Trouble looms for customers and owners of Non-deposit-taking-fintech Financial Institutions as the Nigeria Inter-Bank Settlement System (NIBSS) has instructed Nigerian banks to disengage all non-deposit-taking financial entities from their Nigerian Interbank Payment (NIP) outward fund transfer channels.

This is as disclosed by NIBSS in a recent circular to banks.

The circular states: “Listing non-deposit taking financial institutions such as Switching Companies (Switches), Payment Solution Service Providers (PSSPs) 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.”

The circular states further: “Switches, PSSPs and SAs may process outward transfers as inflows to Banks but are not to receive inflows as their licenses do not permit them to hold customers’ funds.”

For the benefit of clarity, Switches, PSSPs and SAS may process outward transfers as inflows to banks but are not to receive inflows as their licenses do not permit them to hold customers’ funds.

What option have Fintech firms

The fintech companies will, however, retain the capacity to facilitate “outward transfers as inflows to Banks,” but will no longer receive inflows.
In light of these developments, it is anticipated that the affected financial technology companies will explore the necessary steps to obtain banking licenses that will allow them to hold and manage customer funds legally. The list below shows the possible PSSP/ Switches that could be entrapped by the NIBSS circular

NIBSS Possible delist names from holding Customer funds

Impact on SMEs:

This regulatory requirement will in no small measure have a notable impact on small business owners, who frequently utilize these platforms for their financial transactions.

What fintech financial companies can do to avoid the axe:

With the enforcement of this directive, “Fintech companies are expected to expedite action in obtaining banking licenses to avoid the waving axe of the financial regulatory laws for them to sustain their operations and support their customers base.

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