The Registration Processes for FinTech Companies in Nigeria

INTRODUCTION

Financial technology is commonly referred to as “Fintech”. Technology is advancing and changing diverse sectors in the landscape and development of human activities and the financial world is not excluded with this development. Financial technology (better known as fintech) is used to describe recent technology that seeks to improve and automate the delivery and use of financial services.[1] To kickstart a financial technology (fintech) company in Nigeria there is need for registration and the registration of a company marks the beginning of harnessing innovation and meeting regulatory standards. Fintech, at its core, represents the intersection of finance and technology, revolutionizing traditional financial services through the use of digital payments, blockchain technology, and robo-advisors.

The process of registering a fintech company involves navigating a complex regulatory environment that varies across jurisdictions. From compliance with financial regulations to data protection laws, each aspect plays a pivotal role in shaping the operational framework of these innovative enterprises. The registration process of a fintech company not only establishes legal legitimacy but also instills confidence among stakeholders, including investors, partners, and consumers.

REGULATORY BODIES RESPONSIBLE FOR THE REGISTRATION OF A FINTECH COMPANY

7. Central Bank of Nigeria (CBN): The Central Bank of Nigeria is the Apex bank in Nigeria with the responsibility of ensuring and promoting sound financial system in Nigeria. Consequently, the central Bank is charged with the mandate of administering and enforcing the Banks and Other Financial Institutions Act (BOFIA), 2020, and ensuring that high standards in banking practice is maintained  and financial stability is achieved through  monitoring and supervision of other financial institution  such as fintech companies. [2] CBN also ensure the promotion of an efficient payment system.
8. Securities and Exchange Commission (SEC): This Commission was established by the Investment and Securities Act 2007.[3] The Securities and exchange Commission is responsible for the registration and regulation of securities exchanges, capital trade points, future options, derivatives exchanges, commodity exchanges and any other recognized investment exchange. The SEC is responsible for the registration of securities and serves as market intermediaries to ensure that only fit and proper persons / institutions are allowed to operate in the capital market. All fintech companies must register their securities with SEC.
9. Corporate Affairs Commission (CAC): The Companies and Allied Matters Act 2020 established the Corporate Affairs Commission. CAC is responsible for the regulation and supervision of the formation, incorporation, management and winding up of companies[4]. Companies including financial institutions must be incorporated with the CAC to carry on business in Nigeria.
10. Nigeria Deposit Insurance Corporation (NDIC): The NDIC are responsible for insuring all deposit liabilities of licensed financial institutions the importance of this is to protect depositors and customers of the financial institution and guarantee the settlement of insured funds when the financial institution is either bankrupt or cannot pay its depositors. FinTech companies in the business of receiving deposits and savings are required by law to register with the NDIC.
11. Nigerian Communications Commission (NCC): The NCC regulates telecommunication in Nigeria, and it is empowered by the Nigerian Communication Act 2003. FinTech companies that use mobile networks and data are under the regulatory purview of the NCC.
12. National Information Technology Development Agency (NITDA): A major component of the FinTech company is data protection. The NITDA is responsible for making and enforcing data protection regulations in Nigeria pursuant to NITDA ACT 2007. The NITDA issues in 2019 the Nigerian Data Protection Regulation. Which service as the first regulation and legal guideline for data protection in Nigeria.
13. National Insurance Commission (NAICOM): NAICOM is responsible for ensuring the effective administration, supervision, regulation, and control of insurance business in Nigeria and to protect insurance policyholders, beneficiaries, beneficiaries and their third parties to insurance contract[5]. Fintech like Insurtech companies carry on insurance business, they will require licence from NAICOM.
14. The FIRS: The FIRS is central federal tax regulating agency in Nigeria. Fintech companies are mandated to remit income tax, withholding tax, value-added tax, and stamp duties to the government through the FIRS.
15. The Nigeria Data Protection Commission (NDPC): The NDPC is established by the Nigeria Data Protection Act, 2023 (“NDPA”) and they are in charge of regulating the deployment of technological and organizational measures to enhance personal data protection. Fintech companies that handle, process, store, or transfers people’s data are required to adhere to the strict provisions of the NDPA and the subsequent regulations that may be made by the NDPC.

TYPES OF FINTECH COMPANIES

1. Digital banks
2. Lending/credit companies
3. Payment Service Banks
4. Blockchain and cryptocurrency companies
5. Robo-Advisory services

REGISTRATION PROCESS OF A FINTECH COMPANY IN NIGERIA

In Nigeria, not all types of fintech companies have the same license to operate. Digital banks like Opay, and Palmpay must be licensed by CBN as Mobile Money Operators (MMO). Payment service bank like flutterwaves. Paypal, paystack, and payattitude are licensed as Payment Service Providers.

REGISTRATION WITH CORPORATE AFFAIRS COMMISSION

To register a company with CAC in Nigeria, the following steps should be followed. However, these steps are carried out only by an Accredited Agent with CAC

1. Name Reservation: To register a company there is a need to check for availability of your desired company’s name. The essence of reservation of names is to ensure that the desired name of the Fintech company is not in contravention with Section 852[6]. Two names are reserved on the CAC’s online Portal for a period of 60 (sixty) days.
2. Complete the pre-registration form on the CAC portal and upload relevant documents such as Signatures of the Directors, Shareholders, and witnesses, Means of identification of the directors.
3. Payments of the filing and Stamp duty fees
4. Upon completion of the registration, an Electronic Certificate and Certified Extraction of Registration Information is issued.[7]

REGISTRATION WITH THE CENTRAL BANK OF NIGERIA

The Registration of a Fintech company with the Central Bank of Nigeria (CBN) involves several steps to ensure compliance with regulatory requirements.

