In recent times, the idea of digital banking has become increasingly popular with the establishment of digital banks. These digital banks like Kuda, Vbank, and ALAT by Wema provide a seamless means of banking by allowing customers open accounts, request debit cards, and perform complex transactions with any digital device.

As a result of the widespread acceptance of this banking model, Fintech Founders are majorly interested in knowing how to set up.

Who can Establish a Digital Bank in Nigeria?

A new or existing organization with a license to offer banking or financial services can launch a digital bank. However, as they are virtual banks, digital banks are often best run through a Microfinance bank, a payment service bank, or a regulated financial institution.

Steps to Registering a Digital Bank

In establishing a digital bank in Nigeria, there are 2 major steps to be taken, this includes;

  1. Licensing: The first step in the establishment of a digital bank is to determine the appropriate financial license to be gotten from the regulatory agency, in this case, the Central Bank of Nigeria (CBN).

Although there is no specific licensing regime for digital banks mandated by CBN, most companies intending to provide digital banking services must work with one of the available financial licenses including the following:

  1. Payment Service Banks Licence: The holder of a Payment Service Bank license is permitted to accept deposits from customers but cannot issue loans. The capital requirement for this license is N5,000,000,000 (five billion naira). The PSB license can only be obtained by already established banking agents, licensed telecommunication companies and existing fintech companies, etc.
  2. Microfinance Banks: Digital banks are most commonly incorporated as Microfinance Banks (MFBs). It has the advantage of being cheaper to start and it is malleable to fit a number of the product offerings that FinTech founders may want to offer. The major disadvantages are: 80% of its total loan portfolio cannot be more than N500,000 (five hundred thousand naira) for Tier 2 Unit MFBs and N1,000,000 (one million naira) for other categories of MFBs, and it is prohibited from engaging in foreign exchange transactions.
  • Commercial Banks: A commercial bank can be incorporated and proffer digital banking as a product offering; ALAT by Wema Bank PLC is an example of this model. Standard Chartered Bank PLC also allows its customers to carry out all their services -from opening bank accounts to requesting debit cards- online. The capital requirement is N10,000,000,000 (ten billion naira) for a regional banking license, N25,000,000,000 (twenty-five billion naira) for a national banking license, and N50,000,000,000 (fifty billion naira) for an international banking license.
  • Finance Houses: A finance firm is a company that provides financial services to consumers and businesses. Consumer loans, funds management, asset finance, project finance, local and international trade finance, debt factoring, debt securitization, debt administration, financial consultancy, loan syndication, warehouse receipt finance, covered bonds, and issuing vouchers, coupons, cards, and token stamps are among the services it offers. The downside of this arrangement is that a Finance firm cannot accept deposits. This permit requires a capital of N100,000,000 (one hundred million naira).
  • Incorporation: The next step after choosing the most preferred license, is the registration of the Company at the Corporate Affairs Commission (CAC). During registration, there are important details to take into account including the share capital requirement of the company and the CBN licensing capital requirement as stated above.

In registering a digital bank, below are the details we usually request for;

  1. Two proposed names for the Digital Bank
  2. The physical address, email address, and objects of the digital bank.
  3. Personal details (Name, address, phone number, email address, occupation, valid means of identification, and signature) of the proposed directors, secretary, and shareholders.
  4. The shareholding structure of the proposed shareholders
  5. Any other information as may be required


It is recommended to contact a lawyer about the proper legal entity and license that best suits your needs. While a Microfinance Banking License appears to be the most favored license for most digital banks, there is a risk connected with its usage since the CBN may restrict license access for digital banks that do not entirely comply with the purpose and objectives of microfinance banking. To avoid this, digital banks must include comprehensive risk management rules in their whole business plan.

Written bChiamaka Ogbonnaya for The Trusted Advisors

Email us: [email protected]

Telephone Number: +234 810 159 9159

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