The Central Bank of Nigeria’s (CBN) commitment towards achieving 95 per cent financial inclusion rate by 2024 would be enhanced if the apex bank licenses mobile network operators (telcos), as Payment Service Banks (PSBs), Chief Executive Officer, Financial Derivatives Company Limited’s (FDC), Mr. Bismarck Rewane, has said.
According to the financial expert, telco PSBs have some key advantages over deposit money banks, which will make them more effective agents in promoting financial inclusion in the country.
Rewane, who stated this in the FDC’ s latest Monthly Economic Update, obtained by New Telegraph at the weekend, cited telcos’ large customer base, existing fintech capabilities, low service costs and the narrow range of services that they offer, as some of the factors that the PSBs will leverage to boost financial inclusion in Nigeria.
According to him, “the most obvious lever telco PSBs have to decrease the unbanked population is their large customer base; the telcos could use their existing fintech capabilities to increase the number of adults that are granted access to simplified, quality and affordable financial services.
“When paired with another goal of the CBN – increasing access points to financial services – telcos really shine. A lack of infrastructure has constrained banks from setting up physical branches in rural areas. With mobile devices as the primary access point for PSBs, telcos could ease access for depositors, improving the customer to access point ratio.”
Also commenting on PSBs’ low service costs advantage, the FDC boss stated: “PSBs are also likely to have lower charges compared to the deposit money banks, as they compete to gain increased market share. Findings from a KPMG-UBS study indicate that the cost of effecting a transaction on a mobile device is half the cost of internet banking, 13 times cheaper than ATM banking, and 43 times cheaper than branch banking. Increasing competition for market share amongst the telcos would drive down service costs. This is similar to what Nigeria has experienced with the cost of mobile phone credit dropping as more players have joined the market.”
He further pointed out that the limited services offered by PSBs would improve their operating efficiency as “the administrative bottlenecks associated with some services including provision of credit facilities and forex trading would be absent.”
“Telco PSBs could attract a number of account users as they currently loan airtime to their subscribers. This would increase the proportion of unbanked adult population absorbed into the financial system,” Rewane added.
The financial expert noted that “despite the introduction of several initiatives by the CBN, such as, microfinance banking, agent banking, know-your customer (KYC) requirements, and mobile money operators, the rate of financial inclusion remains low in Nigeria.”
Stressing that telcos present an opportunity to change the situation, he said “leveraging the telcos as PSBs will not only grant the unbanked public increased access to financial services, but will also ease their access to funds.”
He, however, identified “high level of illiteracy among target population” as a factor that could hinder telco PSBs.
According to him: “poor adaptability to modern technology by rural residents, who constitute the bulk of the unbanked public, could limit the success of PSBs, despite the increasing traction of the telcos. By implication, the services of these companies may not be recognised beyond rendering call services by a majority of the uneducated unbanked adult population.”
It would be recalled that in an effort to leverage technology to promote financial inclusion, the CBN had in October 2018, introduced regulations and guidelines for the licensing and operations of PSBs. The operations of the banks are, however limited to transactions involving deposits, withdrawals and money transfers.
They are also not allowed to provide credit facilities and participate in forex trading unlike the traditional banks.
Already, leading telcos such as MTN Nigeria and Airtel Nigeria, have applied for PSB license.