Multinational mobile telecommunications company MTN has been granted the license to operate a mobile money banking service in Nigeria. Their license was approved by the Central Bank of Nigeria for its Mobile Money (MoMo) payment service bank in Nigeria, extending its services to wider operations.
The CEO of MTN Ralph Mupita disclosed that granting the company the approval to commence the MoMo bank was an important milestone for the company’s ambition 2025 strategy unveiled a year ago. In January MTN revealed that its mobile money service had attracted 9.4 million active users since launching in August 2019, a growth the company said provided a solid foundation for the upcoming establishment of the bank. The volume of transactions performed through the service rose by 167% to 137.5 million in the 2021 full financial year.
It is also important to note that Nigeria, which has the largest population in Africa, is still MTN’s largest market. Witnessing the Fintech boom in the country, with Nigerian fintech startups raising an estimate of $800 million in 2021, it is obvious that many mobile communications companies also want to tap into the resources in the region, as a lot of them are already venturing into various fintech based services primarily to diversify their income, with banking services being a key area for growth.
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Not only has MTN decided to introduce a banking service, but telecommunications company Airtel has also disclosed plans to venture into the fintech space to offer mobile money services (smart cash) in Nigeria. After Airtel issued its first set of payment service Bank (PSB) licenses to local telcos in August last year, the Central Bank granted an approval in principle to Airtel Africa. It is pertinent to note that despite the fintech boom in Nigeria, the fintech ecosystem has only scratched the surface, as it is estimated that about 40 million adult Nigerians are still unbanked.
With telecommunications companies launching their mobile money service, this will catalyze the inclusion of poor people especially those in the rural areas of the country who do not have access to financial services, to transact quickly and conveniently. There has been an estimate that Airtel Africa could double its mobile money revenues when it finally commenced its operations in Nigeria.
A local newspaper, business day stated that the telecom grant to operate mobile banking could earn an additional $405m, an estimate it arrived at by multiplying the telco’s average mobile money revenue per user in the African markets where it already operates by the potential number of mobile money users the telco have in Nigeria. Banking in Nigeria is indeed a very lucrative sector because, despite the fintech boom in the country, there is still a vast majority of underserved consumers.
A lot of people in the country still lack access to financial services, which has spurred a few telecommunications companies to diversify into mobile banking to make profit, as well as bridging the gap between those who have no access to financial services in mobile banking. With few telecommunications companies venturing into the fintech space, no doubt these companies could pose a significant challenge to some fintech startups, including some incumbents because these telecom operators already have a large user base and also sit on a trove of data that could help them hit the ground running on time with ease.