Phillips Oki is the chief financial officer of 9mobile, Nigeria’s innovative telecommunications company. In this interview with BusinessDay, he speaks on the telco’s planned initiatives to bolster Federal Government’s policy on financial inclusion among the populace. Excerpts.
What is a PSB? Can you give a general background?
In view of the challenges to effective financial services coverage of rural communities, which has led to over 59 million unbanked adults in Nigeria, as well as the need to complement the services provided by other licensed entities, the Central Bank of Nigeria (CBN) has issued licenses for the operation of Payment Service Banks (PSBs) in Nigeria. PSBs are expected to leverage on mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services.
What customer groups will be served by PSBs?
Based on available statistics, 70 percent of the underbanked and unbanked population live in rural areas, with 30 percent in semi-urban communities. This means a majority of PSB customers are rural dwellers. Accordingly, CBN guidelines require PSBs to deploy not less 50 percent of their touch points in rural areas in order to adequately reach the mass of the intended market.
The CBN recently granted approvals-in-principle (AIP) to new Payment Service Banks (PSBs) including 9mobile. What does this mean for 9mobile?
The issuance of AIP for the Payment Service Bank is a commendable move by the Central Bank of Nigeria. At 9mobile, we are constantly exploring opportunities to support Nigerians and we see the issuance of a PSB license to 9mobile as yet another opportunity to serve over 59 million unbanked adults through deployment of innovative financial services that will leverage our top-quality mobile technology and distribution network of agency banking to support the financial inclusion drive of the Federal Government of Nigeria.
The apex bank also said that the issued AIPs were in line with its National Financial Inclusion Strategy (NFIS) with the objective to improve financial inclusion across the country. What impact do you think this will have on the unbanked?
Approved guidelines provide that 75 percent of customers’ deposits with PSBs be domiciled with the CBN, while 25 percent is held by local commercial banks. Therefore, the first impact will be that all doubt as to safety of funds with PSBs will be cleared. In addition, the coming on stream of PSBs is expected to extend financial services to previously unbanked segments of the Nigerian society. The expectation, therefore, is for PSBs to deploy innovative financial services that will run heavily on mobile technology because of its high penetration rate, enabling users to open and operate a bank account from the comfort of their mobile phone, with the existing distribution network of the promoters serving as touch points. As customers adopt the service, they will be able to access credit from deposit money banks and CBN developmental funds for targeted segments to support their businesses.
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Why is 9mobile interested in playing in the financial service market?
At 9mobile, we are constantly exploring opportunities to bring creative solutions to Nigerians and PSB provides an excellent opportunity to further pursue this commitment to serve more people in a manner that improves their quality of life. We are convinced that PSB will further stimulate savings and investments as more liquidity is mobilised from the informal sector into mainstream financial system. This will translate into increased economic activities in the informal sector and the overall economy.
Payment Service Banks could revolutionise financial services in Nigeria as they usher in a new era of change in delivering innovative payment solutions to customers across an evolving financial services environment. What innovative services should customers expect from 9PSB with this new milestone?
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9PSB will provide creative and market-driven financial services solutions that will address the pain points of the target customer segment. The hallmark of these services will be accessibility, affordability, simplicity convenience and security. Customers will be able to transfer and receive money to and from family and friends and earn returns on their savings.
From your vantage point, how disruptive will PSBs be and what impact will it have on the entire national socio-economic ecosystem?
We expect significant socio-economic growth in Nigeria on account of the introduction of PSBs. According to a research conducted by McKinsey in 2016, the potential economic benefits of digital financial services in Nigeria alone as an essential component of financial inclusion includes bringing 46 million new individuals into the formal financial system; boosting GDP growth by 12.4 percent by 2025 (USD 88 billion); attracting new deposits worth USD 36 billion; providing new credit worth USD 57 billion; creating 3 million new jobs; and reducing leakages in government’s financial management annually by USD 2 billion.
Other CBN initiatives like microfinance banking, mobile money, agency banking etc., did not significantly improve financial inclusion in Nigeria. Why are PSBs expected to be different?
What players in the informal sector need is a simple, convenient, secure and affordable platform to save, send and receive money which is the underlying design principle for PSBs. 9PSB will adopt a dual strategy model that will combine telecoms and innovative mobile money technologies to meet this need and shape the nature and future of financial services consumption in Nigeria.
Rural and low-income consumer segments have limited telecom network coverage and low penetration of basic banking facilities. These factors impede their awareness on how to use banking channels. What strategies will 9mobile put in place to drive PSB services adoption within this target segment?
9PSB will deploy a wide distribution network that will serve as a channel for financial education for rural and low-income consumers. This will enable them to conduct basic banking services like cash-in and cash-out transactions. 9mobile will invest in infrastructure to ensure customers can transact easily from the comfort of their mobile phone. We have set up a team of network specialists that are currently mapping our network coverage digitally in these financially underserved communities to identify areas that require urgent network deployment.
What are the potential challenges PSBs will face; how will 9mobile mitigate these and what existing capabilities and infrastructure will 9mobile leverage to deploy and sustain a PSB?
As with all new projects, PSBs may face the expected challenge of slow adoption due to low financial literacy among rural dwellers. But with the right investment in awareness campaigns in partnership with the relevant authorities and proper positioning of the distribution network of PSB service providers, trust will be built over time to drive growth and scalability.
With the issuance of the AIP, when should Nigerians expect news of roll out of 9PSB services considering that CBN guideline provides that licensees have no later than six months after the AIP to apply for final license?
We are working towards launching within the provided regulatory window.
