- The Nigeria Interbank Settlement System (NIBSS Press Release) has asked banks to remove non-deposit financial institutions from instant fund transfer
- NIBSS issued the directives in a circular to financial institutions saying the platforms can only process outflows to banks
- The fund transfer channels include USSD, NIP, Mobile banking apps, ATMs, and PoS
According to the Nigeria Interbank Settlement System Plc (NIBSS), Nigerian banks have been instructed to disengage all non-deposit-taking financial entities from their Nigerian Interbank Payment (NIP) outward fund transfer channels.
Deposit Money Banks (DMBs) have been directed by the Nigeria Inter-Bank Settlement System (NIBSS) Plc to yank off all financial institutions not licensed to hold customers’ funds from their NIBSS Instant Payment (NIP) outwards platforms.
In a circular dated December 5, 2023, the agency said allowing these firms, which obtained licenses to operate as Payment Solution Service Providers (PSSPs), Switching Companies, Super Agents, and others from the Central Bank of Nigeria (CBN), to collect funds from customers was in contravention of the law.
NIBSS said that only commercial banks and others who have been authorized by the central bank to receive inflows from customers are allowed to offer such service, as the PSSPs, Switching firms, and Super Agents cannot process such functions.
The circular from NIBSS states:
“Listing non-deposit taking financial institutions such as Switching Companies (Switches), Payment Solution Service Providers (PSSPs), and Super Agents (SA) as beneficiary institutions on your NIP funds transfer channels contravene the CBN Guidelines on Electronic Payment of Salaries, Pensions, Suppliers and Taxes in Nigeria dated February 2014.”
“Another regulatory advice in this regard is the circular with the caption ‘Permissible Services and Products of PSSP Operation in Nigeria’, Ref: BPD/DIR/GEN/CIR/05/004 dated May 11, 2018.
Further emphasizing the extent of this directive, the circular clarifies: “Switches, PSSPs, and SAs may process outward transfers as inflows to Banks but are not to receive inflows as their licenses do not permit them to hold customers’ funds.”
What the NIBSS Press Release
This move by the NIBSS underscores the regulatory framework within which Nigerian Fintechs operate and the compliance expected regarding their licensed financial activities.
- The policy enforcement will result in the removal of any Fintech platforms without banking licenses from the fund transfer channels of banks.
- The Fintech platforms will, however, retain the capacity to facilitate “outward transfers as inflows to Banks,” but will no longer receive inflows.
- In light of these new developments, it is anticipated that the affected financial technology companies will explore the necessary steps to obtain banking licenses that will allow them to hold and manage customer funds legally.
- This very regulatory requirement is likely to have a notable impact on small business owners, who frequently utilize these platforms for their financial transactions.
With the enforcement of this directive, the expectation is set that “Fintech companies will expedite action in obtaining banking licenses,” a move seen as essential to sustain their operations and support their customer base.
This new directive will affect financial technology companies like Flutterwave, Paystack, and others that obtained licenses to operate as PSSPs, to serve purely as a payment gateway.
This means that users of Flutterwave, Paystack, and others cannot have funds deposited into their accounts as they cannot receive money from anyone.
However, this new directive doesn’t affect Mobile Money Operators (MMOs) like Opay, PalmPay, Smartcash, MoniePoint, MoMo, and others, which can keep the funds of customers.
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