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Technology | Mobile Money and Telcos

Payment Service Banks - Impact on Financial Inclusion

Nov 09, 2021   •   by   •   Source: Proshare   •   eye-icon 2144 views

Tuesday, November 09,2021 / 08:52 AM / by United Capital Research / Header ImageCredit: International Banker

 

Last week, the subject of Payment Service Banks (PSB) became theforefront of economic discussion, after the CBN granted an approval inprinciple to Airtel Africa Plc and MTN Nigeria allowing their subsidiaries,SMARTCASH Payment Service Bank Limited and Momo Payment Service Bank to operatePSBs. In 2019, the CBN had granted three licenses to three new PSBs: Hope PSB(a subsidiary of Unified Payment), Money Master PSB (a subsidiary of Globaltelecommunications) and 9PSB (a subsidiary of 9Mobile Telecommunications).


A PSB is usually a subsidiary of a telecommunications company or asimilar large B2C firm that acquires a license to provide financial services byleveraging its existing telecommunications or distribution infrastructure. PSBsare permitted to offer banking services such as deposit-taking, remittances,payments processing and mobile wallets. The objective of these banks is toincrease financial inclusion and depth in Nigeria by providing tailored financialproducts to unserved and underserved customers. Under the CBN guidelinesPayment Service banks are not allowed to grant any form of loans, advances, andguarantees to customers (directly or indirectly), accept foreign currencydeposits or deal in the foreign exchange market or provide insuranceunderwriting services.


Looking ahead, we welcome the decision to grant PSB licenses to theother two leading telcos. According to Efina's most recent financial inclusionreport, only 45.0% of Nigeria's adult population are banked, way off SSA peerslike South Africa which had 80% of its population banked. The sheer reach ofthe telcos means the financial inclusion gap would be breached. The NigerianCommunications Commission (NCC) maintains that telcos reach up to 98% coverageand are present in all but one of the 774 local governments in the country,compared to 7 bank branches per 100,000 people in Nigeria for commercial banksin 2020, essentially granting telcos access to offer minor banking serviceswhich will improve financial inclusion.


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