Tobi walks in for an interview at his dream company. It’s a moment he won’t forget whether he passes or fails - but he sure hopes that he passes. He has read wide and deep before now. His eyes are almost gloomy from spending the entire night practising how to make a perfect presentation.
The interview begins with a simple question, “Are you familiar with the internet and online payments?”
Tobi gives a wide smile as he nods in agreement, believing this would be an easy pass. Then comes the next question. In a low, subtle tone, the interviewer asks “What are Payment Solution Service Providers (PSSPs)?”
Tobi is stunned. He has heard the term before but he never cared to know what it’s all about. As an everyday internet and online banking user based in Nigeria, he probably should. And so should you.
Who Are Payment Solution Service Providers (PSSPs)?
Payment Solution Service Providers (PSSPs) are financial technology (fintech) companies. They enable the processing of online and offline payments.
PSSPs are responsible for developing software and hardware solutions and making them accessible to consumers. These solutions may work independently or in sync to make payment possible. But they are usually not open for purchase like regular software or hardware are.
Instead, the company provides them on a service basis. This unique business model is what gives Payment Solution Service Providers their name. They provide the service for payment solutions - and that’s it.
How Payment Solution Service Providers (PSSPs) Work
Payment Solution Service Providers (PSSPs) function as key players where transaction is the topic. They are more or less the backbone of today’s electronic payments. They provide gateways and payment security technologies for use by individuals and businesses.
Services provided by PSSPs can be broken into four major categories:
1. Collections
Collection services refer to the action of Payment Solution Service Providers (PSSPs) in helping businesses collect funds and payments which their customers owe them. Examples of collection services are invoices, automated reminders, and detailed reports.
2. Check-out
Payment Solution Service Providers (PSSPs) also provide check-out services for online retail businesses. Customers who want to complete a purchase are directed to the PSSP’s website or interface. There, they can securely input their billing information and authorise a debit on their account.
The PSSP handles the difficult part of collecting payments made by an online user. That way, the retail businesses can focus on selling what they sell while being rest assured that they aren’t losing funds.
3. Biller Aggregation
Digital services can be used to pay school fees, electricity bills, travel expenses etc. The list goes on and on and on. Sometimes, these bill payments are made to different businesses called billers.
For example, electricity bills are paid to Abuja Electricity Distribution Company (AEDC) while air travel bills are paid to Air Peace. AEDC and Air Peace, therefore, fit the description of billers.
Now, the point is that, by using a PSSP, you should be able to pay any biller without much stress. This is because PSSPs aggregate billers, making it easy for customers to find the business they seek and make payments.
The PSSP platform might feature a search bar where you just type in a biller’s name and follow an on-screen instruction to make payment to them. Alternatively, you might have to select the biller’s industry (electricity, air travel, education etc.) and scroll through a list to find the exact one you seek.
4. Payout Services
You could win the lottery or an online sporting bet. When this happens, the business or biller makes payment(s) to you. Such transactions are described as payouts because they come from a biller to a customer rather than from a customer to a biller.
PSSPs manage the entire process from end to end. They ensure that both party’s credentials are secured. In some cases, they may also verify the receiving party through methods such as OTPs.
Payment Solution Service Providers (PSSPs) Licensing Procedure
As with obtaining a Mobile Money Operators license, a long list of procedures accompanies PSSP licensing.
These procedures are encompassed in a two-stage process of Approval-in-Principle and Final License.
Stage 1: Approval-in-Principle
All prospective PSSP companies must receive an Approval-in-Principle from the Central Bank of Nigeria (CBN). Even though this is not an actual license, the award shows that the company has done its homework. It depicts an understanding of the PSSP business and an acquisition of all the necessary expertise.
Here are the steps and relevant documents for the Approval-in-Principle stage:
Step 1: An application letter for a PSSP license
All application letters about payment systems or services are addressed to the same office. This is the office of the Director, Payments Systems Management Department of the CBN.
The application letter must be presented alongside the following documents:
Certificate of incorporation of the company with the Corporate Affairs Commission (CAC): This certificate confirms that the PSSP company is duly registered with the Corporate Affairs Commission (CAC). It is usually presented with proof of a share capital of NGN 100,000,000.
