The Central Bank of Nigeria recently took yet another major step towards expanding the financial market net by rolling out the reviewed guidelines for the operation of payment service banks. The objective 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.
Kevin Amugo, director, financial policy and regulation department of the CBN, in the new directive, said PSBs were to operate mainly in the rural areas and other unbanked locations, go into partnership with card scheme operators (but not eligible for foreign transactions), deploy ATMs in some locations as well as deploy PoS .
They must also have a minimum capital base of N5 billion.
Till date, three PSBs have been licensed by the CBN but have yet to roll out because of some operational challenges. The telcos granted approval-in-principle (AIP) by apex bank include Hope PSB, Money Master PSB and 9PSB. While Money Master PSB is owned by Globacom, 9mobile owns 9PSB.
The apex bank’s effort is in line with its objective of opening up the digital financial services sector, which will help millions who do not have bank accounts. It is estimated that more than half of Nigeria’s population of 180 million do not have bank accounts.
Real Also:NEWSCLCIKNG: Our Story at 3!
Among others, the PSBs are to accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme, carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria; and sell foreign currencies realised from inbound cross-border personal remittances to authorised foreign exchange dealers.
Other services allowed under the guidelines include issuance of debit and pre-paid cards on its name, operating electronic wallet, rendering financial advisory services, investing in FGN and CBN securities; and carrying out such other activities as may be prescribed by the CBN from time to time.
However, PSBs are not allowed to grant any form of loans, advances and guarantees (directly or indirectly), nor accept foreign currency deposits, deal in the foreign exchange market except as prescribed. Also, they cannot go into insurance underwriting, and undertaking any other transaction not prescribed by the CBN.
In a recent report on financial inclusion, titled “Payment aspects of financial inclusion in the fintech era–April 2020”
The Bank of International Settlement noted in its executive summary that Financial inclusion starts with payments. “They serve as a gateway to other financial services, such as savings, credit and insurance.
Transaction accounts operated by a regulated payment service provider are at the heart of retail payment services. To improve financial inclusion, these transaction accounts need to enable end users to meet most, if not all, of their payment needs and to safely store some value,” it said.
By virtue of their local spread and presence in the rural areas, entities such as banking agents, telecommunications companies (Telcos), through subsidiaries, retail chains (supermarkets, downstream petroleum marketing companies), postal services providers, mobile money operators, and courier companies, have been advised to consider taking up the PSB licence by the CBN.
This is a good development as far as financial inclusion drive is concerned. Experts believe that it will bring, at least, another 40 per cent of unbanked Nigerians under the formal financial system, with their savings mobilised for national development. Because of the special emphasis the CBN places on the PSBs being mainly rural based, there is the need for adequate security measures to be taken to ensure that they do not suffer serial attacks from bandits and other lawless elements. Some rural branches of Nigerian banks have had to close shop because of incessant armed robbery attacks and the looting of their strong rooms. This must stop to build confidence in the system, the exerts believe.
However, Techpoint, a stakeholder in the payments sector, is skeptical about the effectiveness of PSBs and the effect of new regulations on improving financial inclusion. Its concerns centre around the entry requirements and the limitations of PSBs which might make it a bit more difficult to achieve. Despite these, the percentage of unbanked adults in Nigeria remains high. According to records from the Nigeria Inter-Bank Settlement System (NIBSS) from August 30, 2020, there are just 43.2 million BVN users in Nigeria, a far cry from any of its estimated populations.
Though the CBN believes the introduction of the PSB will further deepen financial inclusion, the entry requirements and the limitations of PSBs might make it a bit more difficult to achieve.
There is no doubt that the PSBs will boost national output and help transform the financial landscape where transactions will be a lot easy, convenient and safer.
