Nigeria’s leading telecommunications companies MTN Nigeria and Airtel Africa have received an “Approval in Principle” (AIP) from the Central Bank of Nigeria to operate as Payment Service Banks.
Payment Service Banks are banks that take deposits from people and small businesses, provide payment and remittance services within Nigeria, issue debit and prepaid cards, run electronic wallets, and engage in other CBN-approved operations. To lawfully engage in these operations, a PSB License from CBN is required, which these Telcos have now obtained.
This news was received with mixed feelings from fintech stakeholders and the general public as they assume that there will be tighter competition between telcos and traditional banks. What you should know
The main goal of Payment Service Banks is to increase financial inclusion by providing small businesses, low-income households, and other financially excluded entities with access to deposit products and payment/remittance services through high-volume low-value transactions in a secure technology-driven environment.
The approval in principle (AIP) process is only the first step in becoming a PSB. The promoters of a proposed bank must apply to the CBN for a final license no later than six (6) months after receiving the A.I.P.
Analysts at the Nairametrics onTheMoney series hosted on Clubhouse on Saturday, November 6, 2021, looked at the telco companies’ foray into the banking industry and agreed that the licenses will assist the CBN to accomplish its aim of financial inclusion.
Edward Okonkwo Co-Founder of Nairametrics said that “The banks have nothing to worry about because the way the PSB is structured is like the midwife situation since the PSBs would be subordinate to the commercial banks.”
He also stated that the banks shouldn’t be concerned about sharing revenue because the funds would still be with the bank.
“Banks should start thinking about how to create more loans and use the lower-cost infrastructure to distribute the loans. With new initiatives on the way such as the credit agency, fintech AI or credit profiling services, it means there are a lot of opportunities appearing in the space and enough revenue for everyone to share.
“Yes, the bank may lose some of their traditional banking revenue like the N26 for moving money around, but let the bank grant more loans and make money from loans because the PSB is not going to compete with the banks in that space. I see it as a win-win,” he explained.
Further, he stated that the arrangement […]
