The Central Bank of Nigeria (CBN) has published guidelines for the supervision of payment service banks. The framework gave the PSB operators the ability to sell foreign currency, particularly dollars, to authorized foreign exchange dealers, among other things.
The CBN framework also authorized PSBs to accept deposits from individuals and small businesses, which will be covered by the deposit insurance scheme; and to provide payments and remittances (including inbound cross-border personal remittances) through various channels within Nigeria.
According to the framework, operators are supposed to use technology to offer services that the unbanked population and those who live in remote corners of the nation can easily access.
The framework’s primary areas of concentration include corporate governance, PSB risk management, and the security of funds for customers using Payment Service Banks’ products.
This framework also aims to ensure that sound risk management practices are embedded in the operations of the PSBs.
The PSBs are required to comply with relevant existing regulations and CBN’s prudential guidelines and circulars, which are issued periodically.
The CBN said PSBs are to operate mostly in rural areas and unbanked locations targeting financially excluded persons, with not less than 25 percent financial service touch points in such rural areas as defined by the CBN from time to time.
They are to enter into direct partnerships with card scheme operators. Such cards shall not be eligible for foreign currency transactions; they can also deploy ATMs in some of these areas; deploy Point of Sale devices and be at liberty to operate through banking agents.
The PSBs have also been authorized to roll out agent networks with the prior approval of the CBN; use other channels, including electronic platforms, to reach out to their customers; and establish coordinating centers in clusters of outlets to supervise and control the activities of the various financial service touch points and banking agents.
The CBN also authorized the PSBs to accept deposits from individuals and small businesses, which will be covered by the deposit insurance scheme; to provide payments and remittances (including inbound cross-border personal remittances) through various channels within Nigeria; and to sell foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers.
The CBN said the PSBs can also issue debit and pre-paid cards in their name; operate electronic wallets; render financial advisory services and invest in Federal Government of Nigeria and CBN securities.
CBN said the PSBs were licensed to enhance access to final services for low-income earners and use technology to reach Nigerians in remote places where commercial banks find it difficult to operate.
According to the CBN guidelines, the PSBs are to offer smaller-scale banking operations and the absence of credit risk and foreign exchange operations.
Aside from operating current and savings accounts, they can also provide payments and remittance services, issue debit and prepaid cards, deploy Automated Teller Machines (ATMs), and other technology-enabled banking services to people who cannot be reached by traditional banks.
The PSBs are to facilitate high volume, low-value transactions in remittance services, micro-savings, and withdrawal services in a secured technology-driven environment to further deepen financial inclusion.
With a N5 billion minimum capital requirement, the apex bank also authorized PSBs to sell foreign currencies (forex) realized from inbound cross-border personal (remittances) to licensed foreign exchange dealers.
“PSBs shall have the privilege to make their investments from the CBN window. All funds in excess of the PSB’s operational float should be placed with DMBs. PSBs shall participate in the payment and settlement system and have access to the inter-bank and the CBN collateralized repo window for their temporary liquidity management,” it said.
“PSBs shall render quarterly returns indicating the number of financially excluded customers on-boarded during the quarter to which the returns relate. All PSBs shall be required to interface with the Nigeria Inter-bank Settlement System (NIBSS) platform in order to promote interconnectivity and interoperability of operations within the Nigeria banking system,” it added.
The CBN, in furtherance of its mandate to promote a sound financial system in Nigeria and the need to enhance access to financial services for low-income earners and unbanked segments of society, has instituted the Payment Service Bank.
The main goal of creating PSBs is to increase financial inclusion by giving small businesses, low-income households, and other financially excluded entities more access to deposit products and payment/remittance services through high-volume, low-value transactions in a secure, technology-driven environment.
The PSB must target people who are financially excluded and operate primarily in rural and unbanked areas, with at least 25% of their financial service touch points in these rural areas, as defined from time to time by the CBN. They must also enter into direct partnerships with card scheme operators.
