In an effort to promote financial inclusion and enhance access to financial services by small businesses, low income earners and the unbanked segments of the society, the Central Bank of Nigeria (CBN) in October 2018, issued the Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria (the "Guidelines"). This is in addition to existing initiatives.
STRUCTURES AND ACTIVITIES OF PAYMENT SERVICE BANKS (PSBs)
PSBs have been established to facilitate high-volume, low-value transactions in payment services, micro-savings and withdrawal services in a secured technology-driven environment.
PSBs are required to operate mostly in rural areas and unbanked locations to target financially excluded persons. They are authorized to deploy ATMs and Point of Sale devices in some of these areas and are at liberty to operate through banking agents. They can also use other channels including electronic platforms to reach-out to their customers.
PSBs are not standard banks, hence, there are restrictions on the activities and services they can provide.
PERMISSIBLE ACTIVITIES
- Accept deposits from individuals and small businesses.
- Execute payments through various channels within Nigeria.
- Issue debit cards in their name.
- Render financial advisory services.
- Invest in FGN and CBN securities.
NON-PERMISSIBLE ACTIVITIES
- Grant any form of direct or indirect loans, advances and guarantees.
- Accept foreign currency deposits.
- Accept any closed scheme electronic value (e.g. air time) as a form of deposit or payment.
- Deal in the Foreign exchange market except for personal remittances within Nigeria.
- Underwrite insurance.
OPERATORS/PROMOTERS OF PSBs
- Banking Agents.
- Telecommunications Companies through subsidiaries.
- Retail Chains (supermarkets, downstream petroleum marketing companies).
- Postal Services Providers and Courier Companies.
- Mobile Money Operators (MMOs) with the plan to convert to a PSB.
- Fintech Companies.
- Financial Holding companies.
FINANCIAL OBLIGATION
- Minimum Share Capital of N5,000,000
- Non-refundable Application Fee of N500,000
- Non-refundable Licensing Fee of N2,000,000
- Change of Name Fee of N1,000,000 (where applicable)
LICENSING PROCEDURE
- Submission of an Application for the grant of a PSB License with the required documents (reservation of name with the Corporate Affairs Commission(CAC) inclusive).
- An Approval In Principle (AIP) is issued within 90 days of the application. AIP is a condition precedent for the completion of registration with the CAC.
- Upon the grant of the AIP, the incorporation process is completed at the CAC. (NB: Name must end with PSB).
- Not later than 6 months of obtaining the AIP, an application must be made for the grant of a final license with the payment of the prescribed fee and the submission of the required documents.
- Prior to issuing the final license, the CBN will conduct a pre-licensing inspection.
- After the final license is issued, the PSB shall inform the CBN of its readiness to commence operations with the required documents submitted.
Footnotes
1 You can access our articles on previous guidelines issued by the CBN by clicking on this link https://pavestoneslegal.com/tag/central-bank-of-nigeria/
2 You can access our articles on payment service banks by clicking on this link https://pavestoneslegal.com/tag/payment-service-banks/
3 Please access our articles on fintech activities in Nigeria here https://pavestoneslegal.com/tag/fintech/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.