Nigeria’s Inter-Bank Settlement System (NIBSS) is expressing concern about unauthorised financial service firms masquerading as deposit-taking institutions, signalling a push for enhanced regulatory oversight amid rising apprehension over fraud and deficiencies in customer verification processes within payment providers.
In a communication to banks, fintechs, and other payment service providers, NIBSS cautions against listing companies with switching, payments processing, and superagent licences as beneficiary institutions during customer-initiated bank transfers.
The memo specifies that entities with these licences, including prominent players like Paystack, Flutterwave, and eTranzact, are categorised as non-deposit-taking institutions.
Superagents, payment solution service providers (PSSPs), and switches have played pivotal roles in facilitating payment infrastructure and offline distribution, contributing significantly to financial inclusion over the past decade.
The memo, dated December 5, asserts that listing such institutions as beneficiaries contravenes the Central Bank of Nigeria (CBN) Guidelines on Electronic Payments.
Ngover Ihyembe-Nwankwo, the Executive Director of Business Development at NIBSS, emphasises the non-compliance in the memo and directs commercial banks, mobile money operators, and microfinance institutions to disable outward fund transfers into wallets operated by entities with the mentioned licences.
The memo sheds light on various licences such as switching, superagent, and PSSP, outlining their roles and authorizations.
It underscores the critical role of these licences in financial inclusion, allowing entities like Moniepoint to simultaneously hold a microfinance bank licence, ensuring deposits are insured by the Nigeria Deposit Insurance Corporation (NDIC). The memo also points out that certain companies, despite holding these licences, may offer deposit-taking services without proper authorization.
The directive could lead to the exclusion of several fintechs from consumer payment applications as banks and fintechs intensify scrutiny over illicit fund transfers and concerns about weak verification processes by certain companies.
Financial services companies in Nigeria have responded to the NIBSS memo, reassuring users about the impact. The memo particularly affects entities with superagents, PSSPs, or switching licences, prohibiting them from directly accepting consumer deposits.
Over 100 entities currently hold these licences in Nigeria, and some have expanded their services directly to consumers over the past few years.
While some fintechs have secured relevant licences or partnered with banks, enabling them to accept deposits, concerns persist about companies misrepresenting themselves as deposit-taking institutions without the required licences or bank partnerships.
Companies like Flutterwave, Paystack, and Moniepoint have sought to allay fears, emphasising their compliance with regulations and the safety of customer funds.
The situation remains dynamic, with potential further enforcement actions by NIBSS or the CBN in the coming days or weeks, raising questions about the future landscape of financial services in Nigeria.
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