The Central Bank Nigeria has fined Paystack, one of the country’s most prominent fintech companies, ₦250 million ($190,000) for allegedly operating its newly launched consumer product, Zap, as a wallet in violation of its regulatory licence.
The apex bank claims that Zap—a peer-to-peer money transfer app launched in March, functions as a deposit-taking product, which is reserved for financial institutions with a microfinance or banking licence. Paystack holds a switching and processing licence, which permits it to convey financial transactions between banks and other institutions, but not to hold customer funds. That limitation is central to the CBN’s sanction, a source said.
“Paystack is working closely with the regulator as they further review Zap, and out of respect for the process, we won’t be making any public comments at this time,” a Paystack spokesperson told newsmen.
In Nigeria’s t financial services space, a wallet typically refers to a digital account that stores customer funds, allows payments, transfers, and often provides financial management tools. Operating a wallet without the right licence raises red flags with the CBN, which has grown increasingly vigilant about regulating the boundaries between licensed activities. TechCabal learned Zap does not store user funds directly, but instead operates in partnership with Titan Trust Bank, which is licensed to hold deposits.
The fine marks Paystack’s largest publicly known regulatory penalty since it received CBN approval in 2016. It also underscores the risks fintechs face as they expand.
The CBN fine comes during heightened regulatory scrutiny for Nigerian fintechs. In the past year, several fintechs faced increased oversight around customer onboarding and KYC compliance as regulators respond to growing concerns about fraud and financial stability in the financial sector. Two of the country’s most prominent unicorns, Moniepoint and OPay, were fined ₦1 billion each in the second quarter of 2024 over issues of compliance.
The apex bank claims that Zap—a peer-to-peer money transfer app launched in March, functions as a deposit-taking product, which is reserved for financial institutions with a microfinance or banking licence. Paystack holds a switching and processing licence, which permits it to convey financial transactions between banks and other institutions, but not to hold customer funds. That limitation is central to the CBN’s sanction, a source said.
“Paystack is working closely with the regulator as they further review Zap, and out of respect for the process, we won’t be making any public comments at this time,” a Paystack spokesperson told newsmen.
In Nigeria’s t financial services space, a wallet typically refers to a digital account that stores customer funds, allows payments, transfers, and often provides financial management tools. Operating a wallet without the right licence raises red flags with the CBN, which has grown increasingly vigilant about regulating the boundaries between licensed activities. TechCabal learned Zap does not store user funds directly, but instead operates in partnership with Titan Trust Bank, which is licensed to hold deposits.
The fine marks Paystack’s largest publicly known regulatory penalty since it received CBN approval in 2016. It also underscores the risks fintechs face as they expand.
The CBN fine comes during heightened regulatory scrutiny for Nigerian fintechs. In the past year, several fintechs faced increased oversight around customer onboarding and KYC compliance as regulators respond to growing concerns about fraud and financial stability in the financial sector. Two of the country’s most prominent unicorns, Moniepoint and OPay, were fined ₦1 billion each in the second quarter of 2024 over issues of compliance.
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