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CBN Unveils New N4.25bn Licensing Requirements for Payment Service Providers

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The Central Bank of Nigeria (CBN) has unveiled new license categorizations for the payments system that will see any firm seeking to play in all key areas holding minimum capital requirements of a total of N4.25 billion.

In a circular released yesterday by the CBN seen by MoneyCentral, payments system licensing has been streamlined according to permissible activities in four broad categories of: Switching and Processing, Mobile Money Operations (MMOs), Payment Solution Services (PSSs) and Regulatory Sandbox.

The minimum capital requirements for firms wishing to operate in switching and processing is N2 billion, for Mobile Money Operation it is N2 billion, while Payments Solution Services has been broken down into Super- Agent (N50m capital requirement), Payment Terminal Service Provider (N100m), and Payment Solution Service Provider (N100m).

“Only MMOs are permitted to hold customer funds. Companies with licenses within any of the other categories are not permitted to hold customer funds,” the CBN said.

“Companies seeking to combine activities under the Switching and MMO categories are only permitted to operate under a holding company structure with the subsidiary entities clearly delineated to prevent commingling.”

Firms like MTN have been keen on building out their payments services infrastructure in Nigeria.

MTN expanded its Mobile Money (MoMo) agent network with the addition of over 90,000 registered agents during the third quarter of 2020.

Yello Digital Financial Services (YDFS), a subsidiary of MTN Nigeria in 2019, secured a license from the Central Bank of Nigeria (CBN) to operate financial services in the country.

MTN Nigeria invested N5.54 billion in the subsidiary as at September 2020, a 208 percent increase from December 2019.

YDFS is the company’s main pivot into the financial sector of Nigeria. The company was registered as a financial technology company in order to qualify for a CBN license.

MTN Nigeria is also hoping to get a Payment Service Bank license from the CBN to deepen its fintech offerings.

Also the new guidelines state’s that collaborations between licensed payment companies banks and other financial institutions in respect of products and services are now subject to CBN’s prior approval.

“All new licensing requests including those with Approvals-in-Principle are to comply with the new requirements immediately. Existing licensed payment companies are to comply with the new licensing requirements where applicable not later than End-June 2021.”

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