A Payment Solution Service (“PSS”) licence is required when the operator requests the CBN (Central Bank of Nigeria) to grant a combined licence as a PTSP, Super-Agent and PSSP. In this licencing regime series, we considered the licence documentation for a PSS.
The legal framework for a PSS licence in Nigeria is the Approved New Licence Categorizations Requirements (consolidated) 2021 and the New Licence Categorization for Nigerian Payment Systems 2020.
The Background
Commercially, a payment solution service licence may not be necessary for a start-up fintech. In May 2022, CallPhone became the first Fintech that the CBN licenced as a PSS.
Before May 2022, no operator in Nigeria’s payment system combined a PTSP, Super-Agent and PSSP licence.
We are aware that Global Accelerex combines a PSSP and PTSP licence. E-Settlement, the operator of PayCentre, combines a PSSP and Super-Agent licence.
Operating as a PSS, PSSP or PTSP or Super or a combination is a business model question. A good business model canvas is a handy guide.
The PSS’ Role in the Payment System
A PSS performs any of the roles of a super-agent, PSSP and PTSP.
The PTSP as an operator, may:
- deploy POS terminals and service POS terminals
- own POS
- act as a PTAD (payment terminal and application development) and
- carry out merchant and agent training and support-related services
Nigeria’s payment system depends on the Super-Agents to deepen agency banking through agents’ recruitment, agent network management, agent KYC (know your customers) and all other third-party services.
PSSP owns payment processing gateways and portals, payment solutions or application development, and merchant service aggregation and collections.
So, a PSS licence holder in the payment system may perform any or all of the forenamed roles.
Who may apply for a PSS Licence?
Any limited liability company registered at CAC (Corporate Affairs Commission). Their business objects state the permissible transactions of a PSSP, PTSP and a Super-Agent.
The PSS licence application is to the CBN’s Director, Payments System Management Department, for a PSS licence (the “PSS Operator”).
The PSS Operator will have shareholders’ funds unimpaired by losses of two hundred and fifty million Naira. It is required to escrow two hundred and fifty million Naira with the CBN.
The escrowed funds are refundable, and the CBN reserves the right to invest the escrowed funds in a TB (treasury bills).
Documentary Requirements for PSS Operator
The PSS Operator will 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
- Information Technology policy including privacy policy, information ownership/disclosure/loss policy, backup and restore policy, network security and encryption policy, confidential data policy, password and third party connection policy, incidence response and physical security policy
- 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
- project deployment methodology and business plan for the PTSP that shows an understanding of the nature of the POS business and support requirements
- Terminal deployment and connectivity strategy
- POS support strategy (on-site and offsite) and process to ensure failures are remotely detected and fixed within 72 hours
- Securities architecture and features
- Transaction fees and other charges to the customers and strategy for ensuring 99.9% uptime for terminals
- Training, merchant relationship management strategy, customer care and issue resolution strategy
- Procedure to obtain certifications from switches and other relevant bodies
- A project work plan that demonstrates readiness/ability to commence work
- Profit sharing agreement among parties and diagrammatic illustration of transaction flows
- Partnerships & Alliances and BCP (business continuity plan)
- Competitive advantage/value proposition and planned coverage area
- Experience with this activity or something similar in the past
- A detailed PTSP business plan
- The following certifications:
- Payment Card Industry Data Security Standard (PCI-DSS) certificate, where applicable
- Payment Application Data Security Standard (PA-DSS) or compliance with CBN IT Standards for Solution Development certificate (if applicable)
- Payment Terminal Service Aggregator (PTSA) of Payment Terminal Application certificate
PSS Licence Validity
An approval-in-principle (API) for the PSS licence is valid for six months. The CBN determines the validity period of a commercial licence of a PSS. Its renewal is subject to the PSS’s satisfactory performance.
PSS Licence Fee
An applicant for a PSS licence will pay the CBN one hundred thousand Naira non-refundable PSS application fee. The applicant pays a one million Naira PSS licence fee if the application is approved.
Conclusion
We have concluded our commentary on the licencing regime for Payment Solution Services (PSS) given our earlier articles on each PSSP, Super-agent and PTSP.
