Following the introduction of mobile banking in Nigeria by the Central Bank of Nigeria (CBN) which issued operating licences to many deposit money banks (DMBs) and telecommunication companies to provide mobile banking services, the Nigeria Deposit Insurance Corporation (NDIC) has released deposit insurance guidelines on the mobile payments system (MPS) which is known as “Pass-Through Deposit Insurance scheme.”
The “Pass-Through Deposit Insurance scheme” is the protection provided by the NDIC to mobile money subscribers, whereby the Corporation insures funds that are deposited by a Mobile Money Operator (MMO) in the deposit money banks (DMBs). The MMO acts as a custodian on behalf of the one or more subscribers who are actual owners of the funds as if those actual owners have deposits in the deposit money banks (DMBs).
Mobile Payments System (MPS) refers to payment services operated under financial regulation and performed through the use of mobile devices such as smart phones, cell phones, tablets, personal digital devices and other electronic devices. It is also a convenient, safe and affordable way by which subscribers make instant transfer of funds and execute payments for goods and services from anywhere at any time without having a bank account.
The public policy objectives of the Pass-Through Deposit Insurance guidelines which form the framework for the scheme are as follows:
(a) Guarantee the payment of insured sums to subscribers of MMOs in the event of failure of insured institutions where pool funds are maintained.
(b) Enhance confidence of subscribers and ensure continuity of the Mobile Payments System (MPS).
(c) Promote financial inclusion by protecting and ensuring the safety of the MPS; and
(d) Promote the stability of the Nigerian financial system.
The participants of the Pass-Through Deposit Insurance Scheme are:
Mobile Money Operator (MMO) – An entrepreneur licensed by the CBN to carry out the business of mobile payment within the country.
Payment Agent – The Agent appointed by the MPOs to receive or pay monies at various locations on its behalf.
Pool Account – Account opened and operated by an MMO in a DMB on behalf of its subscribers.
Bank – Bank maintains the pool account wherein all subscribers’ balances are domiciled by the MPO.
Customers – These are the subscribers to MPOs for mobile payments services.
The Mobile Network Operator (MNO) – The MNO provides telecommunication network/infrastructure which enables switching, processing and settlement for mobile payments services
Some of the salient elements of the NDIC Pass-Through Insurance consist of the following:
• The subscribers of MMOs shall be insured up to the maximum coverage level of N500,000.00 per subscriber per Deposit Money Bank or the applicable coverage level for depositors in line with the NDIC Act.
• Subscribers’ funds in pool accounts and other deposits in the same institution under the same capacity shall be aggregated and insured up to the maximum coverage limit.
• The relationship between the MMOs and their subscribers shall be based on Bare Trust Arrangement. (Bare Trust refers to an account where each beneficiary holds a separate share and is entitled to protection within the parameters of the scheme.)
• All KYC requirements on the owners of funds in Trust (Pool) accounts shall be fully met as specified by the CBN.
• The records of the Trust (Pool) account holders at the insured institutions shall clearly indicate that the account holder is an Agent or Custodian acting in a fiduciary capacity, and not the actual owner of the funds. The funds must belong to the individual subscribers and not the Agent or custodian.
• The insured institutions, MMOs and Agents shall render returns in specified formats to NDIC on predetermined frequencies.
• Mobile Money Operators (MMOs) shall be required to take Fidelity Bond Insurance for any losses arising from the fraudulent acts of their staff and agents. The applicable rate of the fidelity insurance shall be specified by NDIC from time to time.
• NDIC shall issue regulations to operators on the implementation of the Pass-Through Deposit Insurance.
NIGERIA DEPOSIT INSURANCE CORPORATION