The Nigeria Interbank Settlement System Plc (NIBSS) has directed Nigerian banks to remove non-deposit-taking financial institutions such as switching companies, payment solution providers, and super agents from their NIP fund transfer channels.
The NIP channels include Unstructured Supplementary Service Data (USSD), mobile banking apps, point-of-sale (PoS) systems, Automated Teller Machines (ATMs), and web and internet platforms. In other words, the circular from NIBSS affects all NIP-enabled platforms, and means that customers will no longer be able to make payments to switching companies, payment solution providers, and super agents through any of these channels.
The NIBSS in a circular dated December 5,2023, warned that, “listing non-deposit-taking financial institutions such as switching companies (switches), Payment Solution Service Providers (PSSP), and Super Agents (SA) as beneficiary institutions on your NIP funds transfer channels contravenes the CBN Guidelines on Electronic Payment of Salaries, Pensions, Suppliers and Taxes in Nigeria dated February 2014.”
According to the circular, while financial institutions without deposit-taking licenses will be barred from receiving inflows through NIP channels, they are permitted to process outward transfers as inflows to banks.
The circular specifically states that switches, payment solution service providers (PSSPs), and super agents (SAs) may process outward transfers as inflows to banks, but they are not permitted to receive inflows because their licenses do not allow them to hold customers’ funds.
The NIBSS explained the policy enforcement is designed to remove financial technology companies that do not have banking licenses from banks’ fund transfer channels. It noted that under the new arrangement, the platforms are expected to facilitate outward transfers to banks but won’t be able to receive fund inflows.
Business a.m learnt that the circular’s impact will be felt by financial technology companies such as Flutterwave and Paystack, which operate as payment service solution providers (PSSPs) and do not have deposit-taking licenses. These companies are not allowed to receive funds from customers and must only act as a payment gateway.
On the other hand, mobile money operators (MMOs) such as Opay, PalmPay, Smartcash, MoneyPoint, and MoMo, which are licensed under the CBN’s mobile money guidelines, can continue to hold customer funds.