INTO THE CBN’S NEW LICENCE REQUIREMENTS FOR PAYMENT SYSTEMS

The Central Bank of Nigeria on the 21^st of May, 2021 issued new licence requirements for the payments system in Nigeria. On the 9^th of December 2020, the Central Bank had earlier issued the Licence Categorization Circular which detailed the licence categorizations for the Nigerian payments system.

The New Licence requirements highlight the eligibility, capital requirements, documentary requirements, application and licensing fees and licence validity for each category. The categories for which requirements are listed under the circular include:

1. SWITCHING AND PROCESSING LICENCE

The Switching and Processing licence is issued to companies to process transactions between vendors, merchants, their customers and other financial institutions. Fintech companies engaging in processing transactions are increasing. Notable among them are Interswitch, Visa, ETranzact etc.

To be eligible for the licence, registration with the Corporate Affairs Commission with Articles and Memorandum of Association is mandatory. There is a capital requirement of Two billion Naira (N2,000,000,000)  shareholders’ funds unimpaired by losses, preceding 3-years audited financial statements of the company (If applicable), and an escrow of refundable Two billion Naira (N2,000,000,000) deposited into CBN PSP Share Capital Deposit Account Number – 1000014009. The escrow must be paid as a lump sum.

A non-refundable fee of One hundred thousand Naira (N100, 000) is paid to the CBN as application fees. If the application is successful, another 1 million Naira (N1, 000,000) is to be paid before the issuance of a final licence.

The validity of the licence is determined by the CBN upon satisfactory performance of operations.

2. MOBILE MONEY OPERATOR LICENCE

Mobile Money Licence is required by companies who offer payments services through mobile phones and mobile telephone networks. Due to easy accessibility and a large customer base, most providers of financial services now offer mobile money payments systems. Banks, financial institutions, fintechs and others, offer mobile money services. For instance, Firstmonie by First Bank, Paga, Momo by MTN and others.

To be eligible for this licence, under the new regulations, there must be a registration with the Corporate Affairs Commission, with a Memorandum and Articles of Association.

The capital requirements for this licence are as follows:

• Two billion Naira (N2,000,000,000) (shareholders’ funds unimpaired by losses)
• An escrow of refundable Two billion Naira (N2, 000,000,000) deposited into CBN PSP Share Capital Deposit Account Number paid in a lump sum.

An Application Fee of One hundred thousand Naira (N100, 000) is also to be paid to CBN as well as One million Naira (N1,000,000) to be paid as licensing fees before the licence is issued if the application is successful.

The validity of this licence is also determined by the CBN subject to satisfactory performance of operations.

3. PAYMENT SOLUTIONS SERVICES (PSS)

The Payment Solutions Services is comprised of Payment Solutions Service Provider licence, Payment Terminal Service Provider Licence and the Super Agent Licence. An applicant may take up any or all of the three licences at once. The eligibility for this licence is a registration with the Corporate Affairs Commission with Memorandum and Articles of Association.

The Capital Requirements are as follows:

• Two hundred and Fifty Million Naira (N250, 000,000) shareholders’ funds unimpaired by losses.
• Preceding 3-years audited financial statements of the company (If applicable)
• An escrow of refundable Two Hundred and Fifty Million Naira (250,000,000) paid into the CBN PSP Share Capital Deposit Account Number. The escrow is to be paid in one lump sum.

The escrow of Two Hundred and Fifty million is to be paid if the applicant is applying for all the three licences that make up the Payment Solutions Services Licence.

4. PAYMENT TERMINAL SERVICE PROVIDER

The eligibility for this licence is a registration with the Corporate Affairs Commission with Memorandum and Articles of Association.

The Capital requirements are as follows:

• One Hundred Million Naira (N100,000,000) shareholders’ funds unimpaired by losses
• Preceding 3-years audited financial statements of the company (If applicable)
• An Escrow of refundable One Hundred Million Naira (N100, 000,000) deposited into CBN PSP Share Capital Deposit Account Number in a lump sum.

A non-refundable application fee of One Hundred Thousand Naira (N100, 000) is to be paid to the CBN.  If the application is successful, the sum of One Million Naira is to be paid as licensing fee before the licence is issued.

 The validity of this licence is determined by the Central Bank of Nigeria renewable upon satisfactory performance of operations. 

The holders of these licences provide POS to interact with cards and make payments and funds transfers.

5. PAYMENT SOLUTIONS SERVICE PROVIDER

The eligibility for this licence is also registration with the Corporate Affairs Commission with Memorandum and Articles of Association.

The capital requirements, application fees are the same as the requirements highlighted for Payment Terminal Service Provider.

The validity of this licence is determined by the Central Bank of Nigeria renewable upon satisfactory performance of operations.

6. SUPER AGENT

The eligibility as a Super Agent is that an applicant must be registered with the Corporate Affairs Commission with a Memorandum and Article of Association.

The Capital Requirements are as follows:

• Fifty Million Naira (N50,000,000) shareholders’ funds unimpaired by losses
• Preceding 3-years audited financial statements of the company (If applicable)
• An escrow of refundable Fifty Million Naira paid into CBN PSP Share Deposit Account.

A non-refundable application fee of One Hundred Thousand (N100, 000) Naira is also to be paid to the CBN. Upon successful application, a licensing fee of One Million Naira is also required to be paid before the licence is issued.

These new licence requirements are to constitute a uniform process in the payments system and a step further in the CBN’s quest to regulate the Fintech space. All new requests for licensing are also to comply with these requirements going forward; and all existing licensed companies are to comply with these requirements before 30^th of June 2021. It is however hoped that these requirements will not pose difficulty to small startups, especially putting the capital requirements into consideration.

What are your thoughts one these rules and their impact on the Ease of Doing Business in Nigeria? Also, how do you think MSME will fare under these new requirement? Share your thoughts in the comment section below.