Memorandum and Articles of Association of the company: Every company has to have a well-detailed memorandum and Article of Association. These documents explain the existing constitution, including the business’s purpose and manner of operation. PSSPs must submit a memorandum and an Article of Association during the AIP application.
Form CAC 2A: Form CAC 2A must be properly filled, signed, and submitted. This concerns the Return of Allotment of Shares.
Form CAC 7A: Particulars of Directors will also be presented during the application. This is covered in Form CAC 7A.
Tax Clearance Certificate (TCC) and Tax Identification Number (TIN) of the Company: PSSPs are required to be tax-compliant. Consequently, they must acquire a Tax Clearance Certificate (TCC) and Tax Identification Number (TIN). You can find a complete checklist for the TCC document here.
Company profile: Details such as product and service offerings, policies, and client charges make up a company profile. It clearly states the difference between your company and competitors. Considering that there are nearly a hundred Payment Solution Service Providers (PSSPs) in Nigeria, this document will help you stand out.
Details of ownership: Does your company have a single founder? Or does it have a couple of co-founders? Or does it have a founder and one or more co-founders? Whatever the case, providing an ownership document will answer the question.
Board structure: Board structure formations help to protect stakeholder’s interests. The CBN require this document during the AIP application by PSSPs.
Business plan: A business plan talks about the goal of a business and the proposed methods of achieving that goal. In some cases, it also goes on to outline a timeframe for the set goal. New PSSPs are required to submit their business plan document as part of the AIP process.
Information Technology policy: It is the 21st century and data is the new gold. Surely, you want to ensure you have the right technologies to control and utilise this asset. Your Information Technology policy reveals how you will manage data and use data-related tools.
Dispute resolution framework: Businesses are like technologies. They function okay, but sometimes, their internal or external processes appear faulty or broken. This could lead to a dispute. For instance, from a junior staff or an aggrieved customer. A dispute resolution framework, therefore, idealises ways of delivering unbiased dispute resolutions within your PSSP.
Acquired certifications: PSSPs are relevant to the Nigerian payment ecosystem. As such, your prospective company must acquire relevant certifications. Examples are the Payment Card Industry Data Security Standard (PCIDSS) and the Payment Terminal Service Aggregator (PTSA). Certifications go a long way to prove enterprise competence.
Step 2: Evidence of payment of the non-refundable application fee:
Still under the Approval-in-Principle stage. A non-refundable application fee of NGN 100,000 must be paid into a CBN-designated account. The payment receipt will be submitted as a supporting document.
Step 3: Evidence of the deposit of a refundable minimum capital
A minimum starting capital of NGN100,000,000 (one hundred million Nigerian Naira) is mandated for every prospective PSSP. You should make this payment in full and use your name as the company owner.
Upon submission of the above documents, the CBN will review your PSSP license application. An Approval-in-Principle (AIP) will be issued if your application is successful.
Receiving the AIP does not permit a business to begin operations. Instead, it is a prompt that they can proceed to apply for the final license. And don’t worry if your AIP application is denied. You can simply go back to your drawing board, make necessary adjustments within your company, and take another shot at the application.
With the AIP in your hand, you can proceed to the next stage - Final License.
Stage 2: Final License
How do you go about applying for a final license?
First, you are mandated to pay a license fee of NGN 1,000,000 (one million Nigerian Naira). The CBN is solely responsible for providing the account information for this payment.
Once completed, you may proceed to submit an application letter requesting a final license.
The CBN will respond to your application by investigating the readiness of your prospective PSSP business. It considers your physical business location and your readiness to begin operation.
Examples of Payment Solution Service Providers (PSSPs) in Nigeria
There’s a long list of Payment Solution Service Providers in Nigeria. Top of the fold are Flutterwave, Kora Payment, and AppZone Limited.
Conclusion
Payment Solution Service Providers (PSSPs) facilitate today’s digital and non-digital payments in Nigeria. Their presence and operation are fundamental to the country’s growth in the financial technology industry.