Pirates Invade Mobile Payments Services Space

Unlicensed mobile payment companies have invaded the country’s mobile financial services ecosystem exploiting the weak regulatory enforcement system and stakeholders are not happy about it.
 
Emmanuel Okoegwale, principal associate, Mobilemoney Africa, acknowledging the existence of pirates in the space said: “to avoid the bad experiences with wonder banks not replicating itself in the mobile financial services ecosystem, all providers should be duly licensed and subjected to the oversights and directions of the regulators. Such pirate operators are mushrooming in Lagos and some other cities, deploying their applications, agency networks among others.”

Corroborating Okoegwale, Tayo Oviosu, managing director, Paga Tech, said: I am aware of payment companies that are not licensed. The CBN must enforce its regulations and not allow for unlicensed companies to operate. There is a cost to being regulated and it is unfair to have unregulated companies operating. Also, the answer isn't to then ask them to come and be licensed. Why did they not get licensed in the first place?

Explaining further, Okoegwale, said that the regulator mandates one-to-one coverage for every e-money issued with cash backing in a commercial bank unimpaired by losses and cannot be used for collaterals nor borrowings.

 “For unlicensed providers, they may not be aware of such provisions and wallets deposits may be eroded. The pirate operators do not necessarily conform to these standards which are meant to safeguard the customers in case of any eventualities. Some of them implement a single limit threshold without applying appropriate Know Your Customer’s (KYC) limits.”

“Licensed providers are mandated to acquire customer’s identification to be eligible for some services and KYC categories where necessary. With some of the pirate operators, these requirements are not mandatory therefore creating anonymity of customers which can fuel terrorist financing and money laundering.”

He added: “The regulator mandates all licensed providers to connect to the national switching platform however till date, none of such pirate operators had succeeded in breaching this regulation yet rather they sign up with commercial banks which provide inter-bank scheme settlement on their behalf. The regulator should set new standards for evaluating settlement proposals with commercial banks for e-money, mobile money and other such schemes. The risk of not implementing a rigorous standard will lead to significant systemic risk that might arise from eroding of customers’ deposits or merchants’ collections or payables.”

He noted that recently the regulator mandated the operators to increase their share capital requirements of mobile money operators from N20 million to N2 billion. Many of the operators are actively seeking ways to meet this 100 percent increase by exploring capital injections from current shareholders and new capital from fresh investments. If the operators will then need to contend with pirate operators which do not meet any formal capital requirements of the regulator, the operators will face a great hurdle in recouping their investments and meeting investor’s obligations in future.

“The role of the financial services regulator in the financial services industry is to ensure certainty and appropriate risk based on international acceptable and national laws as empowered by the national legislations but where some providers are operating under the radar without subjecting themselves to the regulatory scrutiny, it portends great danger to the citizens and market players in the industry due to the systemic risk that might arise from such oversights,” he stated.