Requirements to obtain payment service banks (PSBs), or payment service providers (PSP), digital banks, lending/credit Startups, and wealthtech licenses

Compliance is a critical issue in the incorporation and operation of a startup. To operate with ease and prevent unnecessary sanctions fintech startups need to understand the regulatory provisions of the country they operate.

The regulatory agencies Nigerian startups must pay attention to at different stages of their operations and growth are the Corporate Affairs Commission (CAMA ACT), Federal and State Inland Revenue Service (FIRS), Nigeria Social Insurance Trust Fund (NSITF), National Office for Technology Acquisition and Promotion (NOTAP), Economic and Financial Crimes Commission (EFCC).

Being compliant not only makes startups meet federal and state laws, it tells investors that the startup takes risk management seriously and makes it easier for enterprise customers who require their startup vendors to have a security framework in place.

For fintech startups specifically, the regulators are the Central Bank of Nigeria (CBN), National Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC), Nigeria Interbank Settlement System (NIBSS)

The licence a Fintech startup obtains determines how they operate. For this article I will focus on five categories of Fintechs in Nigeria - payment service banks (PSBs), or payment service providers (PSP), digital banks, lending/ credit startups, and wealthtech. Here are the requirements startups must submit to obtain their licences.

Payment service banks are banks tasked with increasing financial inclusion in Nigeria. The PSBs provide banking services to rural areas through the use of technology and agency banking. The minimum share capital of a PSB in Nigeria is ₦5 Billion. To obtain a PSB licence in Nigeria, startups must:

Payment service providers are non-bank fintech startups that offer various financial services. They are divided into six categories based on the type of services they provide.

The types of Fintech PSPs in Nigeria are Switching and processing, Mobile money operators, payment solution services, Payment terminal services providers, Payment solution service providers, and Super agents. Here are the procedures for obtaining the licence of each of the PSP fintech companies.

Switching and processing fintech companies provide the processing of financial transactions. Examples in Nigeria include Flutterwave, Interswitch and Paystack. The procedure for obtaining a switching and processing licence includes:

Mobile money operators enable customers to engage in financial activities through the use of their mobile phones. They allow their customers to transact by using special USSD codes on their phone network. Examples include MTN’s Momo, Paga Mobile, Opay, etc.

The process for obtaining a mobile money operator licence is:

Payment Terminal Service providers are fintech companies licensed to provide POS terminal deployment, support and maintenance services. Examples of PTSPs in Nigeria are Interswitch Limited, IntelliFin Solutions Ltd, and Fidesic Nigeria Limited.

To obtain a PTSP licence in Nigeria startups need to do as follows:

Payment solution service providers are fintech companies that act as fund collectors on behalf of their customers. They serve mostly the interest of merchants by enabling payment through the web. Popular examples are Paystack, Flutterwave and Interswitch Nigeria.

The procedure for obtaining a PSSP license in Nigeria is as follows:

Super Agents are a sub-category of payment solution service fintech companies who operate as recruiters and supervisors of agents who carry out financial services targeted at the financially excluded. They focus primarily on agency banking. Examples include Opay, Teamapt, Paga.

The procedure for obtaining a Super Agent’s license in Nigeria is as follows:

A digital bank primarily operates banking activities through technology, especially a mobile phone or a computer device rather than a physical office. Popular digital banks are Kuda Bank, VBank, and Eyowo.

Since the CBN is yet to create a specific licence regime for digital banks, promoters can operate as microfinance banks, payment service banks, or a finance company.

These startups lend short-term loans to individuals and businesses to cater to their urgent needs. Examples include FairMoney, Carbon and Renmoney. Startups who want to obtain a lending licence need to obtain a licence from their state of operation and a microfinance bank licence from CBN.

These are startups that offer a platform for the purchase of shares in foreign companies (“investment tech” or “wealth tech”) through a digital platform. Examples include Chaka Technologies, Risevest, Cowrywise, etc.

These startups are known as Sub-brokers according to an amendment made by the SEC on April 21, 2021. To apply for this licence, startups must:

As a startup grows, there would be more laws to comply with. Instead of waiting for the startup to grow before creating a compliance function, it’s much better to be well-prepared from the very beginning. This proactive step would preempt waste, loss of name or a government fine.