By: ThinkBusiness Africa
Nigeria fintech startup, Paystack, has officially entered the regulated banking sector, following the company’s successful acquisition of Ladder Microfinance Bank on Wednesday, marking its transition from a third-party payment processor to a licensed financial institution.
According to a statement from the Stripe-owned payment giant, the newly formed entity, rebranded as Paystack Microfinance Bank (Paystack MFB), will operate as a subsidiary of Paystack.
This strategic pivot allows the company to move beyond simply “moving money” and gives it the legal authority to hold customer deposits and, crucially, issue loans directly from its own balance sheet.
“Businesses don’t just need to get paid. They need a financial operating system. One that helps them store money safely, move it easily, understand it clearly, and grow with confidence.” Paystack noted in its statement.
Previously, Paystack functioned primarily as a Payment Service Provider (PSP). In this model, they acted as a high-tech intermediary, collecting payments for businesses but ultimately having to settle those funds into third-party commercial bank accounts.
This meant they were legally restricted from holding customer deposits and were subject to the processing speeds and settlement timelines of partner banks.
With the acquisition of Ladder Microfinance Bank, the company has transitioned into a Licensed Financial Institution. Under the new Paystack MFB identity, they can now offer direct deposit holding, allowing businesses to keep their earnings within the Paystack ecosystem.
Beyond just holding money, the banking license unlocks the ability for direct balance sheet lending. While the old model required Paystack to refer merchants to third-party lenders, Paystack MFB can now use its decade of transaction data to issue loans directly.
This includes innovative products like revenue-linked lending, where repayments are automatically deducted as a small percentage of a merchant’s daily sales, and working capital overdrafts to help businesses manage inventory.
This transformation also fuels Zap, Paystack’s consumer-facing app. Originally a tool for fast transfers, Zap can now function as a full digital wallet, offering users the ability to receive salaries, earn interest on savings, and access personal credit—all powered by the internal microfinance infrastructure.
The acquisition is seen as a direct challenge to “mobile banking services” like Moniepoint and OPay, who have aggressively captured the market by bundling business banking with point-of-sale (POS) hardware.
Last November, paystack was involved in a controversy that led to the sack of its Nigerian Co-founder, Ezra Olubi. Olubi was called out for inappropriate sexual posts from 2010-2013 on his X (formally Twitter account), after a sexual scandal involving him and a colleague were made public.
The posts made by Ezra during those periods involved grossly inappropriate sexual comments on women and animals. Paystack cited “significant negative reputational damage” after an investigation into the matter.
