May 3, 2023/CSL Research
In 2018, Payment Service Bank (PSB) operations were proposed by the CBN to aid Nigeria’s
financial inclusion drive. According to the CBN, the key objective of setting up PSBs is to enhance financial inclusion by increasing access to deposit products and payment/remittance services to small businesses, low-income households, and other financially excluded entities through high-volume low-value transactions in a secured technology-driven environment. PSBs are encouraged to operate mostly in rural areas and unbanked locations, targeting financially excluded persons. A PSB can also issue debit and prepaid cards (Such cards should not be eligible for foreign currency transactions) and deploy automated teller machines (ATMs), and other technology-enabled banking services.
MTN and Airtel introduced both MoMo and Smartcash PSBs respectively. The
commencement of PSBs by two of the major players in the telcos industry represents a huge step in deepening financial inclusion in the country. MTN and Airtel have the largest mobile subscribers in the industry, this is significantly higher than the customer base of the top three Nigerian banks. This development bodes well for Nigeria’s unbanked population as it would serve as a gateway into the financial services sector. While PSBs cannot give loans, having a transaction account enables their users to access loans for their businesses and education.
MTN Nigeria Communications Plc (MoMo Payment Service Bank PSB) added 1.2 million active MoMo wallets in Q1 2023. The company also noted that it expanded its agent network by adding over 40,000 active agents, bringing the total number of Momo agents to approximately 264,000. The increase in MoMo PSB wallets could be attributed to the Naira cash crunch witnessed in Q1 2023 which affected people’s ability to transact in cash, forcing them to adopt digital channels. As a result, active MoMo PSB wallets rose by 1.2 million in Q1 to a total of 3.2 million. MTN fintech operations witnessed a 19.6% increase to 84.4bn in 2022 from the 70.6billon in 2021. The increase in revenues of the company’s fintech operations signals the impact of MoMo Payment Services on the company’s revenues since inception in 2022.
The significant contribution of PSB to the financials of these telco giants understates the importance of the initiative. The emergence of the PSB is one step towards providing easyto-use, accessible, and affordable financial services to all Nigerians, while also achieving financial inclusion, but challenges such as a lack of a unified identification system and increasing poverty rates continue to impact the effectiveness of the initiative negatively.
