Banks in Nigeria have received a directive from the Nigeria Interbank Settlement System Plc (NIBSS) to eliminate non-deposit-taking financial institutions from their NIP (NIBSS Instant Payment) fund transfer channels. 

The affected entities include switching companies, payment solution service providers (PSSPs), and super agents. The NIP fund transfer channels encompass USSD, mobile banking apps, POS, ATMs, as well as web and internet platforms.

According to the circular issued by NIBSS, the inclusion of non-deposit-taking financial institutions as beneficiaries on NIP funds transfer channels violates the Central Bank of Nigeria (CBN) Guidelines on Electronic Payment of Salaries, Pensions, Suppliers, and Taxes dated February 2014.

The circular explicitly states, “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.”

However, the circular clarifies that while these financial institutions will be prevented from receiving inflows, they are permitted to process outflows as inflows to banks. It emphasizes that switches, PSSPs, and SAs may process outward transfers as inflows to banks but cannot receive inflows, as their licenses do not permit them to hold customers’ funds.

“For 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 to hold customers’ funds,” the NIBSS stated.

This action aligns with the New License Categorization of the Nigerian Payment System, which specifies that among various payment licensing categories—such as Switching and Processing, Payment Solutions Services encompassing Super Agent, PTSP, and PSSP—only MMOs, standing for Mobile Money Operators, are authorized to hold customer funds.

The enforcement of this policy will impact fintechs without banking licenses, requiring their removal from banks’ fund transfer channels. These platforms will still be able to facilitate outward transfers to banks but won’t be able to receive fund inflows. 

While the directive is geared towards regulatory compliance and adherence to CBN guidelines, it may have consequences for small business owners who heavily rely on these fintech platforms for their financial transactions. 

The expectation is that affected fintechs will swiftly pursue banking licenses to continue their operations without interruptions. Hence, fintech companies aiming to provide specific deposit-taking services may opt for Microfinance Banks (MfBs), while larger entities such as telecommunications companies choose Payment Service Banks (PSBs) if they intend to offer such capabilities.

Several fintech companies such as Opay, PiggyVest, and Flutterwave, who are not affected by the new directive, have quickly issued statements to allay the fears of their customers.

OPay: “We wish to state that OPay is not affected by the recent circular published by NIBSS. The focus is on Payment Service Solution Providers, Switches and Super Agents. OPay is a Mobile Money Operator (MMO) licensed by the CBN and insured by the NDIC. Your funds are safe and secure with OPay.”

We wish to state that OPay is not affected by the recent circular published by NIBSS.

The focus is on Payment Service Solution Providers, Switches and Super Agents.

OPay is a Mobile Money Operator (MMO) licensed by the CBN and insured by the NDIC.

Your funds are safe and…

— OPay (@OPay_NG) December 7, 2023

Piggyvest: “Hi guys! Kindly note that Piggyvest is not affected by the recent NIBSS circular. Please disregard the misinformation. All Piggyvest virtual account numbers are provided by our licensed partners and do not fall into any of the listed categories. Your funds remain safe.”

Hi guys!

Kindly note that Piggyvest is not affected by the recent NIBSS circular. Please disregard the misinformation.

All Piggyvest virtual account numbers are provided by our licensed partners and do not fall into any of the listed categories.

Your funds remain safe. ?

— PiggyVest (@PiggyBankNG) December 7, 2023

Paystack: “Hi team, we wanted to reassure you that the recent NIBSS circular does not impact Paystack-Titan or any other Paystack services. We developed Paystack-Titan in partnership with Titan Trust Bank in a way that allows the service to operate compliantly, and it passed review from NIBSS.”

Hi team, we wanted to reassure you that the recent NIBSS circular does not impact Paystack-Titan or any other Paystack services.

We developed Paystack-Titan in partnership with Titan Trust Bank in a way that allows the service to operate compliantly, and it passed review from…

— Paystack (@paystack) December 7, 2023

PocketApp: “Hello, Following the recent NIBSS circular, kindly note that PocketApp is a Mobile Money Operator duly licensed by the CBN under Abeg technologies. Our virtual account numbers are provided by licensed bank partners and they do not fall into any of the categories listed by NIBSS. Rest assured, your funds remain safe.”

Hello,

Following the recent NIBSS circular, kindly note that PocketApp is a Mobile Money Operator duly licensed by the CBN under Abeg technologies.

