Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria

These guidelines create and regulate the Payment Service Bank (PSB), a digitally-focused, deposit-taking institution designed to advance financial inclusion by reaching the unbanked and underbanked, particularly in rural areas. The PSB model was introduced by the CBN in 2018 and the licensing requirements were revised in August 2020. PSBs leverage mobile and agent channels to provide a restricted set of banking services. The guidelines apply to entities seeking a PSB licence, including telecommunications companies (through subsidiaries), banking agents, retail chains, mobile money operators, postal services and other CBN-approved promoters. Permissible activities include accepting deposits from individuals and small businesses, carrying out payments and remittance services (including inbound cross-border personal remittances), issuing debit and prepaid cards, operating electronic wallets and selling foreign currencies realised from inbound remittances. Critically, PSBs are prohibited from granting loans, advances or guarantees, from accepting foreign-currency deposits, from dealing in the foreign-exchange market except as permitted, and from insurance underwriting, distinguishing them sharply from conventional commercial banks. The guidelines set a minimum capital requirement of N5 billion and require PSBs to maintain prescribed liquidity and to invest a substantial proportion of deposits in government securities. PSBs must establish a significant proportion of their access points in rural, unbanked locations and meet defined geographic-spread targets to fulfil the financial-inclusion mandate. They are subject to CBN prudential supervision, AML/CFT and KYC obligations, technology and cybersecurity standards, consumer-protection rules and periodic reporting. Enforcement is through licence conditions and the CBN's powers to sanction, suspend or revoke. The PSB licence has been the route by which major telecommunications operators entered Nigerian financial services, making this instrument central to the structure of the country's digital-banking market.

1. 1Creates the Payment Service Bank: a digital, inclusion-focused deposit-taker reaching unbanked and rural customers
2. 2Permitted: deposits, payments/remittances (including inbound cross-border), card issuance, e-wallets, sale of FX from inbound remittances
3. 3Prohibited: lending, advances/guarantees, FX-market dealing (save as permitted), foreign-currency deposits and insurance underwriting
4. 4Minimum capital of N5bn plus liquidity and government-securities investment requirements
5. 5Mandated rural/unbanked access-point spread to deliver the financial-inclusion objective
6. 6CBN prudential supervision, KYC/AML-CFT, technology and consumer-protection compliance with periodic reporting