PAYMENT SERVICE BANKS (PSBs) In Nigeria – Financial Services

The Central Bank of Nigeria (CBN) recently granted licenses to operate as Payment Services Bank (PSB) to two telecommunications companies. It is after these companies have met a series of applications and requirements. This license allows these telecommunications operators to complement other banks rather than compete with them.

What are payment service banks?

Payment Service Banks is a licensed company to use technology and branch banking to mobilize deposits and facilitate transfers from unbanked consumers in rural areas and any other location in Nigeria where they exist. This means that technology-driven companies are granted a license to engage in banking activities such as savings, deposits and withdrawals in rural areas or places where banking activities are restricted.

In August 2020, the Central Bank of Nigeria issued a guideline for licensing PSB in Nigeria. The main objective is to improve financial inclusion by expanding access to deposit products and payment/remittance services for small businesses, low-income households and other financially excluded entities through high-volume, low-value transactions in a secure, technology-driven environment. . In light of existing CBN guidelines, the following types of businesses are eligible to establish PSBs: bank agents, telecom companies, retail chains, mobile money operators, change banks, etc.

In addition, these PSB license operators are to operate mainly in rural areas and unbanked locations, deploy ATMs and POS in these locations, issue ATM cards when needed, use their channel to reach customers, establish centres, kiosks or outlets to reach customers in rural communities, etc.

Functions of payment service banks

PSB License Operators perform the following functions, including:

  • Accept deposits and withdrawals from individuals and small businesses

  • Issue debits and prepaid cards in their name

  • Exploit the electronic purse

  • Provide financial advice

  • Perform such other activities as may be prescribed by the CBN from time to time.

Although PSB license operators receive licenses to complement commercial banks, they are however restricted in carrying out other activities, including:

  • Grant loans

  • Accept foreign currency deposits and trade in foreign exchange markets

  • Granting of insurance products

  • Accept any closed-system electronic value (e.g. airtime) as a deposit or payment

Licensing requirement for payment service banks

To obtain a PSB license, there are two steps to follow which include:

  • Obtain the Grant of Approval-in-Principle (AIP)

  • Get the Grant for a Permanent Banking License

Requirements for granting Approval in Principle (AIP)

The first step to obtain a PSB license is to submit a formal application for the grant of a Payment Services Bank License addressed to the Governor of the CBN together with a proposal to be submitted to the Director of the Department of Policy and Regulation (FPRD), CBN. The proposal should contain the business case, vision and strategy, corporate governance arrangements, risk management, compliance; and financial viability. It is therefore followed by:

  • A non-refundable application fee of N500,000 (five hundred thousand naira only) by bank draft, payable to the Central Bank of Nigeria or such other amount as the CBN may specify from time to time

  • Proof of the capital contribution made by each shareholder

  • Proof of name reservation with the Corporate Affairs Commission (CAC)

  • Detailed business plan or feasibility report

  • Draft copy of the memorandum and articles of association of the company (MEMART)

  • A written undertaking duly signed by the promoters that the bank will be sufficiently capitalized for the volume and character of its business at all times, and that the CBN will have the power to supervise and regulate its operations

  • Shareholders’ agreement providing for the sale/transfer of shares as well as authorization, modifications, waivers, reimbursement of expenses

  • Declaration of intent to invest in the bank by each investor

  • Technical Services Agreement

  • Detailed manuals and policies, in particular

However, the process is slightly different for corporate investors as promoters must submit the following additional documents:

  • Certificate of incorporation and certified copies of other incorporation documents

  • Board resolution supporting the company’s decision to invest in the shares of the proposed bank

  • Names and addresses (business and residential) of owners, directors and their related companies, if any; and

  • Audited financial statements and company reports and tax clearance certificate for the immediate past 3 years.

When all the above conditions are met, the CBN notifies the applicant of its decision within 90 days. When the CBN is satisfied with the application, it grants the applicant an Approval in Principle (AIP).

In addition, it should be noted that payment service bank applicants should not incorporate/register their name with the CAC until an AIP has been obtained in writing from the CBN, a copy of which must be presented to the CAC for registration.

Requirements for granting a permanent banking license

Applicants for a planned PSB must apply to the CBN for the grant of a definitive license no later than six (6) months after receipt of the AIP. The request must be accompanied by the following elements:

  • Non-refundable license fee of N2,000,000.00 (two million naira only) in bank draft payable to the Central Bank of Nigeria

  • Certified true copy (CTC) of the bank’s certificate of incorporation


  • CTC of the CAC 1.1 form

  • Proof of head office location (leased or owned) for business start-up

  • Timing of changes, if any, in the board of directors and shareholding after the granting of the AIP;

  • Evidence of ability to meet modern technical requirements and infrastructure facilities such as office equipment, computers, telecommunications, to perform banking operations and to comply with CBN and other regulatory requirements;

  • Copies of letters of offer and acceptance of employment with respect to the management team;

  • Detailed CVs of senior managers;

  • Aptitude and propriety questionnaire completed; and sworn statement of net worth signed by management personnel;

  • Bank verification number (BVN) and tax clearance certificate of each senior executive;

  • Complete plan on the start of bank operations with milestones and timelines for the deployment of crucial payment channels; and

  • Board and staff training program.

Once the above requirements have been met, the Central Bank of Nigeria will conduct another inspection, which includes: verification of the physical structure of the building, verification of capital contributions from the developers, meeting with the board of administration and management team whose resumes were previously submitted to CBN, check the original copy submitted in support of the license.

More so, the minimum registered capital for companies or investors wishing to obtain a PSB license is Five Billion Naira (₦5,000,000,000.00)


Over 51% of Nigerian adults operate through the banking system. There is a strong need for the unbanked or bank illiterate to access banking activities at their convenience. For this reason, the CBN strives to grant the PSB license to entities and investors seeking to comply with its policies and achieve its objectives.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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