PSBs as the Key to Driving Financial Inclusion?

Tuesday,November 24, 2020 / 06:23 PM / CSL Research / Header Image Credit: Twitter; @9PSB_ng

News reports say 9PSB, aPayment Service Bank (PSB) recently granted license to operate has commencedoperations. Speaking at the launch, the Chief Executive Officer, 9PSP, BrankaMracajac noted that the 9PSB will aid the CBN's financial inclusion goal.According to the report, that the firm has set a target of achieving sixmillion new users in the first year. By dialing *990#, customers can easilyopen accounts using their mobile numbers as an account number, transact andearn money per transaction, receive instant cashback on airtime purchases,savings proposition and investment opportunities.

The CBN launched its financialinclusion strategy in 2012 with the objective of achieving 80% financialinclusion by 2020. Despite many initiatives promoted by the CBN however toachieve its goal, the inclusion rate has remained below expectations. The CBNcame up with the idea of the PSBs to leverage on mobile and digital channels toenhance financial inclusion and stimulate economic activities at the grassrootsthrough the provision of financial services. The key objective of establishingPSBs as stated by the CBN is to enhance financial inclusion by increasingaccess to deposit products and payment/remittance services to small businesses,low-income households and other financially excluded entities through highvolume low-value transactions in a secured technology-driven environment.

The Central Bank of Nigeria(CBN) recently approved three new PSBs. The three PSBs are Hope PSB, asubsidiary of Unified Payments, one of Nigeria's oldest fintech firms;Moneymaster PSB, a subsidiary of Glo, a telecom company; and 9PSB, a subsidiaryof 9mobile, a telecom company. Interestingly, MTN, Nigeria's largest Telco doesnot have a PSB licence. The CBN released guidelines for the operations of PSBsin 2018 and these guide lines were revised by the CBN on 27 August, 2020. Underthe guidelines, prospective PSBs are required to pay a non-refundable 500,000application fee and have a minimum paid-up capital of 5 billion (US$13.2 million).

The PSBs are expected tooperate mostly in the rural areas and unbanked locations targeting financiallyexcluded persons, with not less than 25% financial service touch points in suchrural areas as defined by the CBN from time to time. PSBs are permitted toaccept deposits from individuals and small businesses, carry out payments andremittances services through various channels within Nigeria, sale of foreigncurrencies realized from inbound cross-border personal remittances toauthorized foreign exchange dealers, issue debit and pre-paid cards on itsname, operate electronic wallet, render financial advisory services, invest inFGN and CBN securities. The PSBs are not permitted to grant any form of loans,advances and guarantees (directly or indirectly), accept foreign currencydeposits, deal in the foreign exchange market except as prescribed, undertakeany other transaction which is not prescribed by the set guidelines.

In our view, a major obstacletowards the significant of the contribution of the PSBs to financial inclusionis the restriction of the operation of the PSBs to rural areas and unbankedlocations as many of the locations lack adequate power and internet accesswhich are critical for the successful operations of PSBs.