The recent announcement by telecoms giant, MTN, that it would soon apply for a Payment Service Bank (PSB) licence and launch mobile banking in Nigeria by the second quarter of next year, has set alarm bells ringing at deposit money banks (DMBs) in the country, findings by New Telegraph have shown. According to industry sources, the MTN announcement, which came in the wake of the Central Bank of Nigeria (CBN)’s release of guidelines on PSBs, would make the business environment, which was already tough for lenders, even tougher. Other telecoms firm, according to information, are also billed to take the plunge.
A senior industry player told New Telegraph’s correspondent last weekend: “With a PSB licence, MTN’s subscriber base of over 50 million clearly gives it an edge over banks. In fact, most of the major telcos can easily provide most of the services being offered by banks.
This means that retail banking will even become more difficult for most lenders. “Compared with banks, the telcos have a bigger budget and better technical know-how to drive mobile banking. So, banks are going to face more issues when these firms start introducing new financial products.”
The source noted that there are concerns over CBN’s capacity to regulate telcos that obtain licence to launch mobile banking. Specifically, the source said: “It is true that CBN’s guidelines prohibit PSBs from granting any form of loans, advances and guarantees, but who says telcos cannot find a way of offering this type of service without breaching CBN regulations. In fact, with the number of firms that we are hearing are planning to apply for PSB licence, the banking industry may have gone back to the days prior to the 2004/2005 consolidation period when the country had over 80 banks.”
A few weeks ago, the Chief Executive Officer, MTN Group, Rob Shuter, disclosed at a conference in South Africa that the firm will apply for a mobile banking licence in Nigeria and launch the service in the coming year. “We will be applying for a payment service banking licence in Nigeria in the next month or so and if all goes according to plan, we will also be launching mobile money in Nigeria, probably around Q2 of 2019,” Shuter was quoted as saying. Interestingly, last January, Shuter had revealed plans to make MTN become Africa’s biggest bank.
He stated then: “The core digital service that we have decided to put our money on is mobile money. Mobile money is really about leveraging the strength of the brand and leveraging the strength of the distribution because we have built a huge informal distribution network for prepaid airtime to bring customers into a transactional banking system.” Commenting on Nigeria’s DMBs’ concerns over the imminent entry of leading telcos into the country’s mobile banking space, the Managing Director/CEO Bic Consultancy Services, Dr. Boniface Chizea, said that telecom companies have massive reach going by the level and spread of subscriptions.
“It should therefore be expected that banks would see their involvement in payment services as a threat,” he said. “But if the telecom companies are not licensed to perform other banking related services, I would not unduly worry. “But for self-interest sake, there is the need for concern. It could mean that the commissions earned by banks from massive transfers might be threatened and such a development could undermine profitability.”
Similarly, the President of the Bank Customers Association of Nigeria (BCAN), who is also a former Registrar and Chief Executive of the Chartered Institute of Bankers of Nigeria (CIBN), Dr. Uju Ogubunka, said: “The banks are right to be worried. This is because the telecom companies have the capacity to compete with them. “But I’m not interested in the competition between the banks and the telcos; service is prime. If the coming of PSBs will ensure that most Nigerians are financially included, then that is good for the country.” He, however, stated: “Beyond financial inclusion is financial literacy. If we have inancial inclusion without financial literacy, there could be trouble. There are so many things that people who have access to financial services are ignorant of. So every effort has to be made to ensure that financial literacy campaigns are taken to all parts of the country.”
Also, commenting on the issue, the Principal Consultant, Henates and Associates, Mr. Henry Atenaga, said:
“The banks ought to be scared because the telecoms firms are better positioned than lenders to perform mobile banking services given the kind of country we are in. If you go to the really rural parts of Nigeria you are not likely to find a bank branch or a banking agent, but you will find that most people in those communities have mobile phones.”
Besides, Atenaga stated that the CBN may face challenges in trying to regulate PSBs promoted by telcos, adding this can be addressed if the apex bank effectively collaborates with the Nigerian Communications Commission (NCC). It will be recalled that in releasing the guidelines on PSBs, the CBN emphasised that the move was primarily aimed at ensuring that the country attains its 20 per cent financial exclusion target by 2020. The regulator stated that PSBs are expected to leverage on mobile and digital services to boost access to financial services for lowincome earners and the unbanked segments of the population particularly in the rural areas.
Under the guidelines, PSBs are permitted to carry out activities such as: Operation of savings accounts and acceptance of deposits from individuals and small businesses; carry out payments and remittance (including inbound cross-border personal remittances) services through various channels within Nigeria; issue debit and pre-paid cards as well as operate electronic purse and invest in Federal Government of Nigeria and CBN securities. The guidelines, however, bar PSBs from granting of any form of loans, advances and guarantees or trade in the foreign exchange market. Also, PSBs are required to have N5 billion minimum capital.