The Central Bank of Nigeria (CBN) has approved a new license categorization system for the Nigerian Payment System.
The apex bank made this known in a press release published on its website and dated 9th December 2020.
According to the CBN, the license categorization is meant to help promote a strong and credible payment system and offers “clarity for new and existing market participants, given the significant evolution and innovation in the Nigerian payments system.”
The central bank appears to be updating its regulations amidst the new wave of FinTechs in the country offering varying but often nuanced services.
According to the new guidelines, Payment Systems are now to operate within 4 broad categories.
a. Switching and Processing
b. Mobile Money Operations (MMOs)
c. Payment Solution Services (PSSs)
d. Regulatory Sandbox
It further clarified that “only MMOs are permitted to hold customer funds. Companies with licenses within any of the other categories are not permitted to hold customer funds,” meaning operators who offer Payment Solution Services cannot for any reason hold customer funds or deposits.
Other key clarifications
- Companies seeking to combine activities under the Switching and MMO categories are only permitted to operate under a holding company structure with the subsidiary entities clearly delineated to prevent commingling.
- Payments System companies in the PSS category may hold any of PSSP, PTSP and Super Agents license or a combination of the licenses thereof.
- All licensed payment service providers in any of the categories covered by this framework holding or seeking any other CBN issued licenses are required to obtain a no-objection from the Payments System Management Department.
- The object clauses in the Memorandum and Articles of Association of Payment Service Providers shall be limited to the permissible activities under their licensing authorizations.
- Collaborations between licensed payment companies, banks and other financial institutions in respect of products and services are subject to CBN’s prior approval.
- All new licensing requests including those with Approvals-in-Principle are to comply with the new requirements immediately. Existing licensed payment companies are to comply with the new licensing requirements where applicable not later than end of June 2021
- All payment service providers and stakeholders in the payments system are required to ensure strict compliance with these requirements and all other payments system regulations.
What this means: The CBN has now clearly demarcated the often thin lines within which various service providers in the FinTech space currently operate in the country. For example, merchant payment transfer apps that is used for POS transactions or internet-based transactions will not be allowed to be used for Peer to Peer transactions (transfers between persons).
- Examples of Payment Solution Service providers in Nigeria are Interswitch WebPAY, Remita, Paystack, Flutterwave, eTranzact, Parkway Project Limited etc.
CBN issues framework for QR payments
CBN has issued a framework that would guide Quick response (QR) code payments in Nigeria.
The Central Bank of Nigeria has issued the framework that would guide Quick Response (QR) Code Payments in Nigeria.
This is a proactive move by the Apex bank towards ensuring the safety and stability of the Nigerian Financial System, as well as promoting the use and adoption of electronic payments and foster innovation in the payments system.
Quick Response (QR) Codes are matrix barcodes representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by an imaging device, processed and transmitted by appropriate technology.
The codes are used to present, capture and transmit payments information across payments infrastructure and further enable the mobile channel to facilitate payments and present another avenue for promoting electronic payments for micro and small enterprises.
What you should know
- Quick Response (QR) codes are two-dimensional bar codes. QR code payments allow merchants to receive payments from customers simply by scanning generated QR codes using a smartphone camera. The QR code payments carry the purchase transaction information to the mobile device of the buyer/customer.
- Making payments via QR codes is very secure. It is because the QR code is nothing but just a tool that is used to exchange information. Any data which is transferred via QR codes is encrypted, thus making the payment secure.
- The Participants in QR Code Payment in Nigeria include Merchants, Customers, Issuers (Banks, MMOs and Other Financial Institutions), Acquirers (Banks, MMOs and Other Financial Institutions) and Payments Service Providers.
- QR payments are increasingly becoming a popular means of payments in Nigeria, and some industry players would see the framework as a perfect way of regulating the sector.
- QR codes are capable of storing lots of data. But no matter how much they contain, when scanned, the QR code should allow the user to access information instantly. It can be used for payments, sharing contacts and Wi-Fi passwords and lots more.
- The popular and common argument is that since POS machines are expensive, cheaper options such as QR scanners should be pushed forward to local traders.
CBN unveils framework for regulatory sandbox operations
CBN has issued a regulatory Sandbox framework towards engaging with the operators in the Fintech space.
The Central Bank of Nigeria has taken proactive steps towards ensuring more flexible ways of engaging with operators in the payment solutions/fintech space, in a bid to tacitly regulate how operators churn out their new products and services.
To this end, CBN has introduced Regulatory Sandbox which is a formal process for firms to carry out live tests of new, innovative products, services, delivery channels, or business models in a controlled environment, with regulatory oversight, subject to appropriate conditions and safeguards.
It is expected that the CBN would stay abreast of innovations while promoting a safe, reliable and efficient Payments System to foster innovation, without compromising the delivery of its mandate.
What you should know
- A regulatory sandbox is a framework set up by a regulator that allows FinTech start-ups and other innovators to conduct live experiments in a controlled environment under a regulator’s supervision. It encourages innovation that can improve the design and delivery of payment services.
- No doubt, regulations around Fintech are still emerging and developing, there is still a high entry barrier for new entrants and it is expected that Sandboxes would present them with a safe testing environment and ease regulatory onboarding.
- Sandbox is quite suited for new products, services or solutions that are either not contemplated under the prevailing laws and regulations, or do not precisely align with existing regulations.
- Sandbox is intended to promote effective competition, embrace new technology, encourage financial inclusion and improve customer experience, with a view to engendering public confidence in the financial system.
- The framework provides guidance on the establishment, the applicable rules and operations of a Regulatory Sandbox for the Nigerian Payments System, as well as providing standards for the operations of a Regulatory Sandbox, prescribes the processes and procedures for analysing, collecting, updating, integrating, and storing consumer data and information.
Standard Chartered Nigeria Plc crashes ‘personal loans’ interest rate to 1% monthly
The Bank crashed its interest rate to one of the lowest in Nigeria’s lending space.
Standard Chartered Nigeria Plc, has crashed its interest rate for ‘personal overdraft’ from 1.25% to 1% per month, according to information seen by Nairametrics.
Nairametrics understands that this review makes the rate, one of the lowest in Nigeria’s lending space, especially when compared to other players in the industry.
This is a strategic move by the bank as it makes major inroads into Nigeria’s competitive but lucrative retail end of lending. The retail end which includes divisions such as personal loans, payday loans is highly competitive with Fintechs, and other banks all jostling for the same market.
Despite efforts by some of the banks to restructure their loan books due to the adverse effect of the pandemic, banking sector credit to the private sector improved to N19 trillion in the third quarter of 2020 representing a 15.6% increase from 2019.
Notably, according to a CBN survey on credit conditions as reported by Nairametrics, supply of secured and unsecured credits to households is expected to increase in the first quarter of 2021, having recorded an increase in the previous quarter (Q4 2020).
Meanwhile, a cursory review of lending data on the websites of some sampled financial institutions, revealed that some financial institutions retained or downwardly reviewed their monthly interest rate on payday loans. For example, GT Bank Quick credit crashed its rate from 1.75% to 1.33%.
Furthermore, UBA Click credit maintained its 1.58% charge, Zenith Bank term loan remained at 2.16%, Renmoney retained its 2.98% interest rate, and a host of others.
What you should know:
- According to Standard Chartered, Personal Overdraft facility provided by Standard Chartered Plc is a revolving facility targeted at salaried customers with 12 months tenor and usually based on 50% of the net monthly salary of customers.
- A minimum salary qualification of N50,000 is specified.