What the CBN approval of MTN and Airtel as a payment services bank means

Recently, the Central Bank of Nigeria (CBN) granted MTN and Airtel the Approval in Principle (AIP) to operate Payment Service Banks (PSBs). This has led many to wonder what this means and how it will affect them.

Payment service banks are banks that accept deposits from individuals and small businesses, perform payment and remittance services in Nigeria, operate electronic wallets, and perform other activities prescribed by the CBN .

CBN is focused on promoting financial inclusion and this step to add the telecom giants is a welcome development at all levels, especially for the unbanked. Thus, proposed banks can register their name with the Corporate Affairs Commission (CAC) once an AIP has been obtained from the CBN in writing, a copy of which will be presented to the CAC for registration.

What does the CBN PSB license mean for MTN and Aitel

It is important to note that AIP is not the final step. No later than six (6) months after obtaining the AIP, promoters of a proposed bank are required to apply to the CBN for the grant of a definitive license.

To better understand what is expected of MTN and Airtel, based on the approval by the umbrella bank of their payment service banks, we take a look at the “GUIDELINES FOR THE LICENSE AND REGULATION OF SERVICE BANKS OF PAYMENT IN NIGERIA ”from the CBN.

According to the Central Bank of Nigeria, PSBs can:

  • Accept deposits from individuals and small businesses, which will be covered by the deposit insurance plan.
  • Perform payment and remittance services (including inbound cross-border personal remittances) through various channels in Nigeria.
  • Sale of foreign currency made from inbound cross-border personal remittances to licensed money changers.
  • Issue debit and prepaid cards in its name.
  • Operate the electronic wallet.
  • Provide financial advisory services.
  • Invest in FGN and CBN securities.
  • Perform such other activities as may be prescribed by the CBN from time to time.

What payment service banks (PSBs) can’t do

Payment service banks (PSBs) do not perform the following activities:

  • PSOs would not be able to grant any form of loans, advances and guarantees (directly or indirectly)
  • PSOs would not accept foreign currency deposits.
  • PSOs would not deal in the forex market except to make payments and remittances (including inbound cross-border personal remittances) through various channels in Nigeria and the sale of currencies made from there. Inbound cross-border personal remittances to licensed money changers. .
  • Insurance underwriting would not be possible for PSOs.
  • PSBs would not accept any closed-ended electronic value (for example, airtime) as a deposit or form payment.

At the end of the line

The main objective of payment service banks is to deepen financial inclusion by providing small businesses, low-income households and other financially excluded entities with access to deposit products and payment / debit services. transfer via low volume, low value transactions in secure technology. piloted environment.

Analysts in the Nairametrics OnTheMoney series held on the Clubhouse app on Saturday, November 6, 2021 discussed the newly licensed PSBs and concluded that the licenses would go a long way towards achieving CBN’s financial inclusion goal. In addition, fintechs may face strong competition that would quickly reduce transaction costs for everyday users.

Analysts have also advised banks to focus on lending and be more innovative in revenue generation, as they would face increased competition as well.

The entry of MTN and Airtel into the Nigerian financial services sector, analysts say, will increase competition, especially between commercial banks and fintechs, however, this competition would boost growth and promote CBN’s goal of reducing the unbanked population in Nigeria.

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About Matthew R. Dailey

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