The Payment Service Bank (PSB) framework was introduced by the Central Bank of Nigeria (CBN) to enhance financial inclusion and extend banking services to more customers. PSBs are designed to leverage technology, particularly mobile banking, to provide a range of financial services such as accepting deposits, remittances, and conducting payment operations.
To operate as a Payment Service Bank in Nigeria, financial institutions must meet several requirements, which are outlined in the CBN’s guidelines. This article discusses the key requirements for obtaining a PSB license in Nigeria, amongst others.
Understanding the Regulatory Framework of Payment Service Providers
Payment Service Providers (PSPs) are entities that enable the acceptance of electronic payments for goods and services. They offer a range of services, including payment processing, online banking, digital wallets, and payment gateways. PSPs can be traditional financial institutions, fintech companies, or a combination of both.
The Central Bank of Nigeria oversees the operations of Payment Service Providers to ensure compliance with relevant laws and regulations. CBN’s primary responsibilities include licensing PSPs, monitoring their activities, and enforcing compliance to protect consumers and maintain market integrity.
What are the categories of Payment Service Provider Licenses in Nigeria?
The CBN issued a circular on the 9th of December 2020 establishing and approving five (5) new licensing categories of Payment Service Providers. These categories include:
1. Switching and Processing License
Switching and processing companies are authorized to offer services including switching, card processing, transaction clearing, settlement services, and non-bank acquiring services. The minimum share capital requirement for a switching and processing license is N2 billion.
2. Mobile Money Operator License (MMO)
Mobile Money Operators (MMOs) are PSPs that provide electronic wallets and enable customers to transact via mobile devices. This includes transfers, bill payments, and financial payments. The minimum capital requirement for an MMO is N2 billion.
3. Payment Solution Service (PSS)
The Payment Solution Services (PSS) License allows providers to engage in a wide range of activities within the financial services system. The license covers agents to provide basic financial services in remote areas, maintain POS terminals, create payment processing gateways, etc. The CBN mandates a minimum share capital of N250 million for the PSS License and anyone who obtains this license can carry out the activities of Super Agents, PSSP, PTSP, or a combination of all.
4. Payment Terminal Service Provider (PTSP)
The Payment Terminal Service Provider (PTSP) License allows businesses to provide and manage POS terminals, and enable card-based payments for businesses. The CBN oversees the issuance of PTSP licenses, and businesses must meet security and financial standards, including a minimum capital of N100 million. The license is granted for a specific period and can be renewed if the company performs well.
5. Payment Solution Service Provider (PSSP)
The Payment Solutions Service Provider (PSSP) License allows companies to build secure online platforms for electronic payments, developing payment solutions and apps, etc. The PSSP License is also divided into sub-licenses like Payment Aggregator and Payment Gateway licenses, each with specific requirements and fees. This allows companies to specialize in areas that suit their business needs. The minimum share required is N100 million.
In addition to the above share capital requirements, every applicant is required to pay a non-refundable application fee of N100,000, a licensing fee of N1,000,000 and the professional fee to be incurred for the processing.
What Are the Requirements for Obtaining a Payment Service Provider License in Nigeria?
Now that you are familiar with the licensing categories for card payment providers, here are the requirements to be met before obtaining a license.
- Company Registration: The company must be registered in Nigeria, with a legal structure that meets Central Bank (CBN) standards. It must also have the right share capital to show financial stability.
- Fit and Proper Criteria: Directors, shareholders, and key managers must meet CBN’s criteria for integrity and competence. They may undergo background checks by security agencies, and the company must have at least five directors.
- Business Plan: A detailed business plan outlining operations, technology, risk management, and growth strategies must be submitted by applicants.
- Technology Infrastructure: Applicants must have a secure technology setup that follows international security standards, including data protection and fraud prevention.
- Regulatory Approvals: Depending on the services offered, approvals from other authorities, like the Nigerian Communications Commission (NCC), may be needed.
- Insurance: Adequate insurance coverage is required to protect the company from operational risks.
- Operational Guidelines: The company must follow CBN’s rules on customer service, dispute resolution, anti-money laundering (AML), and counter-terrorism financing (CFT).
- Risk Management: A strong risk management system must be in place to handle potential issues in electronic payment services.
- Regulatory Compliance: Companies must comply with all relevant laws, including data protection and consumer protection regulations.
- Agent Network: Some service providers like Mobile Money Operators, must set up a network of agents to help provide services in underserved areas.
- Security Standards: Applicants must meet the Payment Card Industry Data Security Standard (PCIDSS) to protect sensitive financial data.
If you are looking to secure any category of the licenses listed above, we can guide you in registering your company and ensuring you meet the requirements listed above.
Documents to Submit to the Central Bank of Nigeria to Obtain a Payment Service Bank License
To succeed in your application for the license, an application letter is submitted to the Director, Payments System Management Department (PSMD) of the Central Bank of Nigeria. The written application is accompanied with the following:
- Company Documents:
- Certificate of Incorporation
- Memorandum & Articles of Association (focused on relevant payment system activities)
- Complete CAC registration forms
- Tax Clearance for three years and Tax Identification Number (TIN)
2.Company Profile:
- Current business operations, products, and services
- Structure of holding or parent company (if any)
- Ownership details and recent changes
- Number of employees and company organogram
- Physical address, email, and contact information
3. Board and Management:
- Board structure with at least a Chairman, CEO/MD, and one Independent Non-Executive Director
- BVNs, CVs, and IDs (NIN, passport, etc.) of key directors and managers
4. Business Plan:
- Business nature, security features, 5-year financial projection
- POS deployment strategy, transaction flow, and fee structure
- Plan for customer care, issue resolution, and business management
5. Partnerships & Agreements:
- Details on technical partners, banks, businesses, telecommunications, and other key stakeholders
- Draft service level agreements (SLAs) with partners and agents
6. IT Policies & Risk Management:
- Policies on privacy, data security, backup, and incident response
- Risk management, fraud detection, and consumer protection strategies
- Disaster recovery and business continuity plans
7. Certifications:
- Payment Card Industry Data Security Standard (PCI DSS), Payment Application Data Security Standard (PADSS), and other relevant certifications.
How Long Does it Take to Obtain a Nigerian Payment Service Bank License in Nigeria?
The process of obtaining a Payment Service Bank license in Nigeria generally takes several months. It involves multiple steps, like submission of necessary documents, payment of licensing fee of N1,000,000, scheduled presentation and review by CBN officials, inspection of physical infrastructure, and fulfilling all regulatory obligations.
On average, it can take about 6 to 12 months to finalize, depending on how quickly the applicant meets the requirements and resolves any issues raised during the review. The timeline may be extended if further clarifications or additional documents are requested.
Obtain a Payment Service Bank License in Nigeria Today!
To participate in the Nigerian payment ecosystem, then you need to obtain the required CBN licenses. Unfortunately, securing a payment service license in Nigeria can be complicated without legal guidance.
You need the help of licensing experts to guide you on the type of payment licenses suitable for your business model. At Resolution Law Firm, we have assisted local and international clients from the company incorporation, creating a comprehensive business plan to obtaining the license. Schedule a consultation with our team of experts today!