In a recent circular issued by the Nigeria Interbank Settlement System Plc (NIBSS), banks across Nigeria are now mandated to exclude non-deposit taking financial institutions such as Opay, Monie Point, Palmpay among others from their fund transfer channels. This sweeping directive encompasses switching companies, payment solution service providers, and super agents from channels such as USSD, mobile banking apps, POS, ATMs, as well as web and internet platforms.
The circular, released by NIBSS, specifically notes that listing non-deposit taking financial institutions on NIP funds transfer channels contravenes the Central Bank of Nigeria (CBN) Guidelines on Electronic Payment of Salaries, Pensions, Suppliers, and Taxes in Nigeria, dated February 2014.
Entities falling under the category of non-deposit taking financial institutions, including switching companies, payment solution service providers (PSSP), and super agents, will no longer be eligible to receive inflows through these channels. This strategic move is aligned with regulatory standards and seeks to ensure compliance within the financial sector.
While these entities are restricted from receiving inflows, they are permitted to process outward transfers as inflows to banks. The circular clarified that their licenses do not authorize them to hold customers’ funds.
The enforcement of this policy is anticipated to have a profound impact on Fintech companies lacking banking licenses. These entities will now be removed from banks’ fund transfer channels, limiting their capabilities to facilitate outward transfers to banks, with a significant restriction on receiving fund inflows.
In response to these regulatory changes, affected Fintechs are expected to explore obtaining banking licenses, which would permit them to hold funds. Securing banking licenses is now seen as a strategic move to ensure the continuity of operations for these financial technology platforms.
The policy shift is poised to affect small business owners significantly, given that they are the primary users of Fintech platforms affected by these restrictions. Adjustments in financial management may become necessary for businesses relying on these services due to the limitations on fund inflows.
As the regulatory landscape tightens, affected Fintechs face the challenge of swiftly adapting to the new regulations and obtaining the necessary licenses to continue serving their users effectively. This move reflects the Central Bank’s commitment to maintaining a secure and compliant financial ecosystem while ensuring the stability of Nigeria’s banking sector.