Circular on the Exposure Draft of New CBN Licensing Regime (Licence Tering) for Payment System Providers

CENTRAL BANK OF NIGERIA
Central Business District BANKING AND PAYMENTS SYSTEM DEPARTMENT BPS/DIR/GEN/CIR/05/012 October 15, 2018 To: All Banks and CBN Licensed Payments System Providers (Switches, TPPs, MMOs, PTSPs, PSSPs and Super Agents) CIRCULAR ON THE EXPOSURE DRAFT OF NEW CBN LICENSING REGIME (LICENCE TIERING) FOR PAYMENT SYSTEM PROVIDERS Financial Technology companies (FinTechs) have been evolving with innovative products which are gaining acceptance within the country and banks have been collaborating with these technology companies, in order to remain competitive in the financial services ecosystem. The emergence of Financial Technology Companies (FinTechs) in the financial system accentuates the known risks within the financial system. In particular, the operational risk dynamics within the financial system is fast evolving with an increasing reliance on FinTech platforms and the growing level of acceptability of their services by both traditional financial service providers (Banks) and consumers of financial services (the public).

In view of the above, the CBN has considered and thereby proposes new licensing regime for all categories of payment service providers and financial technology companies. It is our belief that the proposed structure, if implemented, will properly position the Bank to adequately address the emerging issues of FinTech with respects to cyber risks, risk management framework, capital adequacy, better focused regulation and oversight operations.

1. Proposed Licensing Structure

The proposed licensing structure is highlighted on the following pages.

	3 Years
Tenor	3 Years	2 Years
	00,000 /N50,0
Licence/Renew
Fees	1m / N500,00
l2m / N1m
---	---	---	---	---
Minimum
SHF	15Br	N50m	N100m	N100m
	N3Bn
---	---	---	---	---
	vment processing gateway and portals, Paym
Ition/application development, Merchant Serv regation,
	l POS
---	---	---	---	---
	t recruitment and manageme
roposed
ermissible activitie	Cap 30)	Cap 20	(Cap 30
ank Merchant Acqu	bank Merchant Acquir
---	---	---	---	---
sting Licence Typ	uper Agency	uper Agency
Super Agency
Switching	SP
PSSP	PTSP	MMO	(Basic Licenc
	Standard Licenc
Licence
Category/Caps	PSP
(Super Licence)	(Cap 10)	Cap 30)
	PSP
---	---	---	---	---
S/N	l	Z	E

Points To Note

a.

Once the new license regime is implemented, companies shall be expected to notify the Bank before starting any new activity under its licence category. E.g. a Super licence holder who initially had been approved for only PSSP and Switching operations, must inform the Bank (for information purposes only) if it subsequently decides to commence PTSP operations.

b.

PSPs that perform merchant service aggregation functions shall not hold the settlement funds of the merchant. The merchant service aggregator process shall only facilitate settlement by providing the acquirer with the necessary settlement files to complete settlement.

3.

Consideration for Mutual Exclusivity of Some Licens Card Scheme/Switching: It is important that any entity rendering Switching service does not a.

render card scheme service and vice versa. This is to avoid a situation where a Switch prioritizes its own card scheme transactions to the detriment of others/ competitors. Section 2.4.10 of the Current Guidelines on Transaction Switching in Nigeria, prohibits Switching companies from issuing payment cards.

MMO/Switching: It is equally important that MMOs do not render switching services and vice b.

versa. This is to avoid a sifuation where a Switch prioritizes its scheme transactions to the detriment of others/competitors.

Kindly review the aforementioned and forward your inputs to the Director, Banking & Payments System Department and pspo@cbn.gov.ng not later than October 29, 2018.

Thank you for your usual cooperation.

'Dipo Fatokur
Director, Banking & Payments System Department.

2.