Central Bank of Nigeria Imposes Fine of ₦250 Million on Paystack for Zap Wallet Breach
Paystack, a popular Nigerian fintech company, has been fined ₦250 million ($190,000) by the Central Bank of Nigeria (CBN) for operating its new consumer app, Zap by Paystack, without the proper license. This regulatory action against Paystack indicates a potential challenge for fintechs operating in Nigeria without the necessary licenses.
Zap, a peer-to-peer money transfer app launched by Paystack in March, is allegedly operating like a deposit-taking product. However, operating a deposit-taking product is a function only allowed for firms with a banking or microfinance license in Nigeria. Paystack, on the other hand, currently holds a switching and processing license, which does not permit holding customer funds.
This is Paystack's biggest known regulatory penalty. The fine signifies the risks fintechs face when entering Nigeria's tightly regulated consumer finance space. It also adds to mounting pressure on Nigeria's fintech sector, following similar fines imposed on Moniepoint and OPay earlier in 2024 over KYC and compliance lapses.
The CBN is increasingly assertive about compliance in the financial sector. In a statement, the regulator noted that Paystack did not have the authorization to provide deposit-taking financial services, which are regulated under Nigerian financial laws. A spokesperson for Paystack stated that they are working closely with the regulator and will not make any public comments at this time.
The regulatory action against Paystack is a reminder of the importance of adhering to financial regulations in Nigeria. 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 against Paystack comes amidst growing scrutiny of fintechs in Nigeria. With fraud and financial instability on the rise, the CBN is tightening its oversight in the sector. This assertive approach to compliance is a positive step towards ensuring the stability and integrity of Nigeria's financial sector.
In a separate development, Zap Africa, a crypto startup, is currently involved in a trademark dispute with Paystack over the name "Zap". The launch of Zap by Paystack marked a bold consumer push, but it quickly ran into legal and regulatory headwinds. Paystack reportedly partnered with Titan Trust Bank to hold deposits, but this has not shielded it from regulatory action.
As the fintech sector continues to grow in Nigeria, it is clear that compliance with financial regulations will be crucial for the success and survival of fintech companies in the country.
Technology-driven business ventures, such as the fintech industry, must prioritize adherence to finance regulations in Nigeria to evade penalties like the ₦250 million fine imposed on Paystack. This fine is a reminder of the importances of maintaining financial regulatory compliance to navigate and survive in Nigeria's rapidly expanding fintech sector.