1. The fintech company is required to submit a formal application for the grant of a Payment Service Bank licence and the application must be addressed to the Governor of the CBN.
2. A formal presentation of the proposal of the company is made to the Director, Financial Policy, and Regulation Department (FPRD) of CBN. The proposal should cover business case, vision and strategy, governance arrangements, risk management, compliance, and financial viability of the fintech company.
3. The application should be accompanied with a non-refundable application fee of N500,000 (five hundred thousand Naira only) in bank draft, payable to the Central Bank of Nigeria and all other documents has specified by CBN[8]
4. Evidence of minimum capital deposit must be verified by the CBN, and the capital contribution made by each shareholder.
5. There must be evidence of name reservation with the Corporate Affairs Commission (CAC)
6. Detailed business plan or feasibility report.
7. Where all the documents are confirmed and accurate with the receipt of the application, the CBN will communicate its decision to the applicant within 90 days. Where the CBN is satisfied with the application, it shall issue an Approval-in-Principle (AIP) to the applicant.
8. Not later than six (6) months after obtaining the A.I.P, an application for the grant of a final licence can be made to the CBN.
9. A Pre-licence inspection is conducted to check the physical structure of the office building and infrastructure.
10. Any change in the composition of the company in terms of address, business plan or operational policies must be shared with CBN.

1. – The CBN may choose to grant or refuse the application for a final license.
2. – Once the final license is granted, a formal letter is written to CBN informing them of your intention to commence operation.

REGISTRATION WITH NIGERIA DATA PROTECTION ACT (NDPA)

Section 44 of the NDPA 2023 made provisions for the process of registration of a Data controller and Data Processor[9]which in this case can be a Fintech company. The following are the processes by which a fintech company can register with NDPA.

A fintech company must register with the Commission within six months of commencement, the registration shall be made by notifying the Commission of

1. The name and address of the data controller or data processor, and name and address of the data protection officer of the data controller or data processor
2. Description of personal data and the categories and number of data subjects to which the personal data relate and the purposes for which personal data is processed.
3. The categories of recipients to whom the data controller or data processor intends or is likely to disclose personal data and name and address of any representative of any data processor operating directly or indirectly on its behalf.
4. The country to which the data controller or data processor intends, directly or indirectly, to transfer personal data.
5. A general description of the risks, safeguards, security measures and mechanisms to ensure the protection of personal data.

A data controller or data processor of major importance should notify the Commission of any notable change to the information within 60 days of such change. The Commission upon registration of the Fintech company will publish on its website a register of duly registered data controllers and data processors of major importance.[10]

Anti-Money Laundering (AML) and Know Your Customer (KYC) Compliance

A financial institution must adopt policies stating its commitment to comply with Anti-Money Laundering (AML) and Combating Financial Terrorism (CFT). A fintech company must formulate and implement internal controls and other procedures to deter criminals from using their facilities for money laundering and other forms of financial crimes. [11]

KYC requirements is the process used by financial institution thoroughly know the customer’s identity and verification. This includes gathering information about a customer’s background, such as their name, address, date of birth, and government identification documents.  This is the process of scrutinizing the identity of the customer before while Customer Due Diligence (CDD) is the monitoring of customer activities for any suspicious patterns and preventing the opening of anonymous account[12]. Fintech companies are mandated to report any form of illegal activity to the Nigerian Financial Intelligence Unit (NFIU).[13]

CONCLUSION

A Fintech company can successfully navigate the registration process in Nigeria, by ensuring legal compliance and positioning for sustainable growth in the evolving fintech industry. Registering a fintech company is a structured process that requires adherence to multiple regulatory requirements. Securing the necessary licenses from the Central Bank of Nigeria and other relevant regulatory bodies is crucial to the operation of the fintech companies in Nigeria.

FOOTNOTES:

[1] Julie Kagan, Financial Technology (Fintech): Its Uses and Impact on Our Lives < https://www.investopedia.com/terms/f/fintech.asp#:~:text=Financial%20technology%20(better%20known%20as,operations%2C%20processes%2C%20and%20lives> accessed 12^th July 2024.

[2] Central Bank of Nigeria Official Website < https://www.cbn.gov.ng/aboutcbn/#:~:text=Statement%20of%20CBN%20Core%20Mandate&text=issue%20legal%20tender%20currency%20in,advice%20to%20the%20Federal%20Government. > accessed 12^th July 2024

[3] Section 1 of the Investment and Securities Act 2007

[4] Section 7 Companies and Allied Matters Act

[5] NAICOM official website https://www.naicom.gov.ng/about > accessed 12^th July 2024.

[6] Companies and Allied Matters Act 2020

[7] Corporate Affairs Commission official Website https://www.cac.gov.ng/companies/ accessed 13^th July 2024.

[8] Regulation 6 of the Central Bank of Nigeria Guideline for Licensing and Regulation of Payment Service Banks 2020

[9] Section 65 defined a data controller to means an individual, private entity, public Commission, agency, or any other body who, alone or jointly with others, determines the purposes and means of processing of personal data.

[10] Section 44(3) NDPA

[11] Regulation 8 of the Central Bank of Nigeria (Anti-Money Laundering and Countering Proliferation Financing of Weapon of Mass Destruction in Financial Institution) Regulation, 2022.

[12] Regulation 1 Central Bank of Nigeria (Customer Due Diligence) Regulations, 2023

[13] Regulation 4 of the Central Bank of Nigeria (Anti-Money Laundering and Countering Proliferation Financing of Weapon of Mass Destruction in Financial Institution) Regulation, 2022.