The Central Bank of Nigeria (CBN) has reportedly slammed a N250 million fine on Paystack over its latest product, Zap, which the regulator claims was operating outside the scope of its licence.
Launched in March, Zap promised flawless bank transfer, and at first, it looked like Paystack had cracked a long-standing pain point in Nigeria’s broken payments experience. But behind the scenes, the product was already raising red flags.
According to TechCabal, the CBN took issue with Zap functioning like a wallet, something Paystack isn’t licensed to operate.
Instead, Paystack holds a “switching and processing” licence, which strictly limits it to moving money, not holding it. That role is reserved for microfinance or commercial banks. And that’s where the problem began.
Someone familiar with the situation told TechCabal that the CBN sees Zap as “a deposit-taking product,” which clearly crosses the line. In the regulator’s eyes, Paystack overstepped and broke the rules.
The fintech isn’t denying there’s a regulatory matter in play, but it’s keeping things close to the chest. “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 spokesperson at Paystack told TechCabal.
This isn’t Paystack’s first brush with controversy over Zap, but it’s certainly the costliest. The fine is the most severe regulatory sanction the company has faced since it got CBN’s licensing to operate in 2016.
Even more concerning is the context. Nigeria’s financial services sector is undergoing an aggressive compliance revamp. OPay and Moniepoint were each fined N1 billion in Q2 2024, and this current issue shows the regulator isn’t slowing down.
Beyond compliance, Zap is also having issues with branding.
Just hours after the unveiling of Zap, another startup, Zap Africa, accused Paystack of hijacking its name. And they’ve taken it to court. “We’ve been building Zap for 3 years now, intentionally and with full ownership. The name is trademarked. The product is live. The community is real,” said Moore DH, co-founder of Zap Africa, in a statement on X.
His co-founder, Tobi Asu-Johnson, added: “Our name is trademarked and we’re on it. Zap’s legal team will be reaching out to Paystack shortly.”
That case is still ongoing, with Paystack yet to comment on the trademark issue. Meanwhile, users on social media have not been kind. Many pointed out how a Stripe-backed company—with significant resources—could miss something as basic as a naming conflict in its own industry. “They saw it. They just didn’t take them serious,” one user said.
To make things worse, fresh allegations have surfaced. There are concerns that Zap facilitated cross-border payments without proper licensing—potentially violating not just Nigerian rules but also regulations from the UK’s Financial Conduct Authority. That could bring international issues, and Paystack knows it.
According to reports, the CBN has now demanded a full audit of Zap, from the service architecture to every third-party partner involved. Titan Trust Bank, which reportedly holds customer deposits on behalf of Zap, is also being looked at closely.
