In Africa’s largest economy, the boundary of banking is shifting and the reach of financial services radically redefined in the spirit of an inclusion wave that is bent on tailoring financial needs of consumers from low to high-income households, rural to urban centres to the types of banks that can fill them.
The disclosure this week of permit issuance for MTN’s Momo Payment Service Bank (Momo PSB) is the latest push by the regulator, the Central Bank of Nigeria (CBN) , to widen the fold of operators in the payments market and could signpost Nigeria’s arrival at the cutting edge of the payment service banking model after nearly a decade of adopting it.
Momo PSB will be venturing into a territory already occupied by early entrants like 9PSB (owned by rival wireless operator Etisalat) and Hope PSP, both yet to make a remarkable impression since getting the nod to run in August 2020 and starting operation.
Globacom’s Moneymaster has a permit also but has not launched, while Airtel’s licence is in the bag, with an approval-in-principle from CBN already in place. Payment Service Bank (PSB) model
Because setting up a typical commercial bank branch can be capital intensive and because passing on the cost to customers if the outlet were to be situated in a rural area could discourage patronage, PSBs have been designed to function on a scale smaller than conventional banks and within a range of services also narrower.
The idea is to bring financial products closer to rural households and businesses, leveraging faster channels like mobile services and digitalisation to make banking services available and affordable to those only able to access them at rates lower than what their relatively rich urban peers can afford.
The CBN is taking a cue from India, where one of the most successful PSBs called Digibank “enables customers to open an account in less than 2 minutes and authenticate their identity by stopping at any one of the extensive network of outlets run by DBS partners including over 500 cafes,” according to the consultancy KPMG.
As permitted through their regulatory framework, PSBs are empowered to drive financial inclusion by extending small deposit and withdrawal services to those deprived of basic banking services.
They can issue debit cards and handle cumulatively big but individually small remittances but are exempted from facilitating much more complex banking operations such as lending and foreign exchange transactions.
If rigorously developed, this banking model […]
