The CBN’s Approved New Licence Categorizations Requirements (consolidated) 2021 (“Approved New Licence Requirements”) provide the licencing regime for payment solution service providers (PSSP) in Nigeria.
In this licencing regime series, we x-rayed the PSSP’s role and its contributions to the payment industry. Entities qualified for a PSSP licence and documents required for a successful licence application.
We note that the CBN’s is the exclusive regulator under BOFIA (Banking and Other Financial Institutions) Act 2020.
The Role of Payment Solution Service Provider
Under the Central Bank of Nigeria’s (“CBN”) New Payment Categorization for the Nigerian Payment System, the PSSP’s businesses and roles are:
- payment processing gateway and portal – distinct from switching and processing activities. Here, the PSSP’s role is limited to owning a payment processing gateway or portal.
- payment solution/application development. A PSSP is permitted to develop payment solutions for itself and other entities regulated by the CBN. We are unaware that payment solutions developers work for non-resident customers – an evident sign of the sector’s attainment of global competitiveness.
- Merchant services aggregation and collection.
Who may apply for a Payment Solution Service Provider’s Licence
The Approved New Licence Requirements allow a corporate entity registered by the CAC (Corporate Affairs Commission), whose Memorandum and Article of Association spells its business as a payment solution service provider, to apply to CBN’s Director, Payments System Management Department.
Any entity seeking to apply for a PSSP licence should have the following:
- A fifty million Naira unimpaired shareholders’ funds
- Deposit a refundable fifty million Naira in CBN’s designated escrow
- Where applicable, the preceding three-year audited financial statement.
- Escrow a refundable fifty million Naira in CBN’s PSP share capital deposit account – the CBN is willing to liquidate the escrow account and pay accrued interest from TB (treasury bills) investments.
Documentary Requirements for PSSP Licence
An applicant for a payment solutions service provider’s licence should submit the following documents to the CBN:
- Incorporation documents issued by the CAC and the object clauses in the memorandum and article of association must be limited to the permissible business we stated above
- Three-year tax clearance certificate, where applicable and Taxpayer Identification Number (TIN) of the company
- Company’s profile detailing the current type of business operation, products and service
- Structure of the holding company or parent company (if applicable)
- Share structure and historical changes in share structures for the last two years
- Total number of employees, organogram, functional physical address, contact e-mails from the company’s domain and telephone numbers
- Board compositions, indicating at least the chairman, CEO/MD, and one Independent Non-Executive Director and other Director
- The Board and top management’s bank verification number (BVN), professional profile, valid means of identity
- Details of the current line of business (if applicable)
- Business plan showing features of the scheme, security features, five years financial projections, proposed schedule of charges, profit sharing arrangement, and diagrammatic illustration of transaction flows
- Enterprise risk management framework and dispute resolution framework
- Contingency and disaster recovery plan or BCP (business continuity plan)
- Duly executed agreements or drafts, where applicable, with technical partners, participating banks, merchants, Telcos, and other relevant parties
- The shared agent network policy should show a minimum of fifty agents
- Service Level Agreements (SLAs) with sub-agents and Financial Institution (FI) Agent Banking Contracts (drafts or executed versions)
- Risk management, internal control, operational procedures, KYC and AML/CFT procedures and compliance
- Fraud detection plan and standard of care
- consumer protection policy and procedure board approval
- PTSA’s (Payment terminal service aggregator) Payment Terminal Application Certification.
PSSP Licence Validity
An approval-in-principle (API) for the PSSP licence is valid for six months. At the same time, the CBN determines the validity period of the PSSP commercial licence. Its renewal is subject to the PSSP’s satisfactory performance.
PSSP Licencing Fee
An applicant for a PSSP licence pays the CBN one hundred thousand Naira non-refundable application fee. The applicant pays a one million Naira PSSP licence fee if the application is approved.