The Nigerian financial industry has newcomers that are likely going to stir disruption. The Central Bank of Nigeria (CBN) has granted approval in principle to MTN and Airtel to operate a payment service bank (PSB) across the country, as the regulator pushes to deepen further financial inclusion in Nigeria.
Three years ago, the CBN said it would allow non-financial companies to apply for mobile banking licenses – either as PSBs or Mobile Money Operators (MMOs). The decision was drawn up from the push to increase Nigeria financial inclusion that has for years been limited to financial companies.
Nigeria has a huge financially underserved population of about 38 million adults as of 2020, mostly scattered across rural areas where banks and other financial companies are not operational. Giving telcos license to offer financial services means that rural dwellers will hence have access to adequate financial services.
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Under the guidelines, mobile network operators are allowed to provide financial services to millions of unbanked Nigerians. However, they can do so only as PSBs and through a subsidiary separate from their core operations. This means, MTN and Airtel will be providing PSB services via their respective subsidiaries, MoMo and Smartcash.
PSBs accept deposits from individuals and small businesses, offer payment and remittance services, issue debit & prepaid cards, operate electronic purses, and other activities prescribed by the CBN.
MTN announced the issuance of the PSB license through a statement signed by its Company’s Secretary, Uto Ukpanah on Friday.
“MTN Nigeria Communications Plc (MTN Nigeria) as promoter, received an Approval in Principle (AIP) dated 4 November 2021 from the Central Bank of Nigeria (CBN) for a licence application for the proposed MoMo Payment Service Bank Limited. This is the first step in the process towards a final approval, subject to the fulfilment of certain conditions as stipulated by the CBN. The decision to issue a final approval is firmly within the regulatory purview of the CBN and we respect their right and judgment in that regard,” he said.
The South African telecom giant said it would leverage the opportunity to deepen the financial inclusion agenda of the CBN and the federal republic of Nigeria.
The other recipient of the PSB license, Airtel, also announced the approval through a statement signed by the Group Company Secretary, Simon O’Hara.
“Airtel Africa, with presence in 14 countries across Africa, announces that its subsidiary SmartCash Payment Services Bank Limited has been granted approval in principle to operate a payment service bank business in Nigeria. Final approval is subject to the Group satisfying certain standard conditions within six months,” he said.
Also commenting on the approval, the CEO, Airtel Africa, Segun Ogunsanya, said: “I am very pleased that Smartcash has been granted an approval in principle to operate a service bank business in Nigeria. We will now work closely with the Central Bank to meet all its conditions to receive the operating licence and commence operations.
“The final operating licence will enable us to expand our digital financial products and reach the millions of Nigerians that do not have access to traditional financial services. I am looking forward to working closely with the government, the Central Bank and traditional financial institutions to expand financial inclusion and meet the evolving needs of our customers and the economy.”
However, the approval of the PSB license to MTN and Airtel, which is likely going to be extended to other operators, mainly, Globacom and 9mobile, Nigeria’s domestic telcos, will spell further trouble for Nigeria’s traditional financial institutions.
Already, the fintech boom is increasingly immobilizing the growth of players in the traditional financial industry. The International Monetary Fund (IMF) disclosed in its Financial Access Survey 2021 Trends and Developments on Monday, that Nigerian banks closed 234 branches and 649 Automated Teller Machines, ATMs, in 2020 leading to a decline in the country’s Financial Access Score (FAS) to 4.44 in the year against 4.78 in 2019.
This means that there is still a huge financial inclusion gap to be filled even in urban areas. With millions of subscribers in their customer-base, telecom operators are about to rule Nigeria’s financial industry. But it is not clear what it will mean for the newly launched Nigeria’s central bank digital currency – the eNaira.
It took the emergence of Glo for MTN to adjust its stance, so if the entrance of telcos into financial services can wake our traditional banks up, so be it. The POS economy the latter introduced is slicing people’s throats, that cannot qualify as financial inclusion mechanism.
Of course every player is still focusing on getting a slice from the small cake that has never been increased for decades, so it’s more or less about exchanges and movements, rather than expansion and growth.
When your economy is growing at 1% or 0.5%, launching new products and services can only attract a yawn, because disposable income basket isn’t expanding, meaning that to purchase new products, you must forgo some existing ones, since income is constant or depreciating.
What can be done to change the sorry trajectory? Well, a whole lot, but who will do them? We are still searching for the people…
We need to establish National Problems Lottery Fund, once you win the lottery, you move in and start solving one big problem; it’s obvious that our quality of politics and democratic governance cannot do the miracles.
Long wide range of local area network administered the required services needed in development of growth or grass root area known to be clip as urban-rural settlement which encourages empathy, apathy,and enthusiasm amidst individualism to wide and broad spectrum of network denotation.The spectra growth of bandith in network zones enhance immediate act of information, telecommunications and means of telex and telegram.
The CBN is losing her grip. The earlier she realizes this, the better for Nigerians and the economy.
Hi Tekedians
I am very impressed with your work and i must confess this is my first time reading your article..
You know this is an unfair advantage over small operators in this space. Its de ja vue for them or transition into super momo or smartcash agents.
With the ussd massaging system, this telcom giants have perfected their financial play experiment over the years.
I don’t blame CBN they’re desperate to save an ailing economy, even the idea of sacrificing its legacy DMBs does not count at this point. So don’t expect them to look differently on start up experiments in the PSB space.
Well, with the massive distribution infrastructure capacity of the telecoms, deploying this model is only but very easy in comparison to other PSB players outside the telcoms.
Yes. Its true they’ll deepen financial inclusion further into the rural areas with visible results, and with the CBDC now in place its going to be faster and dead cheap per transaction i must add.
Emefile must think himself a janious , but you must commend him non the less.
Those conventional banks have ripped us enough and contributing very little to the real economy. You remember the capital market ripoff?. I still have the share certificates of dead banks.
Thank God for the blockchain and decentralised payment networks like bitcoin and the rest.. that way we’ll always keep the CBDC (eNaira) in check should politicians decide to weaponise their CBDC, we can always boycut the system all together.
More banks will shade more weight as we edge into the 4th industrial revolution.
The future is upon us already and more exciting times are still coming .