Central Bank of Nigeria Levies ₦250M Penalty on Paystack for Infringements in Zap Wallet Operation
Nigeria's Central Bank Fines Paystack for Operating Without Proper License
The Central Bank of Nigeria (CBN) has imposed a fine of ₦250 million ($190,000) on Paystack, a prominent Nigerian fintech company, for operating its new consumer app, Zap by Paystack, without the proper license. This penalty marks a significant development in the growing scrutiny of fintechs in Nigeria, as regulators tighten their oversight in response to fraud and financial instability.
Paystack, which was recently acquired by Stripe, reportedly partnered with Titan Trust Bank to hold deposits, but this has not shielded it from regulatory action. The fine adds to the mounting pressure on Nigeria's fintech sector, following similar penalties imposed on Moniepoint and OPay earlier in 2024 over Know Your Customer (KYC) and compliance lapses.
In Nigeria, fintech companies like Paystack are required to obtain a Payment Service Provider (PSP) license from the CBN to operate wallet services legally. This license requires a minimum capital of ₦5 billion, with a rigorous application process that can take 8 to 12 months and a 40% rejection rate due to stringent compliance checks.
Operating without the appropriate PSP license exposes companies to significant risks, including fines and forced shutdowns. Smaller fintech operators might operate under a Payment Solution Service Provider (PSSP) license, but this is generally insufficient for full wallet services at scale and limits business potential.
Fintechs in Nigeria's tightly regulated consumer finance space must also comply with CBN regulations governing business models, meet security, anti-money laundering (AML), and consumer protection standards, and potentially coordinate with other agencies such as the Securities and Exchange Commission (SEC) and the Nigerian Communications Commission (NCC) for services that intersect with securities or investments, or telecom-related interfaces.
For wallets dealing with the digital Naira (eNaira), which is Nigeria’s central bank digital currency, fintech companies must conform to CBN’s frameworks allowing creation of individual or business wallets accessible via mobile apps, web, or USSD codes.
Zap, launched in March, is a peer-to-peer money transfer app. The trademark dispute between Paystack and Zap Africa, another fintech company, remains unresolved. A spokesperson for Paystack has stated that they are working closely with the regulator. In response to the regulatory action, Paystack will not be making any public comments at this time out of respect for the regulatory process.
The growing scrutiny of fintechs in Nigeria's consumer finance space underscores the CBN's increasing assertiveness about compliance. This development could potentially present challenges for the Stripe-owned firm, as they navigate the regulatory landscape to expand their operations in Nigeria.
- The fine imposed on Paystack is a reflection of the increasing focus on technology-driven businesses in the financial sector, as regulatory bodies tighten their scrutiny of fintech companies to maintain general-news standards and prevent fraudulent activities.
- Amidst growing regulations and challenges, fintech companies in Nigeria's business environment, such as Paystack and others, must adhere to stringent CBN requirements for licenses and compliance, ensuring they fulfill standards for security, anti-money laundering, consumer protection, and potentially collaborate with other agencies like the SEC and NCC for services that intersect with securities or telecom-related interfaces.
