In a bold regulatory move, the Central Bank of Nigeria (CBN) has fined Paystack ₦250 million ($190,000) over its new consumer-facing product, Zap by Paystack, citing operations beyond the scope of its current license.
Launched in March, Zap is a peer-to-peer money transfer app that reportedly mimics the functionality of a digital wallet, a service permitted only for institutions with microfinance or full banking licences. Paystack, however, holds a switching and processing licence, which authorizes transaction routing but not customer fund storage.
What Did Paystack Do Wrong?
While Paystack previously stated that “Zap is not a remittance app,” the CBN believes the company crossed a regulatory line. According to insiders, the user-facing features of Zap, including stored balances, peer-to-peer transfers, and merchant payments, create a wallet-like experience that violates licensing rules.
Although Zap partners with Titan Trust Bank, a licensed deposit-taking institution, to hold user funds, the CBN argues that this does not absolve Paystack of regulatory responsibility due to how the product is structured for end-users.
“Even if third-party banks hold the money, the product interface matters. Consumers perceive it as a wallet,” said a compliance expert familiar with the situation.
This ₦250 million penalty is the largest sanction Paystack has faced since acquiring its CBN licence in 2016.
Brand Wars: The Legal Battle Over ‘Zap’
The regulatory fine isn’t the only issue looming over Zap. Paystack is embroiled in a trademark dispute with crypto startup Zap Africa, which claims to have secured exclusive rights to the name “Zap” in Nigeria.
Zap Africa has accused Paystack of infringing on its brand identity. In a swift legal counter, Paystack issued a cease and desist notice, denying the infringement and escalating the legal showdown.
Meanwhile, Zap Africa insists that it has already obtained trademark approval for “Zap”, fueling a public-facing branding conflict that could reshape how tech firms approach IP protections in Africa.
CBN’s Broader Crackdown on Fintechs
The CBN’s fine against Paystack is part of a broader trend of heightened regulatory scrutiny in Nigeria’s financial ecosystem. In 2024 alone, Moniepoint and OPay were each fined ₦1 billion for compliance breaches, including KYC (Know Your Customer) violations and operational overreach.
Key areas of concern include:
- Unlicensed wallet-like functionality
- Weak KYC and AML processes
- Confusing or misleading user interfaces
- Inadequate consumer protection mechanisms
These actions signal that the CBN is no longer giving growth-stage fintechs a free pass, especially as they pivot from backend services to consumer-facing apps.
Why This Matters for Nigerian Fintechs
Paystack’s transition from a B2B infrastructure provider to a B2C player through Zap reflects a wider strategic shift in African fintech. However, such moves carry higher licensing, compliance, and branding risks.
The takeaway? Fintechs must align innovation with regulation. Simply partnering with a licensed bank isn’t enough if the product interface gives users the impression of a full-fledged digital wallet.
This incident also raises an important question: Who bears the legal burden, platform providers or their banking partner,s when product design blurs regulatory lines?
What’s Next for Paystack and Others?
Industry experts predict that this could lead to:
- A re-evaluation of product launches by other fintechs
- A push for clarified digital wallet licensing frameworks
- Greater IP due diligence before product branding
What do you think? Should fintechs have more flexibility in product development, or is the CBN right to enforce strict boundaries?
