In a recent development, the Nigeria Interbank Settlement System Plc (NIBSS) has issued a mandate instructing Nigerian banks to disengage non-deposit-taking financial entities from their Nigerian Interbank Payment (NIP) outward fund transfer channels.
These entities include Switching Companies (Switches), Payment Solution Service Providers (PSSPs), and Super Agents (SAs) that play a crucial role in the country’s digital financial ecosystem, offering transaction services through various platforms such as USSD, mobile banking applications, POS systems, ATMs, and online banking services.
The circular from NIBSS highlights that including non-deposit taking financial institutions such as Switches, PSSPs, and SAs as beneficiary institutions on NIP funds transfer channels goes against the Central Bank of Nigeria Guidelines on Electronic Payment of Salaries, Pensions, Suppliers, and Taxes in Nigeria issued in February 2014. The circular further clarifies that while Switches, PSSPs, and SAs may process outward transfers as inflows to banks, their licenses do not permit them to receive inflows or hold customers’ funds.
What does this mean for you?
So, what does this mean for the affected entities? This move emphasizes the regulatory framework within which Nigerian Fintechs operate and the compliance expected regarding their licensed financial activities. As a result of this policy enforcement, Fintech platforms without banking licenses will be removed from the fund transfer channels of banks. They will still be able to facilitate outward transfers as inflows to banks but will no longer receive inflows themselves.
In response to this directive, it is anticipated that the affected financial technology companies will take the necessary steps to obtain banking licenses, enabling them to legally hold and manage customer funds. This regulatory requirement is likely to have a significant impact on businesses who frequently rely on these platforms for their financial transactions.
With the enforcement of this directive, it is expected that Fintech companies will expedite the process of obtaining banking licenses. This move is seen as crucial for sustaining their operations and supporting their customer base. By obtaining banking licenses, these entities will be able to comply with the regulatory framework and continue offering their transaction services while legally managing customer funds.
Final Thoughts
The recent mandate from NIBSS regarding the disengagement of non-deposit-taking financial entities from NIP outward fund transfer channels highlights the importance of regulatory compliance in the Nigerian Fintech industry.
The affected entities are expected to obtain banking licenses to continue their operations legally. This move is likely to have a notable impact on small business owners who rely on these platforms for their financial transactions. The industry now awaits the expedited action of Fintech companies in obtaining the necessary licenses to support their customers and sustain their operations within the regulatory framework.
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