Yesterday, When i broke the news that the Nigeria Inter-Bank Settlement System (NIBSS) released a list of Fintech Companies that are unlicensed to receive direct customer deposits from commercial banks, Olajumoke of XDeputy didn’t even allow me land, she quickly interrupted me, “Hope Carbon is not there o?” However, that was all. She didn’t do anything extra. Where am I heading with this?
Nigerians are stubborn-headed people and rarely heed to warnings. I am a Nigerian, so this is no hate speech. Tell a Nigerian that there is a riot on the next street and he would go there just to see for himself rather than stay safe indoors. And Nigerians love reassurance.
A personal experience is the story of the bread that has been home for 6 days and had been forgotten about. The moment someone in the house saw it, observed it and assured that it was still good, we all agreed and ate it. (You didn’t get this gist from me though.)
So I was actually expecting Fintech companies to reassure Nigerians not to panic amid NIBSS warning, and boy was I right.
Below, I have broken down the NIBSS vs. Fintech Saga that is currently trending in the news. Starting off with how Nigerian financial services companies find themselves in a race to reassure users, as a memo from the Nigeria Inter-Bank Settlement System (NIBSS) calls for the removal of unlicensed fintechs from directly accepting consumer deposits.
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What is the Impact of NIBSS Memo?
Licensed vs. Unlicensed Entities
The NIBSS memo specifically targets companies with superagents, payment solution service providers (PSSPs), or switching licenses. According to regulations, entities holding only these licenses are not allowed to directly accept consumer deposits, particularly through bank transfers. This rule affects over 100 entities currently holding such licenses in Nigeria.
Over the past few years, some companies expanded their services directly to consumers. To navigate regulatory restrictions, they obtained licenses such as mobile money or microfinance banking licenses, enabling them to accept deposits.
Different Licenses Used by Fintech Companies
Adapting to Regulations
Editor’s Choice
Leading Nigerian fintechs like OPay, PalmPay, and PiggyVest’s Pocket App operate with mobile money licenses. Moniepoint, on the other hand, holds a microfinance bank, switching, and superagent licenses, allowing it to operate a digital banking platform with offline agents for cash-in and cash-out services across the country.
Others opted for partnerships with banks to provide deposit services through an open-banking architecture. For instance, Paystack announced a partnership with Titan Trust Bank, offering virtual accounts and terminals for multi-person businesses.
Fintech Response to NIBSS Memo
Reassurance Amid Misinformation
The NIBSS memo has sparked misinformation in Nigeria’s public space, causing confusion about its impact. Fintech companies took to social media to reassure users about the safety of their funds.
Companies like Flutterwave and Paystack clarified that the memo doesn’t affect their services, emphasizing compliance with regulations. Moniepoint, holding multiple licenses, assured customers that it is a deposit-taking financial institution.
OPay went further to communicate directly with its customers, stating, “Your funds are safe and secure,” emphasizing its Mobile Money Operator (MMO) license from the CBN and insurance from the NDIC. The focus of the NIBSS memo, according to OPay, is on Payment Service Solution Providers, Switches, and Super Agents.
Different Responses From Fintech Companies
Clarity and Compliance
Other Nigerian fintech companies, including PalmPay and Nomba, also clarified that the NIBSS memo has no impact on their services. PalmPay, licensed as a mobile money operator, highlights its capability to hold deposits, while Nomba stresses its commitment to working only with licensed partners for consumer transactions.
Uncertain Future Enforcement
Potential Purge and Regulatory Uncertainty
The memo from NIBSS could lead to the removal of unapproved deposit-taking institutions from the list of approved institutions for fund transfers. However, the timing and extent of potential enforcement actions by NIBSS or the Central Bank of Nigeria remain uncertain. The fintech industry and its users await further developments in the coming days or weeks.
