Financial experts say Payment Service Banks (PSBs) offer banks an opportunity to increase their revenue profile and better serve their customers by leveraging technology to better serve them.
At a recent webinar organised by Terragon Group, a global marketing & data technology company, experts analysed growth opportunities for banks and other financial institutions through financial inclusion, leveraging intelligence, customer engagement, and reach.
Speaking at the webinar, themed ‘The Rise of Telco PSBs and the Opportunities for Banks,’ Lawrence Amadi, partner and head of IT Assurance Practice at KPMG Nigeria, said every bank today with a deposit money license, can also issue loans and overdrafts.
“What this gives to the banks is the opportunity to drive additional traffic and make more money because if you own a wallet in any of the PSB platforms, your transfers often are predominately to people who have bank accounts, which gives a massive opportunity for NIBSS to power banking transactions,” Amadi said.
He said increasing the number of bank customers helps to reduce the risk for banks in terms of Know Your Customers (KYC) obligations.
“We all know that for a person to be a registered GSM owner, you ought to have gone through some KYC process, for example, biometrics and for you to have done this, it means you would ease the risk for the banks,” he said.
A PSB is a type of bank that operates on a smaller scale by harnessing technology services through mobile and agency banking to mobilise deposits and facilitate transfers from unbanked customers in rural areas and any location in a country.
Introduced in 2018 by the Central Bank of Nigeria (CBN), PSB is a key element of social inclusion, particularly useful in combating poverty and income inequality and also increasing the financial inclusion rate in Nigeria.
PSBs are expected to focus on the unbanked population and financially excluded persons. Many of whom are low-income earners, low-literacy individuals who reside in geographically inaccessible areas characterised by weak or non-existent information and communications technology infrastructure.
Recently, MTN’s Momo PSB and Airtel’s SmartCash were granted full license to operate, making it five already established PSBs operating in Nigeria. Others are Hope PSB, Money Master PSB, and 9 PSB.
According to data from Enhancing Financial Innovation and Access (EFInA), Nigeria’s financial inclusion rate grew to 64.1 percent in 2020 from 63.2 percent in 2018.
The 2020 figure is below the Central Bank of Nigeria (CBN)’s 80 percent financial inclusion target for the year 2020.
Although the inclusion rate dropped marginally from 36.8 percent in 2018 to 35.9 percent in 2020, 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 exclusion circle in the last two years to 2020.
With more PSBs in operation, the CBN hopes to achieve its 2024 target of 95 percent financial inclusion in Nigeria.
But there are fears that it might be a threat to the banking sector rather than an opportunity for them
Unwana Ekanem, vice president, of Commercial at Terragon said though the threat is real, opportunities lie with the banks who invest heavily in technology.
“It is a real threat to traditional banks however, it also presents an opportunity for the banks to step up and offer something uniquely different,” Ekanem said.
He adds, “Today I see banks now launching fintech-type services in a way to demonstrate that they are in tune with the current trends. So, the threat is real but the banks that are going to win in the future have already started taking steps in investing in the right technology to win in that space.”
Ekanem also said that there should be an open collaboration between the players.