The CBN has mandated that Payment Service Banks (PSBs) serve underserved populations by focusing on rural and unbanked areas.
Having at least 25% of financial service touch points in such rural areas as determined by the apex bank from time to time is a requirement of the Payment Service Banks supervisory framework established by the CBN for the sector.
Moreover, they plan to team up with the people who run the various card systems. Any purchases made with one of these cards would have to be made in the local currency, while they would be free to use ATMs, POS terminals, and financial agents in other parts of the world.
The PSBs have also been given permission by the CBN to build coordination centers in clusters of outlets to supervise and oversee the activities of the numerous financial service touch points and banking agents, as well as to roll out agent networks with or without CBN clearance.
The PSBs have been given permission to accept deposits from individuals and small businesses, which will be insured by the CBN’s deposit insurance scheme; to provide payments and remittances services (including inbound cross-border personal remittances) through a variety of channels within Nigeria; and to sell foreign currency profits made on inbound cross-border personal remittances to authorized foreign exchange dealers.
The CBN has given PSBs permission to act as its agents in a number of ways, including issuing debit and prepaid cards, running electronic wallets, providing financial advising services, investing in Federal Government of Nigeria and CBN assets, and more.
The Central Bank of Nigeria (CBN) stated that PSBs were granted permission to employ technology to expand access to banking services for low-income Nigerians in areas where traditional banks have difficulty setting up shop.
In accordance with CBN regulations, PSBs are restricted from engaging in large-scale banking activities, including credit risk and foreign exchange transactions.
Traditional banks are unable to serve the vast majority of the population, while fintech startups can provide current and savings accounts, payments and remittance services, debit and prepaid cards, ATMs, and other technology-enabled banking services.
To further expand access to financial services, PSBs are tasked with providing a safe, technologically-driven environment for huge volumes of low-value transactions like remittances, microsavings, and withdrawals.
The central bank mandated a minimum capital requirement of N5 billion, and it authorized PSBs to submit quarterly reports detailing the number of previously unbanked consumers who were brought into the financial system during the reporting period.
To encourage connectivity and interoperability between financial institutions, it was stated that PSBs will need to join to the Nigeria Inter-bank Settlement System (NIBSS) platform.
The CBN’s Payment Service Bank Supervisory Framework grants PSBs the authority to accept deposits from individuals and small businesses, which are then insured by the CBN’s Deposit Insurance Scheme; process payments and remittances (including inbound cross-border personal remittances) within Nigeria via a variety of channels.
According to the guidelines, service providers should use technology to make their offerings more accessible to the financially excluded and people living in remote places.
The corporate governance, risks management, and consumer protection of the Payment Service Banks’ goods are the main concerns of the framework.
The PSBs’ activities would be far more likely to succeed if they incorporated solid risk management methods, another goal of this Framework.
The PSBs must follow the regulations currently in effect as well as the CBN’s prudential recommendations and circulars.
