Banks ordered to remove non-deposit-taking financial institutions from transfer list

Through a circular dated December 5, 2023, the Nigerian Interbank Settlement System (NIBSS) has directed banks to remove non deposit financial institutions from their transfer lists. According to NIBBS, these institutions are only permitted to process money—not to store it.

It referred to the CBN’s February 2014 recommendations on the electronic payment of salaries, pensions, suppliers, and taxes in Nigeria pointing out that listing such institutions on the transfer list is a violation of the existing rules.

The non deposit taking institutions include Super agents, switches and payment solution service providers (PSSPs). They can process outgoing transactions as inflows to banks, but they are not allowed to accept inflows because their licenses do not allow them to store customers’ funds, according to the statement.

This means that since payment gateways like Flutterwave and Paystack are PSSPs and cannot store deposits, they shouldn’t be on the NIP outward list. The CBN recommendations on the electronic payment of salaries, pensions, suppliers, and taxes in Nigeria, which were published in February 2014, were cited by NIBBS.

The guideline outlines the obligations of all parties involved in the end-to-end electronic payment process, including payment recipients, paying organizations, deposit money banks, other financial institutions, transaction switching businesses, payment solution providers, and regulatory bodies. As per the Central Bank of Nigeria’s (CBN) announcement on April 9, 2020, the licensing process for payment systems in Nigeria has been simplified