A Switching and Processing License is one required by companies that engage in processing payments and routing of payment transactions between different financial institution, and payment service providers to ensure that payment instructions are correctly directed to the appropriate financial institution for authorization and processing. This license is mostly used by financial technology (Fintech) companies such as flutterwave, Paystack, Habaripay, Interswitch, Moniepoint (formerly Teamapt), Remita and a host of others.
What Can You Use This License For?
- Directing payments between different banks and financial institutions.
- Authorizing and processing card transactions.
- Verifying the accurate transfer of funds between parties.
- Enabling merchants outside the traditional banking system to accept electronic payments.
What Regulatory Body Issues this License?
The Central Bank of Nigeria (CBN) is the regulatory body that issues and regulates the usage of this license. It is also worthy to note that only those registered as a company with a memorandum and articles of association that can apply for the license.
The capital requirement for obtaining this license include:
- (N 2,000,000,000 -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 which must be paid in full (one lump sum) and made in the name of the company applying for the licence (not an individual or related company). The escrowed funds are invested in treasury bills, subject to availability of treasury instruments, which would be refunded accordingly. The refund is usually done once the final approval of the CBN is received
The CBN recently stated that companies with the switching and processing license can now operate under the scope of activities of those with Super-Agents, Payment Terminal Service Providers (PTSPs), and Payment Solutions Service Providers (PSSPs) licenses. This would enable the license holder to have a broader range of functionalities.
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