The Central Bank of Nigeria (CBN) recently gave an official nod to telecommunication operators’ push to offer mobile money services in Nigeria through the final approval for three firms to operate as Payment Service Banks (PSBS).
The three firms are Hope PSB, a subsidiary of Unified Payment (UP), Globacom’s Money Master and 9Mobile’s 9PSB. The apex had issued Approval-in-principle (AIP) to the three subsidiaries in September 2019.
“Three Payment Service Banks (PSB) have been granted final approval to operate as PSBS following compliance with licensing requirements: a. Hope PSB b. Moneymaster PSB c. 9 PSB,” the CBN said.
According to the apex bank, its decision to give way for Telcos to offer financial services is in furtherance of its mandate to promote a sound financial system in Nigeria and the need to enhance access to financial services for low-income earners and unbanked segments of the society.
Before now, only banks and licensed financial institutions were allowed to provide financial services. Although telecom operators and other fintech companies indicated interest to operate in the market, the CBN policy would not allow them. The regulator eventually shifted because
of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.
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As at the time Nigeria was considering the optimal approach needed to leverage new, innovative technology to deliver financial services to its people. Countries like Kenyan and other African peers were seeing an explosion in mobile money wallet usage, an initiative that has put those countries ahead of Nigeria.
While the National Financial Inclusion Strategy (NFIS) of the central bank seeks to ensure that over 80 percent of the bankable adults in Africa’s most populous country have access to financial services by 2020, the data by EFINA showed that Nigeria fell short by 16 percent points from the desired target of a 20 percent exclusion rate.
The NFIS planned to achieve an 80 percent inclusion target but failed. Only 64.1 percent were financially included by the end of last year.
With a tepid 0.9 percent growth, Nigeria’s financial inclusion rate improved to 64.1 percent in 2020 from 63.2 percent in 2018. This means that its financial exclusion rate slowed marginally from 36.8 percent in 2018 to 35.9 percent in 2020. However, the excluded adult population of 38.1 million reported in 2020 was higher than the 36.6 million recorded in 2018, meaning 1.5 million adults fell into the excursion circle in the last two years to 2020.
“At our current rate of progress, we will not reach the 2020 financial inclusion targets until around 2030,” Ashley Immanuel, CEO of EFInA, said.
The Central Bank had in a circular in July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the NFIS. Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved 60.3 percent in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent translating to financial exclusion of about 41.6 percent.
Like in Kenyan, Ghana and some other parts of Africa where mobile money has played a huge role in financial inclusion growth, analysts expect the PSB initiative in Nigeria to broaden access.
“We know that this new development ( PSB) will further improve the country and the people going forward,” Alan Sinfield, CEO of 9mobile said, adding that the 9mobile is happy to be among the first PSB to provide all Nigerians with access to banking services and open up a digital world of possibilities to improve everyday lives.
While Glo, 9Mobile, UP subsidiaries will leverage PSB licence to among other things; maintain savings accounts and accept deposits from individuals and small businesses; carry out payments and remittances, issue debit and prepaid cards, the companies can help broaden Nigeria’s financial inclusion drive through the following measures.
Enabling financial service touchpoints in rural areas
According to Efina’s 2018 Access to Finance Survey, financial exclusion is highest in rural areas. This is because the traditional model of delivering financial services (the bank branch) is not sustainable in those areas.
But, through PSB services the barrier of distance to a financial access point will no longer be on the list of challenges restricting financial inclusion.
The structure of PSB as outlined in the guidelines and regulation circular issued by the Central Bank says that payment service banks shall operate mostly in the rural areas and unbanked locations targeting financially excluded persons, with not less than 25 percent financial service touchpoints in such rural areas.
Glo, 9Mobile, UP subsidiaries are expected to leverage the deployment of Point-of-Sale devices; banking agents and partnerships with industry players to deepen access.
Leveraging mobile and digital channels
Since there are more Nigerians with mobile phones than bank accounts, PSB companies can leverage the country’s already established mobile phone infrastructure to deepen financial inclusion.
According to the CBN, PSBs are expected to leverage mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services.
The rapid penetration of Nigeria’s financial services has been noteworthy, and the increasing ownership of smartphones, especially among the low-income groups, has been instrumental in reforming the financial services landscape.
Jumia’s 2019 mobile report shows that Nigeria had over 172 million mobile subscribers in 2018, a 6.4 percent improvement as compared to the 162 million recorded the previous year.
Going by the recent circular by the Central Bank, PSBs are envisioned to facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion and help in attaining the policy objective of 20 per cent exclusion rate by 2020.
