The Central Bank of Nigeria (CBN) has imposed a fine of N250 million on Paystack, a Nigerian payment processing company, for launching its consumer-facing app, Zap, without obtaining the required regulatory approvals.
As reported by TechCabal, the CBN penalised Paystack for violating financial regulations by holding customer funds without the appropriate deposit-taking licence and facilitating cross-border transfers without the necessary authorisation.
Zap’s cross-border transfers violate CBN’s regulations
Launched in March without CBN’s go-ahead, Zap allows users to transfer money between bank accounts. However, the app does not have the proper approval to store funds, similar to a commercial bank. This regulatory violation drew the attention of the Central Bank, which closely monitors fintech operations in Nigeria.
The scrutiny around Zap grew more intense following a trademark dispute between Paystack and another fintech company, Zap Africa. Both companies claimed ownership of the ‘Zap’ name, prompting regulators to investigate Paystack’s product. What initially started as a trademark issue evolved into a broader enquiry that revealed other regulatory violations.
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One of the primary infractions noted by the CBN was Zap’s facilitation of international transfers without holding the necessary licence as an International Money Transfer Operator (IMTO), which is required for any cross-border payment service.
As a result of these violations, the imposition of a fine was inevitable. The Central Bank has maintained a strict stance against companies that disregard its financial regulations.
Zap remains under regulatory scrutiny as the CBN continues its efforts to strengthen oversight of Nigeria’s growing fintech sector.