Payment Service Holding Company: Digital Payments Industry Remains Significantly Under Tapped


Thursday, August 05, 2021 / 3:35 PM / By CSL Research / Header Image Credit: arabnews


The Central Bank of Nigeria (CBN) on 3 August 2021, in a new circular released, issued new guidelines for the registration and regulation of a Payment Service Holding Company (PSHC) in Nigeria. The guideline is expected to facilitate the regulatory requirement for the operations of a PSHC in the country, and it is coming on the back of the recently issued circular on licence categorization within the Nigerian Payments System (NPS).

The CBN had approved new licence categorisations for participants in the payments system. The regulation requires companies that wish to operate more than one licence category to set up a Payments Service Holding Company (PSHC), while clearly separating the activities of the subsidiaries. This, according to the CBN is to help the regulator better manage the inherent risks and achieve better regulatory oversight of all the companies operating within the Group.


The affected regulated payment activities are Mobile Money Operations, Switching and Processing, Payment Solution Services and any other activity as may be approved by the CBN

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Among other points, the guideline states that;

1) The PSHC shall be non-operating, existing solely to carry out investment in approved subsidiaries without engaging in the day-to-day management and operations of subsidiaries.


2) For any PSHC structure to emerge, there shall be at the minimum, two subsidiaries, which include a Mobile Money Operator (MMO) and a Switching company.


3) The CBN may, by order, direct a PSHC to divest from a subsidiary where, in the opinion of CBN, the PSHC is being run in a manner that is detrimental to the subsidiary and/or stability of the financial system.


The Nigerian payment industry remains at its nascent stage of development with a huge portion of transactions done in cash. Nevertheless, the payments industry has evolved in leaps and bounds with the development of electronic payments and Automated Teller Machines in Nigeria. The development of the industry in terms of payment channels and solutions stands favorably with the most developed in the world especially with the recent use of QR Codes for payments. The average Nigerian consumer now has the option to make payments via multiple channels including Point of Sale terminals, Automated Teller Machines, Mobile Payments, web payments etc.


Despite the increasing payment channels available to Nigerian consumers, the digital payments industry remains significantly under tapped. Payment for goods & services are mainly done with cash. According to the Enterprise Development Centre (EDC) of the Pan African University, cash payment accounted for 95.3% of transaction volumes at the end of 2018.This compares less favourably with SSA figures of 88.5% cash payments. Nevertheless, we highlight that the volume of non-cash transactions in Nigeria has improved significantly from 2013, when EDC puts Nigeria's cash payment at 99.6% of total transaction volume.

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