The Central Bank of Nigeria (CBN) has levied a substantial fine of ₦250 million (approximately $190,000) on the prominent payment processing company, Paystack. According to reports from TechCabal, the penalty stems from the alleged operation of its newly launched peer-to-peer money transfer application, Zap, without the requisite regulatory approval.
Launched in March, Zap functions as a digital wallet, enabling users to send and receive funds. Under Nigerian financial regulations, operating a wallet service necessitates either a microfinance banking or a full banking license. Paystack currently possesses a switching and processing license, which grants it the authority to facilitate the routing of financial transactions between parties but does not permit the holding of customer deposits.
This decisive action by the CBN underscores the increasing regulatory scrutiny being applied to the burgeoning fintech sector in Nigeria. The rapid expansion and innovation within the financial technology space have prompted regulatory bodies to adopt a more vigilant stance to ensure stability and protect consumer interests.
This recent development aligns with a broader trend of stricter oversight within the Nigerian fintech ecosystem. In December 2023, the Nigeria Inter-Bank Settlement System (NIBSS) issued a directive to all deposit money banks, mandating the removal of non-deposit-taking financial institutions from their lists of permissible transfer recipients. This circular specifically targeted entities, such as payment solution service providers and gateways like Paystack, which facilitate the movement of funds for online businesses but are not authorized to hold customer money directly. These institutions were to be excluded from the NIBSS Instant Payment (NIP) Outwards System.
Furthermore, the CBN has intensified its compliance enforcement efforts within the current year. In 2024, the apex bank reportedly halted the onboarding of new bank accounts for at least six fintech startups, including well-known players like Moniepoint and OPay.
These regulatory actions are indicative of Nigeria's overarching objective to fortify its financial system and enhance its standing with international bodies, notably the Financial Action Task Force (FATF), which monitors and promotes measures to combat money laundering and terrorist financing.
The situation involving Paystack serves as a stark reminder of the intricate regulatory landscape that fintech companies operating in Nigeria must navigate. While the CBN's actions are geared towards safeguarding consumers and maintaining the integrity of the financial system, fintech firms bear the responsibility of ensuring their operations align strictly with the prevailing legal framework to mitigate the risks of substantial penalties and potential service disruptions.
As Nigeria's fintech sector continues its dynamic evolution, fostering a collaborative environment between regulatory bodies and fintech companies will be paramount. Such collaboration can pave the way for sustained innovation while simultaneously ensuring adherence to regulatory requirements and the protection of consumers within this rapidly transforming financial landscape.