solution Service Provider (PSSP)
A PSSP license grants the licensee the authority to offer and manage payment processing gateways and portals, develop solutions and applications, and provide services for merchant service aggregation and collections.
Capital Requirement
- N100,000,000.00 (shareholders’ funds unimpaired by losses)
- Preceding 3-years audited financial statements of the company (If applicable)
- Escrow of refundable N100m into CBN PSP Share Capital Deposit Account No. 1000014009
Super Agent License
A Super-Agent is a legally authorized corporate entity that has the power to perform specific banking activities within a community. These entities mostly thrive in rural and suburb areas in the country. The CBN through its Guidelines for the Regulation of Agent Banking and Agent Banking relationships in Nigeria provides a framework for the scope of super agents.
Capital Requirement
- N50,000,000.00 (shareholders’ funds unimpaired by losses)
- Preceding 3- years audited financial statements of the company (If applicable)
- Escrow of refundable N50m into CBN PSP Share Capital Deposit Account No. 1000014009
It is important to note that there are other documentary requirements that must accompany these capital requirements. The requirements in question contain among others the Corporate Affairs’ Commission documents of the company, tax clearance, business plan, organogram and so on.
Remarks & Conclusion
Applicants are required to pay the non-refundable application fee of N100,000.00 (One hundred thousand naira), to the Central Bank of Nigeria. After a successful screening session by the CBN, an Approval-in-Principle valid for six (6) Months is granted to the applicant after which the Commercial license will be granted.
The CBN has taken the task of intervening in the information technology disruption currently being experienced across the globe. The safety of depositors’ funds in Nigeria has remained a fundamental topic with the failure of some financial institutions at ensuring good corporate governance practices. It is further hoped that more legal frameworks to strengthen the operators shall be implemented.
DISCLAIMER: Please note that this article is meant to offer general information on the topic and does not establish a client/attorney relationship between readers and our Firm, nor does it serve as legal advice. Our team of legal experts is available to provide specialized legal advice tailored to the readers’ specific circumstances.