Nigeria-based payment processor, Paystack, has been slammed with a ₦250 million fine by the Central Bank of Nigeria (CBN), its largest known sanction to date.
The fine is coming amid the crackdown by Nigerian authorities on Fintech companies that do not comply with regulations concerning Know-Your-Customer (KYC), fraud prevention and operating licenses.
After the unveiling of Paystack’s peer-to-peer transfer application, Zap, there have been lots of concerns over the platform’s lack of regulatory compliance and the potential punishment that will follow.
According to the CBN, Zap works like a wallet, and that is a service that should be handled by companies with banking or microfinance licenses.
And while Paystack is a switching and processing license holder, which certifies it to aid transactions between financial institutions, it has no authorisation to hold customer funds.
CBN inspectors have always been of the opinion that Zap operating as a digital wallet was a direct violation of regulatory guidelines that will have to be addressed.
Paystack has maintained that Zap was launched in collaboration with Titan Trust Bank, a CBN-regulated company with an official license to hold deposits, but the Central Bank of Nigeria never changed its stance about Paystack erring despite the laid-down regulations.
CBN has punished several Fintech brands amid its regulatory scrutiny in recent years. Its increased effort to curb violations has led to major penalties for several companies who have tried to circumvent the rules.
As part of its effort to safeguard Nigeria’s financial system, CBN recently ordered the Nigeria Inter-Bank Settlement System (NIBSS) to start debiting the settlement accounts of banks and Fintechs who are found to have processed fraudulent transactions, effective from January this year.
Just last year, the CBN directed 4 popular Fintech organisations, OPay, Kuda Bank, Moniepoint, and PalmPay, to immediately suspend new customer registration due to ineffective KYC procedures.
