CBN Fines Paystack ₦250 Million Over Zap Operations, Citing Licensing Breach

Nigeria’s Central Bank (CBN) has imposed a hefty fine of ₦250 million (approximately $190,000) on Paystack, one of the country’s leading fintech companies. The penalty comes after the CBN accused Paystack of operating its newly launched consumer product, Zap by Paystack, as a digital wallet without the proper authorization. According to sources familiar with the matter, the CBN claims that Zap a peer-to-peer (P2P) money transfer app introduced in March 2024 functions like a deposit-taking service, which is only permitted for licensed banks and microfinance institutions.

Paystack currently holds a switching and processing license, which allows it to facilitate transactions between banks and other financial entities but does not permit it to hold customer funds. This restriction is at the core of the CBN’s decision to sanction the company. In response to the fine, a Paystack spokesperson stated that the company is cooperating with regulators to review Zap’s operations and declined to comment further out of respect for the ongoing process.

Understanding the Controversy Around Zap

In Nigeria’s tightly regulated financial sector, a digital wallet is defined as a service that stores user funds, enables payments and transfers, and often includes financial management tools. The CBN has become increasingly strict about enforcing licensing boundaries, particularly as fintechs expand into consumer-facing products. While TechCabal reports that Zap does not directly hold user funds instead partnering with Titan Trust Bank, which is licensed for deposits—the CBN still views the app’s functionality as too similar to an unauthorized wallet service.

This fine marks the largest known regulatory penalty Paystack has faced since receiving CBN approval in 2016. It highlights the challenges fintech companies encounter when venturing beyond business-to-business (B2B) services into the consumer market, where stricter regulations apply.

Zap’s Rocky Start and Broader Regulatory Crackdown

Paystack, which is owned by global payments giant Stripe, launched Zap as a bold move to compete in Nigeria’s rapidly growing digital payments space. However, the product quickly became embroiled in controversy. Shortly after its debut, Nigerian cryptocurrency startup Zap Africa accused Paystack of trademark infringement, leading to an unresolved legal dispute.

The CBN’s action against Paystack is part of a wider regulatory clampdown on Nigerian fintechs. Over the past year, authorities have intensified scrutiny of customer onboarding processes and Know Your Customer (KYC) compliance to combat fraud and ensure financial stability. In a notable example, two of Nigeria’s top fintech firms, Moniepoint and OPay, were each fined ₦1 billion in early 2024 for failing to meet regulatory standards.

What’s Next for Paystack?

Paystack must now work closely with the CBN to address the concerns raised about Zap. Depending on the outcome of these discussions, the company could face additional penalties or even be forced to suspend the product if it fails to comply with licensing requirements.

This case serves as a cautionary tale for fintech firms looking to expand their services: regulatory boundaries must be carefully navigated, and operating without the proper approvals can result in significant consequences. The situation also underscores the CBN’s growing vigilance in ensuring that financial innovations align with the country’s regulatory framework.