There is no doubt in our minds that the advent of mobile phones has opened consumers up to immense possibilities. From communications to financial transactions, our mobile phones has become a powerful device. To exploit the inherent benefits associated with mobile devices especially in the area of financial transactions, companies such as Paga, MTN’s MOMO, Kudi Mobile, etc have emerged and are dominating the scene as licensed operators.
On 3rd August 2021, the Central Bank of Nigeria (CBN) issued a circular mandating companies wishing to operate a combination of various payment service activities which includes; switching, processing and mobile money services to set up a Payment Service Holding Company Structure. What this means is that, where a company wishes to operate in more than one payment license category (i.e Switching, processing, mobile money service, other activities as approved by the CBN) at the same time, such company must set up a Holding company with a minimum of two subsidiary companies each of which payment service activities would be carried out separate and independent of each other. In the bid to avoid commingling of business activities, facilitate management of risks, and enable the Central Bank exercise sufficient oversight over subsidiaries operating within the holding company.
This article would however be restricted to circumstances in which a company wishes to obtain only a mobile money license.
WHO REGULATES MOBILE MONEY OPERATORS IN NIGERIA?
The Central Bank of Nigeria remains the regulatory agency for all financial institutions, including Institutions rendering mobile money services in Nigeria. The Nigeria Telecommunication Commission also regulate the activities of mobile money service in Nigeria.
Presently, the guidelines governing procedures for obtaining a Mobile Money License in Nigeria are;
- Central Bank of Nigeria Guidelines On Mobile Money Services in Nigeria, 2015 ( “the Guidelines”)
- The Central Bank of Nigeria Regulatory Framework on Mobile Money Services in Nigeria, 2021 ( “the Framework”)
WHAT ARE THE MODELS IN WHICH MOBILE MONEY SERVICES ARE TO BE CARRIED OUT IN NIGERIA?
The Central Bank of Nigeria has identified specifically two models for the implementation of mobile money services in Nigeria. Namely;
- The bank led model and/ or its consortium- This model applies where banks either alone or with consortium of banks, whether or not partnering with other approved organizations, seek to deliver banking services, using mobile payment system while acting as the lead initiator. Practical examples of licensed operators under this model are; “First Monie” by First Bank, Moni Agent by UBA, Sure Padi by Polaris Bank, etc.
- The non-bank led model- The lead initiator here are corporate organizations. They are non-banking organizations duly licensed by the central bank Nigeria to carry on the business of mobile money services to customers. Examples of licensed operators within this category are; Paga Mobile, Kudi Mobile, etc.
Please note, according to the framework, telecommunication companies are not captured under this model to offer mobile money services to customers.(See the CBN’s Regulatory Framework for Mobile Money Services, 2021)
WHAT ARE THE SCOPE OF ACTIVITIES TO BE CARRIED OUT BY MOBILE MONEY SERVICE OPERATORS?
Mobile money operators are permitted under the 2021 Guidelines to engage in the following activities:
- Wallet creation and management;
- Pool account management;
- E- money issuing;
- Agent recruitment and management;
- Card Acquiring;
- Non-bank acquiring as contained in the regulatory requirements; and
- Any other activities that maybe permitted by the Central Bank of Nigeria
However, they are prohibited from engaging in the following activities:
- Accepting foreign currency deposits;
- Granting any form of loans, advances and guarantees; either directly or indirectly;
- Dealing in the foreign exchange market.
- Insurance underwriting;
- Accepting scheme electronic value as a form of deposit or payment;
- Establishing any subsidiary;
- Undertaking any other transaction which is not prescribed by the Guidelines and;
- Any other activities that maybe prohibited by the CBN.
WHAT ARE CBN’s LICENSE REQUIREMENT FOR OBTAINING A MOBILE SERVICE LICENSE?
There are two stages involved in obtaining mobile money operator’s license in Nigeria;
i. Approval- In Principle
ii. Final license stage
REQUIREMENTS FOR GRANT OF MOBILE MONEY LICENSE
A formal application for the grant of a license is made and addressed to the Director, Payment System Management Department of the CBN, accompanied with the following documents:
1.Evidence of the formation of the Consortium that will deploy the project (Certificate of
2.The Consortium’s profile and functional contact e-mails and telephone numbers
3. Memorandum & Articles of Association
4. Shareholding structure of the Consortium
5. Forms C02 (Return on Allotment of shares) and C07 (Particulars of Directors)
6. CV’s of Board and Management of the Company
7. Organogram of the company
8. Business Plan, to include:
a. Nature of the Business
b. Features of the scheme
c. Securities features that will be put in place
d. Three (3) years Financial projections for the company
e. Transaction and other charges that will be borne by customers
f. Profit sharing agreement among the parties
g. Diagrammatic illustration of transaction flows
9. Information Technology Policy of the Company including:
b. Information Ownership/Disclosure/Loss Policy
c. Backup and Restore Policy
d. Network Security Policy
e. Encryption Policy
f. Confidential Data Policy
g. Password Policy
h. Third Party Connection Policy
i. Incidence Response Policy
j. Physical Security Policy
10.Enterprise Risk Management Framework
11.Contingency and Disaster Recovery Plan (Business Continuity Programme)
12.Draft agreements with the following:
a. Technical Partners
b. Participating banks
c. Switching company/(s)
f. Any other party
13. Tax Clearance Certificate for three years of each party in the consortium
14. Project deployment plan (time, location, operation, etc.)
15. Payment of non-refundable application fee of 100,000.00 (one hundred thousand naira) made payable to the CBN via the RTGS third party transfer.
16. Evidence of shareholders of fund of 2 billion naira before a license is issued.
WHAT IS THE SHARE CAPITAL REQUIREMENT FOR OBTAINING A MOBILE MONEY LICENSE?
According to the CBN guidelines and requirements for mobile money operator’s license, the minimum share capital for obtaining such license is two billion naira, which must be deposited with the CBN before a final license is issued.
HOW LONG DOES IT TAKE TO PROCESS A MOBILE MONEY LICENSE?
For the Approval in Principle stage, it takes 2 to 3 months, while the final license stage takes an additional 2 to 3 months.
Persons wishing to set up a mobile money service company should bear in mind the fact that an Approval-in-Principle must first be obtained before incorporation of such company can be done with the Corporate Affairs Commission.
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