Central Bank of Nigeria Imposes ₦250M Fine on Paystack for Violations in Zap Wallet Operations
Paystack Faced a ₦250 Million Fine for Operating Unlicensed Wallet Service
Paystack, a popular Nigerian fintech company, has been fined ₦250 million ($190,000) by the Central Bank of Nigeria (CBN) for operating its peer-to-peer money transfer app, Zap, without the necessary licensing. This penalty is the biggest known regulatory penalty the company has received to date.
The regulations for digital lenders and fintech consumer finance operations, effective in 2025, require explicit licenses from the CBN for digital wallets and deposit-taking services. Failure to comply can result in significant fines.
Zap, which operates like a deposit-taking product, falls under this category. According to the CBN, Zap functions in a manner that requires a banking or microfinance license, a privilege only granted to firms with such licenses. In Nigeria, "wallets" are tightly defined, and offering deposit-holding features without the right license puts fintechs in conflict with the Central Bank.
The fine serves as a sign of the risks fintechs face when entering Nigeria's tightly regulated consumer finance space. Fintech companies must ensure they possess the relevant licenses, comply with the FCCPC's consumer lending regulations, and maintain transparency and consumer protections to avoid penalties.
In addition, the CBN is increasingly assertive about compliance in the consumer finance space. Earlier in 2024, Moniepoint and OPay were fined ₦1 billion each due to KYC and compliance lapses.
Navigating this strict regulatory framework is crucial for fintech companies operating in Nigeria. They must adhere to the Nigerian Data Protection Act 2023, Nigerian Communications Act 2003, among other applicable laws. They need to submit biannual reports, file annual returns, and produce records within 48 hours upon request. Digital lenders must also undergo regular audits and comply with reporting requirements to the Federal Competition and Consumer Protection Commission (FCCPC).
It's worth noting that the trademark dispute between Zap (launched by Paystack) and crypto startup Zap Africa remains unresolved. A spokesperson for Paystack stated that the company is working closely with the regulator and will not make any public comments at this time.
This incident underscores the importance of adhering to regulatory guidelines in the fintech industry. As the sector continues to grow, so does the need for clear and stringent regulations to protect consumers and maintain financial stability.
Businesses in the fintech industry, such as Paystack, must adhere to strict regulations set by authorities like the Central Bank of Nigeria (CBN) to avoid significant fines. For instance, the fine Paystack received for operating Zap, a deposit-taking product, without the right licenses reached ₦250 million.
Technology advancements in the general-news sector, like fintech, necessitate clear regulations to ensure consumer protection and maintain financial stability, as demonstrated by Paystack's fine for non-compliance with CBN regulations.
