Why MTN's MoMo PSB is suing 18 Nigerian banks

MTN Nigeria's fintech subsidiary, Mobile Money Payment Service Bank (MoMo PSB) Limited has sued 18 commercial banks to seek a refund for ₦22.3 billion ($53.7 million) "erroneously transferred to 8,000 bank customers".

In a suit marked FHC/L/CS/960/2022 and filed on May 30, 2022, the PSB asked the court to declare that the deposits worth ₦22.3 billion belonged to it (MoMo PSB) and not the banks’ customers, local reports revealed. Anthony Usoro, MoMo PSB's CEO said that over 700,000 transactions were affected within a one-month period. MoMo PSB shut down its service on May 24, 2022, to prevent the escalation of the fraud.

Why is MTN suing the banks? Usoro said the banks requested a court order to facilitate the reversal. The payment service bank is contending that, under the Central Bank of Nigeria (CBN) Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services [pdf], made pursuant to sections 2(D), 33(1)6) and 47(2) of the CBN Act 2007, it is incumbent on the 18 banks to make the refund and provide the required information.

The affected banks, listed as defendants in the suit, are Access Bank, Ecobank, Fidelity Bank, First Bank, First City Monument Bank, Guaranty Trust Bank, Heritage Bank, Polaris Bank, and Providus Bank. Others include StanbicIBTC, Standard Chartered, Sterling Bank, Suntrust Bank, Union Bank, United Bank for Africa (UBA), Unity Bank, Wema Bank, and Zenith Bank.

This cybersecurity breach is coming barely a week after MoMo PSB formally started operations after receiving the final approval for a Payment Service Bank license from the CBN.

Even though MTN Nigeria is yet to formally confirm the development, the Fraud Desk of Nigeria Inter-Bank Settlement System Plc (NIBSS), has notified other fintech organisations to be wary of transactions from MoMo PSB. "Please be informed that we are currently investigating a suspected fraud case involving MoMo PSB transactions," NIBSS said. "Monitor all inflows from MoMo PSB wallets/accounts for suspicious activities while we investigate. We shall provide an update as soon as possible."

MTN Nigeria has recorded an increase in the number of customers subscribing to its fintech service to 10.7 million as of the first quarter of this year. This represents a 135.2% growth compared with the 4.6 million customers it had same period last year. According to the company’s Q1 2022 financial results, its fintech revenue also rose by 46.5% to N20.8 billion on the back of the growing adoption of its fintech services and expanded user base.