Nigeria’s central bank fines Paystack, co-founded by Shola Akinlade

Key Points

• The Central Bank of Nigeria fined Paystack N250 million($0.19 million) for allegedly operating its Zap product as a wallet without proper licensing, violating deposit-holding regulations.
• Paystack’s Zap app, launched in March, sparked regulatory heat and a legal dispute with crypto firm Zap Africa over trademark rights.
• The fine signals growing scrutiny of Nigerian fintechs, as Paystack joins OPay and Moniepoint in facing regulatory actions over license and compliance issues.

Paystack, the Nigerian payments company co-founded by Shola Akinlade and acquired by U.S. tech giant Stripe, has been sanctioned by the Central Bank of Nigeria (CBN) for operating beyond the scope of its regulatory license. The N250 million ($0.19 million) sanction stems from the launch of Zap by Paystack, a consumer-facing peer-to-peer payments app that the central bank deemed to be functioning as a digital wallet—a service restricted to deposit-taking institutions.

The move is part of a broader enforcement drive by the CBN as it intensifies oversight of Nigeria’s fast-growing fintech sector, amid mounting concerns over fraud, illicit flows, and systemic risk. While Paystack is licensed as a switching and processing provider—authorizing it to facilitate transactions between financial institutions—it is not permitted to hold customer funds.

CBN inspectors concluded that Zap, launched in March 2024, effectively operated as a digital wallet in violation of regulatory boundaries. Although Paystack has claimed the product was delivered in partnership with Titan Trust Bank—a CBN-regulated institution licensed to hold deposits, the central bank nonetheless held the company directly accountable.

Paystack’s expansion draws regulatory heat

The Zap product marked Paystack’s push into Nigeria’s competitive consumer payments market, long dominated by commercial banks and mobile money operators. But the launch has triggered both regulatory scrutiny and legal challenges. Nigerian crypto startup Zap Africa has sued Paystack for alleged trademark infringement over the use of the Zap name. “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,” the company said in a statement.

The penalty is Paystack’s most significant regulatory challenge since its landmark acquisition by Stripe in 2020, a deal reported to be worth over $200 million. Often hailed as one of Africa’s top fintech success stories, the company is now navigating the complexities of moving from its original business-to-business (B2B) model into the consumer segment.

Fintechs under the microscope

Paystack is a leading African payments platform enabling businesses to accept payments from anyone, anywhere. Founded in 2016 by Nigerian entrepreneurs Shola Akinlade and Ezra Olubi, the company operates in Nigeria, Ghana, and South Africa. It now processes over half of all online payments in Nigeria, serving more than 60,000 businesses—including MTN, FedEx, UPS, and Piggyvest.

Paystack is not alone. In the second quarter of 2024, major players such as OPay and Moniepoint were each fined N1 billion ($760,000) for lapses in customer onboarding and KYC compliance. The clampdown reflects the CBN’s heightened sensitivity to risks posed by fintechs operating outside their licensed mandates.

The Zap sanction underscores a growing imperative in Nigeria’s fintech landscape: innovation must be matched with rigorous regulatory compliance. For Paystack and its peers, aligning product ambition with licensing terms is no longer optional—it’s existential.