Analysts: Fresh PSB Approvals to Deepen Banks, Telcos’ Competition

Kayode Tokede

The approval-in-principle granted to MTN Nigeria and Airtel Africa by the Central Bank of Nigeria (CBN) to operate Payment Service Banks (PSBs) is expected to heighten competition between the banks and the telecommunication companies.

With the two approvals by the CBN, there are presently a total of five firms operating as PSBs in the country. The central bank had in 2019 granted approvals to Hope PSB, Money Master PSB and 9PSB.

The PSBs are to operate mostly in the rural areas and unbanked locations, targeting financially excluded persons, with not less than 25 per cent financial service touch points in such rural areas as defined by the CBN from time to time, the guidelines said. Their introduction was in furtherance of the central bank’s mandate of promoting a sound financial system and enhancing access to financial services for low income earners and unbanked segments of the society.

According to analysts, the entrance of MTN Nigeria and Airtel Africa into the financial services space would heighten competition especially. They, however, noted that competition was necessary to drive financial inclusion through the provision of diverse and convenient financial services to the unbanked population.

Speaking with THISDAY, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, noted that the approval-in-principal approval by CBN to both telcos was meant to create competition and boost the nation’s economy.

According to him: “In mobile money countries like Kenya, Ghana, among others, banks are making money and mobile money operators are also making money- it is better for everyone because it brings greater financial inclusion.

“It a complete misinterpretation of facts that it will affect banks fees and commission. Banks in Ghana are making profits and it has not reduced their profit.

“The mobile payment system in Ghana has become more efficient and actually boosts economy growth. It is a great thing CBN granted MTN Nigeria and Airtel Africa principal licence.

“The approval will help the mobile money platform and it will help impact positive on the nation’s economy.

“The approval means customers will look for most convenient and efficient way of making transfers. The license is in everybody’s interest and I’m surprise it took so long. Three telecos operators were granted and they had no impact.

“Now, there will greater competition, efficiency and it will bring down cost of payment settlement going forward.”

Also, the President, Association of Telecommunication Companies of Nigeria (ATCON), Mr. Ikechukwu Nnamani, said the approval by the CBN was long overdue, stressing that financial inclusion efforts in Nigeria had been slow.

According to him, for many years, the CBN had insisted in making financial inclusion activities to be bank-led instead of teleco-led.

He explained further: “Given the subscriber base of the country, it is expected that if financial inclusion activities is telcos-led, then we will see far more adoption of financial services across the country.

“We have seen examples in other countries that support this assumption. So, I am very happy we finally got to this point. I believe it will enhance the delivery of financial services across the country

“In all parts of the world where telcos lead financial inclusion services have been allowed to thrive it has not had any negative impact on the traditional banking system, instead, it has helped enhance it.

“Remember the underlying word here is financial inclusion. The major beneficiary of these services will be people not already embracing the traditional banking services. So, I don’t see how this will negatively impact the traditional banks. I see it as a win-win for all parties including the banks.”

Commenting also on the development, the President, Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, said the principal approval granted to MTN Nigeria and Airtel Africa was expected to impact on financial inclusion stakeholders have been talking about over the years.

According to him: “So many people were excluded from the financial inclusion and with mobile companies involved in payment services, it will expand the scope and increase number of people in the financial affairs of the country.”

He said the mobile money payment sector was going to witness competition as well.

“I think telecommunication companies are going to compete with banks and it may drive down cost and bring about efficiency in the sector. Once we have serious competition, we may have cut reduction and customers will be looking for better price settlement.”

Also speaking with THISDAY, Prof. Hassan Oaikhenan of the Department of Economics, University of Benin, applauded the granting of PSB approvals to MTN Nigeria and Airtel.

He noted that the approval was expected to expand financial inclusion.

The Chief Executive Officer, Airtel Africa, Segun Ogunsanya in a statement had said: “I am very pleased that Smartcash has been granted an approval in principle to operate a service bank business in Nigeria. We will now work closely with the Central Bank to meet all its conditions to receive the operating licence and commence operations.”

A data by the Nigerian Communication Commission revealed that MTN has 73.6 million subscribers, which make up 38.61 per cent of the total telecommunication market share in Nigeria, while Airtel with 51 million subscribers and a market share of 26.79 per cent as at September 2021, are arguably among the top three largest telecommunication operators in the country.