CBN unveils guidelines for payments system firms

The Central Bank of Nigeria (CBN) has unveiled guidelines for licensing and regulation of payments system holding companies (PSHC), stressing that companies must exist as non-operating entities in the ecosystem.

The guideline is a follow-up to an earlier template on new license categorisation, which required companies with an interest in switching/processing and mobile money service to set up holding structures.

In an accompanying circular issued yesterday and signed by the Director, Payments System Management Department, Musa Jimoh, the CBN insisted that PSHC must maintain a minimum of two subsidiaries with a focus on switching and mobile money services.

The guideline covered broad areas such as licensing process/requirements, ownership, corporate governance, permissible/non-permissible activities and prudential regulation.

“For the purpose of this regulation, a PSHC is a company whose principal object clause include the business of a holding company set up for the purposes of making and managing equity investment in two or more companies, being its subsidiaries, which are payments service providers across the following categories Mobile Money Operations, switching/processing and payment solution services.

“The PSHC shall be non-operating, existing solely to carry out investment in approved subsidiaries without engaging in the day-to-day management and operations of subsidiaries,” the regulator noted in the new document.

According to the Bank, the approval process shall be in two stages – approval-in-principle and final licence. Applicants are required to pay non-refundable application fees of N1 million for the first stage of approval and N5 million for the final licence.

Concerning ownership, it stated: “Prior approval of the CBN shall be obtained for any shareholding of five per cent and above, or any change in ownership that results in a change in control of the PSHC.

“Where such shares are acquired through the secondary market, the PSHC shall apply for approval from the CBN within seven days of the acquisition.

“Subsidiaries of a PSHC are prohibited from acquiring shares in the PSHC. Subsidiaries are prohibited from acquiring shares of other subsidiaries of their parent PSHC.”

Where a PSHC loses control of any of the two payments services subsidiaries for a period exceeding six consecutive months, it maintained, “the PSHC shall cease to be a PSHC and will be required to return its licence to the regulator for cancellation”.