In a significant move aimed at curbing fraud and addressing lapses in customer verification processes, the Nigeria Inter-Bank Settlement System (NIBSS) has issued a warning against unlicensed financial services companies masquerading as deposit-taking institutions. In a memo to banks, fintechs, and other payment providers, NIBSS emphasized that companies with switching, payments processing, and superagent licenses are not deposit-taking institutions. The memo, sent on December 5, stated that listing these institutions as beneficiaries in bank transfers violates the Central Bank of Nigeria's guidelines on electronic payments.
NIBSS, responsible for Nigeria's widespread instant payments system, directed commercial banks, mobile money operators, and microfinance institutions to disable outward fund transfers into wallets operated by these firms. The regulatory body highlighted that superagents, payment solution service providers (PSSPs), and switches play crucial roles in payment infrastructure and offline distribution, contributing to financial inclusion. However, the memo clarified that their licenses do not permit them to hold customers' funds.
This move by NIBSS is expected to prompt increased scrutiny from banks and fintechs, possibly leading to the removal of several fintechs from consumer payments apps. The directive aligns with the industry's efforts to combat illicit fund transfers and address concerns regarding weak verification processes by certain companies. Notably, this regulatory action follows instances like Fidelity Bank's temporary restriction of consumer fund transfers to neobanks, citing rising fraud and customer verification issues. The financial services sector is exploring additional initiatives to enhance security and anti-fraud measures, signaling a broader industry shift in response to evolving challenges.
