Listen Now: Can Payment Service Banks (PSBs) be commercially sustainable and transform financial inclusion in Nigeria?


Author: Xanske le Roux

In 2018, the Central Bank of Nigeria (CBN) created a new banking license category – Payment Service Banks (PSBs), which opens an opportunity for other players, such as telcos to deliver financial services. It is hoped that PSBs will financially include millions more Nigerians, particularly those in remote/rural areas and the informal sector. For PSBs to be commercially viable, they will need high volume as transactions will be of low-value, and a wide range of partnerships will be needed to achieve this.

In this webinar, we explore how partnerships can enhance PSB’s ability to play a transformative role in advancing financial inclusion and build commercial sustainability in Nigeria. You can find the presentation here.

It is estimated that around 38 million people are financially excluded in Nigeria, 56% are women, 27% have farming as a primary income, 31% run micro/small businesses and 43% live in the Northwest. A significant amount, 61%, of the excluded do have a mobile phone and telcos have the distribution, experience and trust of the last mile consumer. This is reflected in the CBN awarding MTN and Airtel a PSB licence earlier this year.

The challenge of the PSB is that they are not allowed to underwrite insurance, offer credit or make/receive international forex payments, which limits the financial services they can directly provide. Similar challenges were also experienced in India, the only other country with PSB licenses. From 45 applications, just a handful of PSBs who were granted a license found a successful business model and survived. Fino Payments Bank in India is one of the success stories and much of its success is due to the partnerships it formed and the verticals it supports. These include banking correspondence, pensions, insurance, referrals for loans, international remittances, G2P and P2G payments, transport, PayG, KYC facilitation and cash management services. PAYG utilities is an important use case to consider as GSMA’s studies have shown that there is an increased frequency of mobile money transactions after a customer adopts PAYGO services. Both parties (MNO and solar) mutually gain in this partnership as does the consumer.

Ayoola, Nonso and Tayo spoke about their hopes for what a partnership PSBs could offer all parties including their businesses. Mutual areas of benefit can include:

  • Consumer confidence and trust
  • Access to a large distribution network and customer base
  • Ability to scale more rapidly and cheaply
  • Efficiencies in operation, particularly on collection and reconciliation
  • Creation of digitised credit history of individuals/businesses to be able to offer them and give the consumer more access to financial products and services
  • Ability to identify and KYC customers efficiently
  • Services can be provided at a lower cost
  • Onboarding and driving adoption of usage of PSBs

We will be watching this space to see how PSBs fare in Nigeria, we very much hope to see the above benefits and more realised.