Following the granting of approval in principle (AIP) by the Central Bank of Nigeria (CBN), MTN Nigeria and Airtel now have about six months to become licenced Payment Service Banks (PSBs).
Apart from helping to include 40 million adult Nigerians outside the financial services industry, the move could create over 1 million direct jobs in 2022.
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.
The telco is expected to grow its agent network from 230,000 in order to deepen its mobile money presence across the country. Airtel would plug into its large population of airtime resellers to quickly grow its agent network. This is the same strategy it deployed in nearly all the 14 African countries where it currently operates mobile money services.
The model would also attract hundreds of young unemployed Nigerians providing the telco with over 100,000 banking agents. MTN Nigeria and Airtel could also be the push Globacom needs to launch its mobile money operations after one year of securing the licence.
The CBN wants to provide access to financial services to 95 percent of Nigerians who are not financially included by 2024. In the past, the CBN has pushed the commercial banks to lead the financial inclusion campaign and the result has not been as the apex bank expected.
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The banks did make an effort with the establishment of the Shared Agent Network Expansion Facilities (SANEF) with banks like First Bank acquiring the largest agent footprint of all the banks in Nigeria and recording $16.2 billion in agency banking transaction in 2020, and Access Bank adding 4.46 million new customers through its agents over the last two years.
Where the banks were unable to close the gap, the CBN sought help from fintech companies by issuing different mobile banking licences, including payment service licences. OPay, TeamApt, Paga, and Kuda are some of the companies that now command significant numbers of banking agents and presence across Nigeria.
Despite the efforts, millions of Nigerians continue to exist outside the financial services system. Different experts have in the past canvassed for the participation of telecom operators like MTN Nigeria and Airtel Africa in the financial services industry due to their footprints across Africa.
The CBN only bought into the idea on October 26, 2018, when it released the Guideline for Licensing and Regulation of Payment Service Banks in Nigeria. The release saw many companies including MTN and Airtel express interest. But the telcos were made to wait while several players in financial services especially were granted approval.
What is the PSB all about?
A Payment Service Bank (PSB) is defined as a category of banks with smaller-scale operations and the absence of credit risk and foreign exchange operations. In Nigeria, a PSB is allowed to accept deposits from individuals and small businesses, carry out payment and remittance services within Nigeria, issue debit and prepaid cards, operate electronic purses, and other activities prescribed by the CBN.
PSBs are also expected to have not less than 50 percent physical access points in rural areas. Only a few banks have an extensive network of branches in rural places in Nigeria. Fintech companies also utilise banking agents to reach people in rural areas but very few have physical outlets due to the cost implications. However, telcos like MTN Nigeria would not only make use of agents, they also have a physical presence in many rural communities.
“A PSB licence is like an upgrade to the MMO or Super Agent licence, especially for telcos,” Oluwaseun Ayansola, a fintech expert. “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).”
It should be noted however that a PSB cannot grant any form of loans, advances, or guarantees, accept foreign exchange (forex) deposits or deal in forex except selling forex realised from inbound cross-border personal remittances to authorised forex dealers.
Road to PSB licence
In the past, bank executives and some stakeholders had expressed misgivings in telcos participating in the financial services.
At a Social Media Week session in 2019, Segun Agbaje, CEO of GTBank, suggested that telcos would do the economy a better service if they stayed focused on improving the quality of service rather than being distracted by offering banking services.
“We need the telcos to bring the price of data down. Getting a PSB licence isn’t a disruption because that is already being done. What is a disruption is for a telco to be bold enough to reduce the cost of data,” Agbaje said.
At a breakfast meeting hosted by Unified Payment in 2018, a former executive director of Nigeria Interbank Settlement Systems (NIBSS) told the audience that telcos really had no business doing banking because they already have their hands full with telecommunication services. He also fancies a mobile money space led by financial services firms and not telcos.
But all that seems to be in the past now as the CBN began issuing licences to telecom operators in 2020. It is now over one year since 9Mobile and Globacom got the PSB licences, while the former has launched mobile money operations, the latter appears to have it focus on other things but mobile money at the moment.
9Mobile, which launched 9PSB in 2020, has lacked the intensity experts had expected from a telco launch. Aside from a partnership with Flutterwave in September, there is little activity coming from the telco. Some experts say this is not surprising given 9Mobile does not have the experience of MTN and Airtel and the network of agents for widespread deployment of its service.
With an Approval in Principle granted to MTN and Airtel, the road seems clear for deployment sometime next year. An approval in principle does not mean the telcos have a PSB licence but it is the first step to getting the licence. The final licence is usually granted not later than six months after the AIP.
