Since the Central Bank of Nigeria (CBN) granted MTN Nigeria and Airtel Africa approval in principle for the operation of Payment Service Banks (PSBs), a lot of competitive realignment has been taking place.
Chinese-owned OPay, arguably the largest mobile banking provider in Nigeria, has announced the appointment of a president and co-CEO for its Nigerian unit. Also, Chipper Cash, an African cross-border payments company, which in October raised a $150 million funding round, is now pushing its visibility aggressively in Nigeria.
OPay’s new appointment is particularly telling, not just because of the timing but also because of the quality of the recruitment. Olu Akanmu, the new president of the company in Nigeria, is a former executive director for retail banking at FCMB.
Akanmu also has extensive knowledge of the telecoms industry having held the position of chief marketing officer for Airtel Nigeria from 2012 to 2013. He moved from Airtel to Insights Communication as client service director and later to MTN, where he held the position of general manager for consumer marketing for five years.
So, it is possible that OPay not only got themselves, someone, to help them drive mobile retail banking, they also can keep an eye on the steps being taken by the likes of MTN Nigeria and Airtel Africa. OPay already claims it has more mobile money agents than MTN and other competitors, with over 300,000 compared with 230,000 MTN’s MoMo agents.
While Chipper Cash, with a valuation of $2 billion, may only focus on cross-border payments and transfers, and may no less be a big competitor for MTN and Airtel. In recent times, Chipper Cash has intensified campaigns aimed at creating brand awareness across the country and signed Nigerian afrobeats artiste Burna Boy as its global ambassador.
MTN and Airtel would also need to keep an eye on TeamApt, which is currently in the market seeking to raise $150 million to push valuation to $1 billion. TeamApt claims 150,000 mobile money agents, 70 million transactions carried out on a monthly basis with over 14 million users, and a $3.5 billion value transacted.
While MTN may find it a lot easier to deploy by leveraging the 230,000 MoMo agents, Airtel would need to build its army of agents to the level of existing competition to have a chance of gaining any significant market share. The telco has recently been granted approval in principle (AIP) for the Super Agent licence. Like the AIP for PSB, Airtel would need to satisfy all the requirements of the CBN within a period of six months before it gets a final super-agent licence.
However, if antecedent is anything to go by, Airtel and MTN may have to wait more than six months for final licences to be issued. 9Mobile and Globacom were granted approval in principle for PSB by the CBN in August 2019; the final licence was issued in September 2020, approximately a year ago.
Read also: PSB: Why MTN, Airtel Africa unlikely to replicate mobile money success in Nigeria
It is important to note that the number of mobile banking agents does not equate to the number of PoS terminals. As of September 2021, data from the Nigeria Interbank Settlement (NIBSS) showed there were about 307,000 PoS machines and 30,000 ATM terminals in Nigeria. The telcos would need to facilitate the provision of infrastructure in the country, and access to them has to be as easy as possible to attract new agents into the market.
Financially, both telcos may seem sufficiently prepared. MTN’s vast infrastructure deployment may even give it an upper hand in the competition. The telco owns the majority of the backbone infrastructure that powers the services of its competitors. It not only provides broadband connection, but it controls about 80 percent of USSD services. It therefore would have the competition paying it while it also reaps benefits from direct services.
Also, MTN and Airtel are publicly listed companies. The South African telco is currently planning to seek additional funding through the sale of 575 million shares in MTN Nigeria, by way of a bookbuild to institutional investors and fixed price to retail investors. The shares are reportedly worth around $241.7 million.
MTN Nigeria also successfully completed the issuance of its N89.999 billion Series II 10-year bond with a fixed rate of 12.75 percent due by 2031.
The series II Bond is the second issuance this year by the telco following the debut in May 2021. This completes MTN’s N200 billion bond issuance programme.
Airtel has also been busy in the funding market. In April, the telco announced it had raised $100 million for its mobile money business. So far, the telco has received a total of $500 million cumulative proceeds from the minority stake sales in Airtel Money from three investors.
Stakeholders say the decision by the CBN to issue an AIP to the telcos has positive implications for financial inclusion in Nigeria.
MTN Nigeria and Airtel combined boast 124.6 million voice subscribers and 96.1 data subscribers. Apart from that, MTN Nigeria through its MoMo Super Agent network has amassed 230,000 agents across the country, and given its experience as the second-largest mobile money operator in Africa, after Safaricom, deploying the same service in Nigeria would not be so difficult for the telco.
Airtel Africa has also acquired massive experience operating mobile money in 14 African countries. The participation of telcos in PSB is expected to significantly impact the more than 40 million Nigerians that lack access to financial services in the country.
“The CBN has finally taken a decision that is positioned to impact the implementation of financial inclusion in Nigeria. Financial inclusion is best driven by mobile networks operators because everyone has a phone that makes use of their networks,” Ajibola Olude, general secretary, Association for Telecommunication Operators of Nigeria (ATCON), told BusinessDay.
Nevertheless, the biggest challenge for the telcos may lie in the limits of the PSB licence they are waiting to receive. While their competitors, TeamApt, Chipper Cash, OPay may decide to give loans to users or even secure a licence for digital insurance, the PSB holders are not allowed to.
Importantly, Nigeria’s version of mobile money is different from other markets the telcos are used to. In Kenya or Ghana, MTN MoMo or Airtel Money users do not need a bank account or Bank Verification Number (BVN) to conduct a mobile money transaction. This is the requirement in Nigeria, whether or not the operator wants to use the mobile phone numbers of users to carry out transactions.
The phone numbers are connected to a bank account. It, therefore, means that MTN Nigeria and Airtel Africa cannot keep deposits even though they can accept. They are not allowed to deal in the foreign exchange market directly but through channels within Nigeria.
These regulatory hoops could be the difference in revenue between the telcos and the competition. OPay has a microfinance bank licence that offers it the opportunity to resume credit services. It had suspended the loan business OKash in January, as part of containing its super app ambitions. Experts say credit and insurance offer more financial rewards, which are why digital banks such as Kuda Bank have recently increased their attention in growing the loan business.
Despite the limitation, getting their PSB licences presents MTN and Airtel a great opportunity of fulfilling their long-term ambitions and may be with time their impact in financial inclusion would convince the regulator to remove the barriers.
“A PSB licence is like an upgrade to the MMO or Super Agent licence, especially for telcos,” Oluwaseun Ayansola, a fintech expert, says. “What do I mean? MoMo already had a mobile money operation (MMO). With a PSB licence MoMo can do more including issuing debit and prepaid cards in its own name by entering into a direct agreement with a card scheme (Mastercard, Visa, etc).”
