Nigeria is preparing rules that will allow wireless carriers to transfer cash, softening a previous policy that protected the turf of banks in Africa\u2019s most populous country.<\/p>\n
The central bank may have realised it can\u2019t rely on lenders alone to achieve its objective of extending services to the 50 million adults still without a bank account in the nation of about 200 million people. Telecommunications firms, including South Africa\u2019s MTN Group Ltd, are now interested in applying for licenses that will allow them, and even supermarket chains, to create units that can collect deposits and maintain savings accounts.<\/p>\n
The regulator late last year released guidelines on how Payment Service Banks will operate to reverse a drop in access to affordable financial products. It had previously blocked network operators from getting licenses to move money for customers without using a bank.<\/p>\n
But, with 162 million active lines between the nation\u2019s four wireless carriers, the regulator is opening up the field in a bid to more than double its financial inclusion rate to 80% by 2020.<\/p>\n
\u201cThese guys are going to grab all the bottom-of-the-pyramid transactions,\u201d said Bismarck Rewane, chief executive officer of Financial Derivatives Co, a risk advisory group based in Lagos. \u201cThis is a disruptor to the traditional way of doing things.\u201d<\/p>\n
Banks still have some shelter from full-blown competition as the new policy won\u2019t enable licensees to lend, pay interest or accept foreign-currency deposits. It also requires that at least one quarter of access points be located in rural areas, which are currently under-served.<\/p>\n
\u201cI don\u2019t think everyone will say, \u2018this is the perfect document,\u201d\u2019 said Usoro Anthony Usoro, the general manager of mobile-financial services for MTN Nigeria, the market leader with 67 million mobile subscribers. \u201cIt\u2019s a first step towards bringing all players in. We expect that the CBN will keep listening to customers, to potential participants in that space and will keep improving the policy.\u201d<\/p>\n
The Central Bank of Nigeria didn\u2019t respond to requests for comment about the new policy or when the licenses will be granted.<\/p>\n
Competition vs Collaboration<\/strong><\/p>\n Banks aren\u2019t standing still and are confident they can withstand the competition with their own digital offerings. FBN Holdings Plc\u2019s First Bank of Nigeria is pushing ahead with its digital-banking roll-out, with more than 10,000 agents targeting the unbanked everywhere in the country, according to CEO Adesola Adeduntan, out of the 500,000 agents which the regulator has said are needed to cover Nigeria.<\/p>\n \u201cAs a bank, we can open accounts nationwide using digital financial services, invest the funds across a broad range of asset classes, and, most importantly, we can lend,\u201d said Lagos-based Diamond Bank Plc\u2019s head of corporate communications, Ezechinyere Anyanwu.<\/p>\n Without the ability to lend or pay interest on deposits, there might be little incentive for customers to keep their money outside the banking system, said Abayomi Odumosu, an independent mobile-money consultant based in Lagos.<\/p>\n \u201cIt pushes people to withdraw,\u201d he said. \u201cThat increases the cost of handling cash and forces mobile operators to collaborate with banks.\u201d<\/p>\n It will probably be a fine line between collaboration and competition. Nigerian lenders are already facing uncertainties around what is shaping up to be a close presidential election in February, the risk of a currency devaluation, a surge in soured loans, and tepid economic growth.<\/p>\n Win-Win<\/strong><\/p>\n The additional competition might stimulate innovation and interest in financial services, especially in far-flung areas shunned by banks, where people rely mainly on cash to transact. As these customers get used to transferring money using their phones, the payment service providers might even act as recruitment agents for rural dwellers seeking broader banking services.<\/p>\n \u201cIt\u2019s a win-win for everybody,\u201d said Segun Ogunsanya, CEO of New Delhi-based Bharti Airtel Ltd\u2019s Nigerian unit. \u201cIt\u2019s a win for the banks, a win for the licensees, a win for the central bank, a win for the government and a win for the areas where people have been excluded from the economic activities of this country.\u201d<\/p>\n Airtel Nigeria may apply through an affiliated entity rather than applying for a license directly, he said. Nigeria\u2019s two other main wireless operators, 9mobile and Globacom, with a combined 59 million subscribers as of November, didn\u2019t respond to requests for comment about potential plans to apply for a license.<\/p>\n As the adoption of mobile money helped grow financial inclusion across sub-Saharan Africa more than 8 percentage points to an average of 43 percent between 2014 and 2017, Nigeria\u2019s rate dropped nearly 4 percentage points to 39% over the same period, according to World Bank data.<\/p>\n The lenders will need to be on their toes. \u201cBanks will be forced to develop innovative banking services,\u201d said Oluwole Babatope, a senior research analyst at International Data Corp., or risk losing accounts to mobile-phone providers, hurting their revenue.<\/p>\n
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