Nigeria’s Central Bank has imposed a ₦250 million (about $190,000) fine on Paystack, a leading Nigerian fintech firm, over alleged regulatory violations tied to its new consumer app, Zap by Paystack. This development was confirmed by a source familiar with the matter.
The CBN claims that Zap, a peer-to-peer money transfer application introduced in March, effectively operates as a digital wallet, a service that requires a different category of licence. While Paystack currently holds a switching and processing licence, which allows it to facilitate financial transactions between banks and institutions, it does not have the necessary authorisation to hold customer deposits. The regulator considers this a core issue behind the sanction, the source said.
According to the CBN, the way Zap functions aligns more with a deposit-taking service, which is legally reserved for institutions with microfinance or full banking licences. This kind of operation goes beyond Paystack’s approved regulatory scope.
A Paystack spokesperson commented to TechCabal, saying, “Paystack is working closely with the regulator as they further review Zap, and out of respect for the process, we won’t be making any public comments at this time.”
In Nigeria’s tightly monitored financial sector, digital wallets are defined as platforms that store user funds, support transactions and transfers, and sometimes offer financial planning tools. The central bank has become increasingly strict about ensuring fintechs do not operate outside the bounds of their licensed activities.
Sources told TechCabal that Zap does not directly hold customer funds. Instead, it works in partnership with Titan Trust Bank, which is duly licensed to manage deposits. Still, the CBN appears concerned that the structure could blur regulatory lines, prompting the hefty penalty.
This marks Paystack’s most significant regulatory fine since it secured CBN approval in 2016. The situation highlights the regulatory risks associated with fintechs branching into consumer finance from their traditional business-to-business model.
Zap’s launch had signalled Paystack’s intention to tap into Nigeria’s expanding consumer payments market. However, controversy soon followed. A legal dispute arose when Zap Africa, a Nigerian crypto startup, accused Paystack of infringing on its trademark, a matter that remains unresolved.
This fine comes amid increasing scrutiny of fintech operations in Nigeria. Over the past year, authorities have ramped up oversight on issues like customer verification and onboarding processes. In 2024’s second quarter, two major players—Moniepoint and OPay—were each fined ₦1 billion over separate compliance breaches.
