CBN Licensing Requirements For Payment Service Providers

The Central Bank of Nigeria (“CBN”) issued a circular on the 24th May 2021 on the licensing requirements for Payment Service Providers (“PSP”). The circular provides for the new licensing

requirements of the various categories of licenses which are outlined below:

Payment solution services provide bridging infrastructure, end-to-end electronic payment solutions, systems, and services to stakeholders within the financial services space.

Permissible Activities: Activities as permissible under Super Agents, PTSPs and PSSPs

An applicant for a PSS license must:

• be a company incorporated with the CAC. The memorandum of association should be restricted to the permissible activities for PSS providers. A holder of the PSS license can combine the permissible activities of super-agent, payment terminal service provider, and payment solutions service provider.
• Possess N250 million of shareholder’s funds’ unimpaired losses.
• Deposit, in its own name, a refundable lump sum of N250 million into the CBN PSP Share Capital
• Deposit Account. The escrowed funds are invested in treasury bills.

A Super-Agent is an entity licensed by the CBN and contracted by a financial service provider, that is empowered to conduct certain financial activities within a local community.

Permissible Activities: Agent recruitment management and other activities as specified in the Regulatory Framework for Licensing Super Agents in Nigeria

An applicant must be:

• A Company incorporated with the CAC. The permissible activities that should be specified in its memorandum of association for super-agents are agent recruitment, management, and other activities set out in the Regulatory Framework for Licensing Super Agents in Nigeria;
• Possess N50 million of shareholder’s funds unimpaired by losses;
• Deposit, in its own name, a refundable lump sum of N50 million into the CBN PSP Share Capital Deposit Account.

A PTSP is an entity licensed to deploy, maintain, and ensure the effectiveness of Point of Sale (POS) operations.

Permissible Activities: POS Terminal deployment and Services, POS Terminal ownership, PTAD, Merchant/agent training, and support.

An applicant for a PTSP license must:

• be a company incorporated with the CAC. The memorandum of association should be restricted to the permissible activities for PTSPs including POS terminal deployment and services, POS terminal ownership, Payment Terminal Application Developer (PTAD), merchant/agent training, and support;
• Possess N100 million of shareholder’s funds unimpaired by losses;
• Deposit, in its own name, a refundable lump sum of N100 million into the CBN PSP Share Capital Deposit Account.

These are companies that make up the underlying e-payment infrastructures in Nigeria.

Permissible Activities: Payment processing gateway and portals, Payment solution/application development, Merchant Service aggregation, and collections.

An applicant for a PSSP license must:

• be a company incorporated with the CAC with memorandum and articles of association. The memorandum of association should be restricted to the permissible activities for PSSPs such as payment processing gateway and portals, development of payment solution/application, and merchant service aggregation and collections;
• Possess N100 million of shareholder’s funds unimpaired by losses;
• Deposit, in its own name, a refundable lump sum of N100 million into the CBN PSP Share Capital Deposit Account.

Mobile money is an electronic wallet service. MMOs allow customers to receive, store and expend money using a mobile phone.

Permissible Activities: E-Money issuing, wallet creation, and management, pool account management. Activities as permissible under Super Agent.

An applicant for an MMO license must:

• be a company incorporated with the CAC. The memorandum of association should be restricted to the permissible activities for MMOs. A holder of the MMO licence can engage in e-money issuing, wallet creation, and management, pool account management, as well as activities permitted for super-agent.
• Possess N2 billion of shareholder’s funds unimpaired losses;
• Deposit, in its own name, a refundable lump sum of N2 billion into the CBN PSP Share Capital Deposit Account. The escrowed funds are invested in treasury bills.

A Switching Company is a Payment/Transaction switch that routes transaction data to financial institutions or hosts and merchants for processing and approving electronic transactions upon receiving transaction requests from more than one interface like the ATM, POS, etc).

Permissible Activities: Switching, Card Processing, Transaction clearing, and Settlement Agents Services, non-bank acquiring services. Activities as permissible under Super Agent, PTSP and PSSP.

An applicant for switching and processing license must:

• be a company registered with the Corporate Affairs Commission (“CAC”). The object of the memorandum of association should be restricted to permissible activities of a switching and processing company;
• have N2 billion of shareholder’s funds unimpaired by losses;
• deposit in its own name, a refundable lump sum of N2 billion into the CBN PSP Share Capital Deposit Account.

All written applications are to be addressed to the Director, Payments System Management Department, of the CBN, accompanied by evidence of payments of application fee and other documentary requirements.

The applicant is required to provide a non-refundable application fee of N100,000.00 and a licensing fee of N1 million where the application is successful. Initially, an approval-in-principle is granted for a period of six months. The duration of the commercial license is determined by the CBN upon satisfactory performance of operations

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