CBN bars Payment Service Banks from accepting forex deposits

The Central Bank of Nigeria has barred operators of Payment Service Banks (PSBs) from accepting foreign exchange deposits and to accept any closed scheme electronic value (airtime) as a form of deposit or payment.

This was disclosed by the apex bank in the reviewed guidelines for licensing and regulations of PSBs released on Thursday on its website.

In the new guideline, which is the upgraded version of the circular the CBN issued on October 05, 2018 to all banks, telecommunications firms, Mobile Money Operators and banking agents among others, the apex bank emphasised that PSBs are not allowed to grant any form of loans, advances and guarantees (directly or indirectly.)

The document, which was signed by Kevin Amugo, Director, Financial Policy and Regulation Department, CBN, added that the name of PSBs must not include any word that links it to the parent company.

Permissible Activities
Payment Service Banks shall carry out the following activities:
* Accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme;
* Carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria;
* Sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers;

* Issue debit and pre-paid cards on its name;
* Operate electronic wallet;
* Render financial advisory services;
* Invest in FGN and CBN securities; and
* Carry out such other activities as may be prescribed by the CBN from
time to time.

Eligible promoters

The following may promote PSBs:
* Banking Agents;
* Telecommunications companies (Telcos), through subsidiaries;

* Retail chains (supermarkets, downstream petroleum marketing companies);
* Postal services providers and courier companies;
* Mobile Money Operators (MMOs that desire to convert to PSBs shall comply with the requirement of this Guideline);
* Switching Companies;

* Financial technology companies (Fintech);
* Financial Holding Companies; and
* Any other entity on the merit of its application subject to the approval of the CBN.

It stated, “Where the promoter of a PSB is a regulated entity, it shall be required to obtain approval or a ‘no objection letter’ from its primary regulator and submit same at the licensing application stage to the CBN.”

#CBN issues revised guidelines for the Licensing and Regulation of Payment Service Banks (PSBs) in Nigeria...https://t.co/WTuFJo9xNa #PSBs

— Central Bank of Nigeria (@cenbank) August 27, 2020

Why it matters: Despite several initiatives including the Introduction of Microfinance banking, Agent Banking, Tiered Know-Your-Customer Requirements and Mobile Money Operation (MMO), the inclusion rate remains below expectation, as about 80% of the bankable adults in Nigeria do not have access to financial services.

CBN embraced the PSB initiative to promote a sound financial system in Nigeria and to enhance access to financial services for low-income earners and unbanked segments of the society.