Banks to disconnect non-deposit financial institutions from funds transfers

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Banks to disconnect non-deposit financial institutions from funds transfersThe Nigeria Inter-Bank Settlement System (NIBSS) has directed banks, and other financial institutions to disconnect switches, payment solution service providers, and super agents from its Instant Payment Outwards System (fund transfer channels).

NIBSS disclosed this in a circular dated December 5, 2023, with Ref: NIBSS/BD/NI/PO/005/051223 to Deposit Money Banks, merchant banks, switches, mobile money operators, payment service banks, microfinance banks, mortgage banks, payment solution service providers, super agents, and others

NIBSS explained that listing of non-deposit taking financial institutions as beneficiaries  contravenes the Central Bank of Nigeria, CBN,  guidelines on electronic payment of salaries, pensions, suppliers and taxes in Nigeria dated February 2014.

It said: “Directive to disconnect switches, payment solution service providers (PSSPs) and super agents (SA) from NIBSS Instant Payment (NIP) Outwards System.

“This is to bring to your attention that listing non-deposit taking financial institutions such as switching companies (Switches), PSSPs and SA as beneficiary institutions on your NIP funds transfer channels contravenes the CBN Guidelines on Electronic Payment of Salaries, Pensions, Suppliers and Taxes in Nigeria dated February 2014.

“For clarity, Switches, PSSPS and SAs may process outward transfers as inflows to banks but are not to receive inflows as their licenses do not permit them to hold customers’ funds.”

This means that financial technology companies (Fintechs) that appear on the NIBSS Instant Payments (NIP) platform as banks receiving deposits by generating reference numbers that mimic bank accounts and by utilizing core-banking applications will no longer carry out such  practice.

Consequently, the name of any account created by Fintechs will not appear in the lists of banks when a customer attempts to credit such an account. However, outward fund transfer will remain operational.

The directive does not affect those Fintechs that partner with banks. Such collaborations allow them to generate dedicated accounts that carry the bank’s name.

However, Fintechs using customized names are likely to be affected by such change.

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