The Central Bank of Nigeria (CBN) has imposed a penalty of ₦250 million on Paystack for running Zap, their peer-to-peer payment application, as a wallet without adhering to the required regulatory permissions.
The top financial institution labeled Zap as a service for taking deposits, which is a role solely designated for entities holding microfinance or banking licenses, as reported by TechCabal.
Introduced in March, Zap enables users to transfer funds both ways, presenting itself as a user-friendly digital wallet for consumers.
Nevertheless, Paystack possesses merely a switching and processing license. This allows them to enable transactions without holding client money. The central bank’s restriction regarding this regulation is the core reason for their penalty, as per informed sources.
“Paystack is collaborating closely with the regulatory body during their ongoing assessment of Zap. In deference to the procedure, we will refrain from making any public statements at present,” stated a representative from the firm.
The fine arises due to a legal disagreement between Paystack and Zap Africa, a Nigerian cryptocurrency company, which alleges that the financial technology firm has violated its trademarks.
In Nigeria’s tightly controlled financial sector, digital wallets are classified as institutions that accept deposits. Providing these services without the necessary license poses regulatory compliance issues for the authorities.
Even though Zap allegedly doesn’t handle customer funds directly, it collaborates with Titan Trust Bank, an institution licensed to receive deposits.
This is Paystack’s most significant publicly disclosed regulatory sanction since it received CBN approval in 2016. It reveals the growing scrutiny facing fintech firms as they transition from enterprise-focused offerings to consumer-facing financial services.
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