New Telegraph

PSB: Banks fret over telcos’ 127m potential customers

Commercial banks in the country are worried that the Payment Service Bank (PSB) licences for which MTN and Airtel secured approval will spark stiff competition between them and the telecommunications companies. New Telegraph gathered that the apprehension stemmed from the fact that the two operators, as of December 2021, had a combined 127.5 million active customers who could shift attention to them for financial services. Data from the Nigeria Inter- Bank Settlement Systems (NIBSS) shows that the 21 banks in the country had a total of 111.5 million active bank accounts as of May 2020.

Highlighting the threat, one of the leading banks in the country, GTCO, disclosed in its 2022 Economic Outlook just released that banks have been seriously feeling concerned since the two operators were granted Approval-in-Principle for PSB by the Central Bank of Nigeria (CBN) in November last year. According to the report, the competitive environment in the banking sector is constantly changing primarily driven by regulation, non-bank competitors, law enactment, and responses to macro-economic developments. Projecting into the bank ing sector this year, GTCO said: “The competition between banks and telcos is expected to go up a notch following the Approval-in- Principle (AIP) granted to MTN and Airtel to commence Payment Service Bank (PSB) operations.

“There are concerns about licensing the country’s two largest mobile services providers, who together account for over 65 per cent of total mobile subscribers in Nigeria, to perform financial service operations could see more traditional banks struggle.” The bank’s analysts, however, noted that the lenders may be able to minimise the impacts of the new players on their business through their Shared Agency Network Expansion Facilities (SANEF).

“While these concerns might be valid, it is important to note that the banks pre-empted the possibility of having telcos become licensed financial services providers and, consequently, established the Shared Agency Network Expansion Facilities (SANEF) in a bid to minimise its impact on industry earnings and their market share,” it said. The financial analysts also noted that banks’ ability to run a wallet account system in addition to the traditional accounts, the need for PSBs to be subjected to the same rigorous KYC procedures in place for banks and the payment of similar regulatory charges/levies (AMCON, NDIC, etc.) would go a long way to level the playing field for them.

The threat from telcos is coming amidst increasing competition between the traditional banks and the financial technology companies (fintech). According to the report, nonbank competitors sustained their pressure on the earnings of banks in 2021 as more fintech secured requisite approvals and entered the space offering a range of financial services & products to banked customers using assetlight technology. MTN and Airtel had in separate statements in November 2021, revealed that the CBN had granted them approval in principle to operate payment service banks (PSBs).

Subject to meeting specific requirements later this year, the telecom operators would receive approval to operate PSBs. MTN, in a statement announcing the approval-in-principle, said: “The decision to issue a final approval is firmly within the regulatory purview of the CBN and we respect their right and judgment in that regard. “MTN Nigeria affirms its commitment towards the financial inclusion agenda of the CBN and the Federal Republic of Nigeria and continues to explore means whereby it can contribute to its fulfillment.

While we look forward to the eventual grant of a final PSB license, we will continue to communicate material information in accordance with regulatory obligations and guidelines.” Also, Airtel Africa, in a statement, announced that its subsidiary SMARTCASH Payment Service Bank Limited (“Smartcash”) has been granted approval in principle to operate a payment service bank business in Nigeria. “I am very pleased that Smartcash has been granted 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,” CEO, Airtel Africa, Segun Ogunsanya, said.

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