CBN fines Paystack ₦250 Million over Zap operations

Nigeria’s Central Bank has fined Paystack, one of the country’s most prominent fintech companies, ₦250 million ($190,000) for allegedly operating its newly launched consumer product, Zap by Paystack, as a wallet in violation of its regulatory licence, according to one person with direct knowledge of the matter.

The apex bank claims that Zap—a peer-to-peer money transfer app launched in March—functions as a deposit-taking product, which is reserved for financial institutions with a microfinance or banking licence. Paystack holds a switching and processing licence, which permits it to route financial transactions between banks and other institutions, but not to hold customer funds. That limitation is central to the CBN’s sanction, the person said.

“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,” a Paystack spokesperson told TechCabal.

In Nigeria’s tightly regulated financial services space, a wallet typically refers to a digital account that stores customer funds, allows payments, transfers, and often provides financial management tools. Operating a wallet without the right licence raises red flags with the CBN, which has grown increasingly vigilant about regulating the boundaries between licensed activities. TechCabal learned Zap does not store user funds directly, but instead operates in partnership with Titan Trust Bank, which is licensed to hold deposits. 

The fine marks Paystack’s largest publicly known regulatory penalty since it received CBN approval in 2016. It also underscores the risks fintechs face as they expand beyond business-to-business payments into consumer-facing products. 

Zap’s launch was seen as a bold move by the Stripe-owned firm to compete in the fast-growing consumer payments market. However, it was quickly entangled in controversy: Nigerian crypto startup Zap Africa accused Paystack of trademark infringement, triggering a legal dispute that is still unresolved.

The CBN fine comes during heightened regulatory scrutiny for Nigerian fintechs. In the past year, several fintechs have faced increased oversight around customer onboarding and KYC compliance as regulators respond to growing concerns about fraud and financial stability in the financial sector. Two of the country’s most prominent unicorns, Moniepoint and OPay, were fined ₦1 billion each in the second quarter of 2024 over compliance issues.