Our virtual account numbers are provided by licensed bank partners and they do not fall into any of the categories listed by…

— PocketApp (@getpocketapp) December 7, 2023

Flutterwave: “The recent NIBSS circular has ZERO impact on our services because we are not deposit-taking like a bank. We are a licensed Switching and Processing company & an International Money Transfer Operator – this means our services remain unaffected, and we will continue to deliver best-in-class excellence to you, our customers. We are connected to NIBSS for the purpose of outward money transfer in Nigeria. Rest assured, we are open for business as usual!”

The recent NIBSS circular has ZERO impact on our services because we are not deposit taking like a bank.

We are a licensed Switching and Processing company & an International Money Transfer Operator – this means our services remain unaffected, and we will continue to deliver…

— Flutterwave (@theflutterwave) December 7, 2023

The affected fintechs are listed below: 

In 2018, I wrote a simple post and a Kenyan member of parliament asked to speak with me. I had written that the ordinance which Kenya was trying to approve WeChat Pay in the nation could pose challenges to its banking system:

 “The Kenyan banking regulator has run a regulatory regime where market forces are allowed to play. Allowing WeChat and Alipay in Kenya would certainly have real challenges to the Kenyan banking system. Even in China, WeChat has become so popular that local banks are having liquidity problems as what users do is to move their monies from their bank accounts into WeChat, and from there spend as they want. The banks have become pipelines into and out of WeChat and nothing more.

“For the banks, this is a very huge test because if WeChat warehouses lots of cash in its platform, some banks may fold. Interestingly, that is what Alipay and WeChat plan to do”. Kenya changed the structure!

On Dec 5, 2023,  the Nigeria Inter-bank Settlement System (NIBBS) sent a circular, and asked for switches, superagents, and payment solution service providers, to be disconnected from the NIBSS instant outward payment system. NIBBS noted that these companies are “non-deposit taking financial institutions”, and by implication should not “hold customers’ funds.”

The next day we received a list of companies which are alleged to have contravened this policy. Simply, most of the major fintech companies in the payment space are affected.  

Good People, while these fintechs are not the real culprits, but if you are paying attention you will notice that Nigerian banking is under stress despite the “huge profits” they declare yearly. Those profits are vapour-profits, powered by mindless fees on customers and FX-anchored arbitrages.  When it comes to real banking, which is interest-anchored banking, Nigerian banking has disappointed.

And that disappointment is evident as there is no catalytic project in Nigeria which any bank can come and claim that it funded. In America, banks tell you dams, bridges, etc they financed and challenged Americans to support them so that they can finance the future for shared prosperity and progress.

Why are banks under stress? It has to do with the aggregation business model. These fintechs which have figured out how to aggregate users are capturing value, making it challenging for banks. In other words, one fintech handles $14 billion monthly in Nigeria and if a huge part of that stays in its wallet, that is money not for the banks to lend. It is key to note that Nigeria’s largest financial institution does not have a bank license; it is a fintech aggregator which delivers APIs which millions of users use to collect payments.

And the big one, when these startups operate, they stay at the edges of the smiling curve where they capture value. What that means is clear: they can quickly improve gross margins at a pace banks which fund the foundational stacks cannot.

So, in the end, the government wants to help the banks, to ensure the deposit funds stay with them so that they can fund businesses via loans. This is not a new policy across nations; in small regions in China, fintechs are mandated not to allow funds to stay more than 3 days in wallets without moving them to banks. China did that to save many small banks which were running into liquidity problems due to WeChat and AliPay.

It does seem like Nigeria just woke up. Yet, this should not affect these fintechs as their business models are not built on lending. So, not holding the customers’ funds will not derail them at scale.

If your company “promotes” you, or you accept a new offer where you are 100% ready on Day 1, it is not an elevation, but a job title evolution. Career ascension requires taking responsibilities which even though you may not be 100% ready on Day 1, you know that you have inherent capabilities to quickly rise to the occasion.

The year 2024 is just around the corner, and I am asking you to plan to accelerate your leadership ascent. Simply, aim higher and keep looking up because no one was born a CEO, a Director, or a president. All, and everyone, were once not one. Yes, it’s time for the next lift because you’re more than ready. And will cross as many (visible and invisible) are holding that  crossover “bridge” to help.

Yes, you must understand that you have some wins and you must leverage on those for the next level. Good People, in the Igbo Nation, it takes the killing of one leopard to be called a killer of LEOPARDS. That means, we must use even the “little” wins to ascend into the next level.

What has 2023 provided to you? Can you build on those little wins? Plan for the #crossover because 2024 is going to be amazing.

Time for Next Career Elevation; Many Are Holding The Crossover “Bridge”