Barring any last-minute intervention, telcos would most likely not be issued a Payment Service Bank (PSB) licence by the end of 2020 as indications emerged on Thursday that the CBN has unofficially extended the 6 months deadline given to the recipients of the Approval in Principle for a PSB.
The Central Bank had said in 2019 that it will not licence more PSB operators until it certifies that the three that got the AIP were able to meet up with the requirements at the end of the six-month window given to them. The three recipients of the AIP include Hope PSB, a subsidiary of Unified Payment, Globacom’s Money Master, and 9Mobile’s 9PSB.
At the BusinessDay Dialogue Series on Thursday, which focused on ‘Future of Payment and Financial Inclusion’, Musa Jimoh, Director, Payments System Management, CBN, said the AIP process was still ongoing and had not concluded. He also suggested that the apex bank already see telcos involved in financial services, hence are not in a hurry to issue the licence at least until the conditions are met.
“Three companies have actually been granted the AIP and they are going through the AIP period. Once they are done and we have certified that they have fulfilled the requirements of the AIP, then the commercial licence would be given to them. So the stage they are now is AIP for them to bring together all the things that they need to go commercial,” Jimoh said.
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The 6 months deadline the AIP licensees were given by the CBN supposedly began the day the licence was issued in 2019. But there is little indication on the ground that the conditions were met. While Jimoh said during the conference that the AIP process is continuing he did not elaborate whether the CBN has officially extended the deadline.
Read more What you should know about PSBs as CBN delays licence
The PSB licence is supposed to allow telecommunication companies to offer payments and remittance services, issue debit and prepaid cards, deploy ATMs, and other technology-enabled banking services. It is like a stripped-down version of traditional deposit money banks, with limited functionality and a focus on onboarding more of the excluded and marginalised population.
In 2019, the CBN issued three Approval in Principle (AIP) to two telcos (Glomobile and 9Mobile) and Unified Payments, a financial technology company set up by Nigerian banks.
There have been expectations that the licenses will be issued before the end of the first quarter of 2019. At the BusinessDay Inclusion for All summit which was held earlier in 2019, Nurudeen Zauro, the Technical Adviser, Financial Inclusion Secretariat at CBN, had said to expect the PSB licences, “Most probably by the end of this first quarter.”
The AIP – the closest licence to the PSB – was eventually issued in September 2019. The AIP is basically a stepping stone and an indication that the regulator is willing to issue the licence subject to specific conditions.
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MTN Nigeria which had been a leading voice for the licence was granted a full Super Agent license a month earlier. The Super Agents licence enables MTN to provide shared agent network services.
The MTN agents will be able to carry out services such as – cash deposit and withdrawal; bills payment; payment of salaries; funds transfer services (local money value transfer); cash disbursement and cash repayment of loans; as well as other agent mobile payments/banking services.
While the super-agent licence gives MTN a foot into the financial services landscape in Nigeria, it limits the company in other different ways. One of them is, a super-agent needs a reference letter from a financial institution (in the case of MTN, a GTBank) as part of its documentation licence, which keeps the telco under some form of supervision of the selected financial institution.
“The Super-Agent is a licence of collaboration in nature, it means that MTN through its subsidiary Yellow Digital Financial Service would partner with financial institutions including the banks and fintech to distribute their products across the country,” said Elsa Muzzolini, General Manager, Commercials, Mobile Financial Services, MTN.
In other words, the Yellow Digital Financial Services’ agents get to mostly distribute partners’ financial products and services. Without the PSB licence, the telco is unable to offer its full MTN Mobile Money service in Nigeria. This means that users won’t be able to store funds in their MTN Mobile Money service because the requirement for super agents requires the telcos to store funds with the banks.
The super-agent licence also means MTN shares its fees with four different parties including NIBSS, the Issuer, Acquirer, and the agents. The minimum interchange fee for inter-scheme cash-out transactions is N50. However, the final fee of up to a maximum of N100 is set by the originating financial institution and not the super agent. The additional N50 is to give the FI room to further incentivise its agents.
“You know it is a niche banking service where they are expected to provide digital financial services. As a matter of fact, all their products and services should be digital and should happen in the hinterlands in areas where you have the most vulnerable and financially excluded people,” Jimoh said.
As a requirement to grant the final licence, the CBN said it “shall conduct an inspection of the premises and facilities of the proposed bank to, among others: Check the physical structure of the office building and infrastructure provided for the take-off of the PSB; sight the original copies of the documents submitted in support of the application for license; and verify the integration of its infrastructure with the National Payments System.”
