CBN SETS N1M AS APPLICATION FEE FOR PAYMENT SERVICE HOLDING COMPANY LICENCE
By: Nneka Oduada Eze Esq.
The Central Bank of Nigeria (CBN) has approved new license categorizations for participants in the payments system. CBN in its circular released its guidelines for the establishment and regulation of Payments Service Holding Companies (PSHCs) in Nigeria. The guideline is expected to facilitate the regulatory requirement for the operations of a PSHC in the country. The regulation requires companies that wish to operate more than one license category (within the Mobile Money Operations, Switching and Processing, Payment Solution Services ) to set up a Payments Service Holding Company (PSHC), while clearly separating the activities of the subsidiaries.
Promoters of a PSHC are required to submit a formal application for the grant of the license to operate within this space. The application process is in two phases namely: The Approval-in-Principle (AIP) and a Final License Stage (FLS). A promoter of PSHC applying for AIP is required to pay a non-refundable application fee of N1,000,000.00 (One Million Naira only), and Not later than six (6) months after obtaining the AIP, submit an application for the grant of a Final License, alongside with a non-refundable licensing fee of N 5,000,000.00 (Five Million Naira only) both payable via electronic transfer. These fees are however subject to review from time to time by the CBN.
Among other points, the guideline states that;
- The PSHC shall be non-operating, existing solely to carry out investment in approved subsidiaries without engaging in the day-to-day management and operations of subsidiaries.
- For any PSHC structure to emerge, there shall be at the minimum, two subsidiaries, which include a Mobile Money Operator (MMO) and a Switching company.
- The CBN may, by order, direct a PSHC to divest from a subsidiary where, in the opinion of CBN, the PSHC is being run in a manner that is detrimental to the subsidiary and/or stability of the financial system.
- PSHC is allowed to borrow from the Nigerian banking system for the purpose of capitalizing itself or any of its subsidiaries.
It is not in doubt that the license requires companies desirous of offering switching and processing services, and mobile money services to set up a PSHC structure such that activities of the subsidiaries are clearly delineated. The arrangement would prevent commingling of activities, facilitate management of risks and enable the Central Bank of Nigeria exercise adequate regulatory oversight on all the companies operating within the PSHC. Indeed, this new regulatory framework will help the regulator to properly manage inherent risks associated with this subsection and achieve overall regulatory oversight of Fin-tech companies operating within this narrow compass, thereby engendering financial inclusions