The Central Bank of Nigeria (CBN) has granted approval to Paystack, a fintech company owned by Stripe, to operate under the switching and processing category. This approval, received in April 2022, places Paystack among the select group of 16 fintech startups licensed under this category. With this license, Paystack can now function as a payment switch in Nigeria, directly routing financial transactions between financial institutions without relying on third-party partners.
Previously, Paystack worked with third-party partners to process and settle transactions for merchants. The new license allows Paystack to process transactions directly, similar to how traditional banks route transactions between each other. This development is expected to result in faster transactions, improved security, and an enhanced payment experience for African businesses using Paystack.
The license aligns with Paystack’s goal of addressing online payment challenges in Africa by providing multi-channel payment options, including debit cards, credit cards, and direct bank transfers. The company, founded in 2015 by Shola Akinlade and Ezra Olubi, has expanded its services beyond Nigeria to Ghana, South Africa, Kenya, Côte d’Ivoire, Egypt, and Rwanda.
The announcement comes in the context of Paystack’s recent product developments, including a partnership with the Nigeria Inter-Bank Settlement System (NIBSS) to launch a direct debit digital solution and the introduction of Paystack Virtual Terminal, enabling physical stores to accept and confirm bank transfers.
The trend of fintech companies obtaining switching licenses is growing, with Paystack joining notable players like Interswitch, eTranzact, Unified Payments, and TeamApt in the highest tier of CBN-licensed payments processors. Other companies, including Appzone and Flutterwave, have also obtained switching licenses in response to this trend.