Leading telecommunication service providers, MTN Nigeria and Airtel Nigeria have shown major interest in operating in the financial services space and have formed subsidiary companies in order to apply for a mobile banking licence as stipulated in the payment service banking policy guidelines released by the Central Bank of Nigeria (CBN), BusinessDay can report.
Once granted a banking license, each of these telecom companies will be able to offer to Nigerians a lot more financial services on their phones, including paying for goods and services, and withdrawing money from recognised payment service agents on the roadside.
However, the telecom companies are not allowed to collect deposits or give out loans but players in the telecom and financial industry expect that partnerships could be created that could see telecom companies offer more services in collaboration with banks and other financial institutions.
Segun Ogunsanya, chief executive officer, Airtel Nigeria, told BusinessDay that the telco “already has a name for its subsidiary company that will operate as a payment service bank to carry out basic mobile money services such as funds transfer and payments.”
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Rob Shutter, MTN Group CEO, also told Reuters, Tuesday, that the group ‘‘will apply for a mobile banking licence in Nigeria and plans to launch the service next year.”
If granted the license regardless of its current hiccups with the Nigerian government, MTN, which is the largest mobile operator in Nigeria, says it is ready to start mobile money services as early as the second quarter of next year.
“We will be applying for a payment service banking licence in Nigeria in the next month or so, and if all goes according to plan, we will also be launching Mobile Money in Nigeria probably around Q2 of 2019,” Rob Shuter told a telecoms conference in Cape Town.
It is believed that the swift move by MTN and Airtel to embrace this opportunity to play in the financial services space – the next big growth area for Telcos, will also prompt Globacom and 9mobile to apply for licenses.
The CBN, on November 2, 2018, published the draft policy guideline, for payment service banking by non-banks in order to help drive the country’s national financial inclusion strategy goal of 80 percent inclusion by 2020.
Olusola Teniola, President of Association of Telecommunications Companies of Nigeria (ATCON) told BusinessDay that “the telecommunication operators are very keen to apply for licences because they have always wanted to be given a free hand to participate in mobile money services. Although what CBN is allowing is not what they fully wanted, it is a step in the right direction and is open to further reviews in the future.”
Mobile network operators have over the years clamoured for the right to fully participate in the mobile money industry, leveraging their capabilities – technology, infrastructure, and distribution network and subscriber base to drive financial inclusion.
Series of meetings with the Nigerian Communication Commission (NCC) and the CBN which resulted in the two regulators visiting India to view and analyse the progress of telco-operated mobile money services somewhat softened the resistance to the idea for mobile network operators to qualify for mobile banking license.
Industry watchers say the application fee of N500, 000 as well as a non-refundable licensing fee of N2 million, requirement to have a minimum capital of N5 billion and the requirement of the organisation to operate in rural and unbanked areas, with a minimum of 25 percent of their total touch points in these areas eliminate a vast amount of non-bank organisations. However, it is likely to drive increased partnerships and collaboration to enable smaller organisations to participate.
They are also of the view that the guideline which proposes a structure wherein the name of the subsidiary company to perform payment banking services shall not include any word that links it to its parent company may prove problematic, as financially excluded individuals who are already sceptical may need a sense of familiarity through a trusted service provider.
Some have said that the requirement for PSBs to maintain a minimum of 75 percent of their deposit liability in CBN securities, treasury bills and other short-term federal government debt instruments may also limit the effectiveness of PSBs as having them invest the greater percentage of their deposit liability in low-yield investments will limit profitability.
Jumoke Akiyode-Lawanson
