The Payment Service Banks (PSBs), which where were recently granted Approval-in-Principle (AIP) by the Central Bank of Nigeria (CBN) are seeking approval for indirect lending through strategic partnership with the Deposit Money Banks (DMBs).
The PSBs are specialised banks established to promote financial inclusion and enhance access to financial services for low-income earners and unbanked segments of the society by leveraging on technology.
The guidelines for licensing, regulation and operation of payment service banks stipulates that the PSBs shall not grant any form of loans, advances, and guarantees.
“I am proposing that PSBs need strategic partnership to do loans indirectly,” said Olufemi Balogun, mobile banking, digital business, 9mobile, at a breakfast session on ‘Payment Service Banking: Implications on the Financial Services Industry, organised by the Chartered Institute of Bankers of Nigeria (CIBN).
Other speakers and participants at the session unanimously asked the CBN to consider amending the regulation of 25 percent presence in the rural areas by the PSBs.
They also want the inclusion of insurance companies in the collaboration space for micro pension. Responding to this, Sam Okojere, director, payment systems management, CBN, noted the proposals as take-home points.
Represented by Ademola Adeleke, assistant director, payment systems management, he said the CBN was not averse to evolving more stakeholders in this.
Okojere explained that 75 percent of the excess deposits that would be mobilised by the payment service banks would be used for investment in Treasury Bills in CBN and 25 percent to DMBs.
“Since they cannot create loans, anything above the threshold should be given 75 percent to the CBN and 25 to deposit money banks. It is a form of investment,” he said.
As a takeaway from the event, Olalekan Asikhia, director, CIBN centre for financial studies said there are so many advantages of running a PSB compared to the regular banks.
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“For example 75 percent of their deposits could be backed up by treasury bills. In other words, it is deposited with CBN and they will be giving the Treasury bills and the 25 percent going to banks and may be out of that 25 percent, 5 percent could be for operational engagements. The PSBs have been modelled to be successful in their operations”, Asikhia said.
According to him, with the growing usage of mobile phones in Nigeria, the PSBs already have a ready market for mobile banking to deploy their services using user friendly mobile applications. Furthermore, he said the establishment of Payment service banks posed a threat to the traditional and reactive banks as they challenge the position and roles of the banks.
However, despite the numerous opportunities and benefits that PSBs are said to bring with their introduction, they are not without their challenges. One of such challenge is onboarding unserved and rural customers who lack access to basic telephone service or the knowledge of same as they may be novice to digitised solutions offered by PSBs.
Others speakers at the session included, Umar Garba Dambatta, executive vice chairman/CEO, Nigerian Communications Commission (NCC); who was represented by Mohammed Babajika, director of policy competition and economic analysis, NCC, Oluwaseun Adesanya, group head, strategy and innovation, SystemSpecs, and Olusegun Zaccheaus, senior manager, management consulting KPMG Nigeria.
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