Fintech License Costs and Processing Time in Nigeria

In 2020, the Central Bank of Nigeria (CBN) introduced a new set of rules that affected fintech companies operating under a broad payment service license. The CBN released a circular stating that it had approved new license categorizations for payment systems. These new rules aimed to streamline fintech startups according to their capabilities and limitations, effectively assigning them to specific fields of operation. As a result, four new groups were established: switching and processing payment service providers, payment service providers involved in mobile money (MMOs), payment service providers involved in payment solutions (PSSs), and payment service providers under the regulatory sandbox.

In simple terms, these new groups determined what each group could and could not do. Consequently, certain groups were restricted from engaging in activities allowed for other groups. Here is a breakdown of what each group may or may not do:

1. Mobile Money License Holders: Only this group is permitted to hold customer funds. Other groups are prohibited from doing so. Essentially, mobile money services have a status similar to that of a bank, albeit to some extent.
   
2. Companies Combining Switching and Mobile Money Operations: If a company wishes to engage in both switching and mobile money operations simultaneously, it must establish a holding company and make the companies involved in these operations separate subsidiaries of the holding company.
   
3. Payment Solution Service Providers: Companies falling under this category can possess a combination of licenses, such as a payment service provider license, a payment terminal service provider license, or a super-agent license concurrently.
   
4. Regulatory Sandbox Category: Companies within this category, although their criteria for obtaining licenses are separately clarified by the CBN, may be a viable option for companies without sufficient funds.
   

Based on the CBN’s rules, the implications can be summarized as follows:

1. Payment Solution Services License: Fintech companies in Nigeria can acquire a singular license called a Payment Solution Services License for ₦250 million. This license enables them to engage in agency banking (Super Agent License), own POS terminals (Payment Terminal Service License), or operate a payment processing portal (Payment Solutions Service License). Alternatively, companies can opt for any of the three licenses separately if they don’t have the required funds to obtain the combined license.
   
2. Mobile Money Fintech Companies: Licensed mobile money fintech companies in Nigeria, as they can hold customer funds, are treated similarly to banks. Therefore, if a company wishes to combine a mobile money banking license with any other license, it must establish a “non-operating” holding company. This holding company will oversee the subsidiary structure, holding the mobile money license along with other licenses.
   
3. Holding Company Structure: Companies operating under a holding company structure have the potential to acquire multiple licenses simultaneously, provided they meet the minimum authorized capital thresholds for each license and obtain a no objection letter from the CBN’s Payments System Management Department.
   

It should be noted that many fintech companies in Nigeria have predominantly relied on microfinance licenses rather than the new license groups mentioned above. However, these new categorization rules primarily apply to companies focused on mobile money services, switching, card processing, and agency banking.

Again, the new rules state that any company in the aforementioned groups must obtain approval from Nigeria’s central bank before partnering with any bank in the country for their products and services.

The deadline for compliance with the new categorization is set for June 30th, 2021.

Based on our experience, acquiring a fintech license in Nigeria typically takes between 6 months to 1 year, or even less, depending on the promptness of the applicant in meeting the requirements set by the Central Bank of Nigeria (CBN).

For more detailed information regarding the application process for the new license categories, you can download the CBN’s latest application guidance from their website in PDF format.

For more enquiries, kindly contact us. 

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