MTN Group is seeking as many as three more strategic investors in addition to Mastercard for its fintech unit, which it values at $5.2-billion. This was made known by the Group CEO of the telco giant Ralph Mupita, “We are open to selling up to a maximum of 30% of the fintech business,” adding that “There might be three or maybe even four strategic partners within that.”
MTN earlier said it signed a memorandum of understanding with Mastercard for a strategic investment and will also use the payment network processor’s technology to offer more services. MTN has 60 million users for its fintech unit, which currently offers basic services like cash-in/cash-out
Africa’s young, underbanked population is increasingly using mobile phones to bridge gaps in services. That’s opened a lucrative and fast-growing space in the fintech sector for wireless carriers. Much of the investment to date has been in mobile payment systems, with a wave of fast-growing start-ups such as Flutterwave and Interswitch emerging.
Ralph Mupita, the MTN Group President and Chief Executive
MTN is Africa’s largest wireless operator. It has 60 million users for its fintech unit, which currently offers basic services like cash-in/cash-out, according to Mupita.
“With mobile money and fintech services, you are able to leapfrog people from not having any financial services to using the phone to provide a lot of financial services,” Mupita said.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Nigeria’s largest telco by subscriber base MTN, and its immediate competitor Airtel have taken up a new business — that of attempting to beat Nigerian banks at what they know how best to do. The two have been granted one of the country’s most expensive fintech licenses, a payment service bank license, costing over $12.8m in licensing fees. Last year, 9mobile, another of the country’s leading telco, became one of the first set of licensees, alongside Hope PSB and Moneymaster PSB.
The payment service bank license is one of the many types of banking licenses a financial technology company in Nigeria seeking authorisation to operate from the country’s central bank may explore. It is different from other existing banking licenses for financial technology companies because it is one of the few types of fintech licenses that allow the licensee to operate across the country. A majority of others have geographical and structural limitations.
Nigeria’s central bank in its latest update on the payment service bank licensing rules is clear about what purpose this type of bank would serve.
“PSBs are envisioned to facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion and help in attaining the policy objective of 20 per cent exclusion rate by 2020,” CBN said it in its latest rules.
The new banking license from MTN. Credits: MTNNG
But it appears that MTN and Airtel strategically delayed their license applications for the PSB license for a reason: the recently introduced mobile money licensing framework. While all hopes were high that the mobile money operational guidlines would be wider in scope, these hopes were dampened with the eventual release of the guidelines in July this year.
The mobile money guidelines heavily limited the operational capabilities of its licensees, restricting mobile telecoms operators such as MTN and others, for instance, from carrying out substantial banking activities using the model.
A clearer picture about the differences between Nigeria’s payment service bank and mobile money licenses is painted in the table below. The differences also capture how the payment service bank design will function in practice.
S/N
KEY REGULATORY REQUIREMENTS
PAYMENT SERVICE BANK LICENSE
MOBILE MONEY LICENSE
1
Can accept and hold deposits
YES
YES (mostly via mobile wallets)
2
Cross-border Remittance
YES ( including, inbound cross-border personal remittances)
NOT Specifically stated. Operationally improbable)
3
Deal in foreign exchange transactions
YES (only to the extent of sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers, only)
YES (only to the extent of sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers, only
4
Issue cards
YES
YES
5
Lending
NO
NO
6
ATM
YES
NOT Specifically stated (Operationally improbable)
7
Extent of participation allowed to telecommunications companies.
RESTRICTED from accepting payments from the public, apart from airtime billing.
ALLOWED (through their subsidiaries) to accept deposits from the members of the public.
8
Estimates of licensing fees
Over 5 billion naira ($12m)
Over 2 billion naira ($5m)
9
Geographical limitations
NATIONAL (provided not less than 25% financial service touch points in rural areas are set up)
NATIONAL
10
Use of network of agents permitted
YES
YES
11
Who may obtain the license?
i) Banking Agents; ii. Telecommunications companies (Telcos), through subsidiaries; 8 Classified as Confidential iii. Retail chains (supermarkets, downstream petroleum marketing companies); iv. Postal services providers and courier companies; v. Mobile Money Operators (MMOs that desire to convert to Payment Service Banks shall comply with the requirement of this Guideline); vi. Switching Companies; vii. Financial technology companies (Fintech); viii. Financial Holding Companies; and ix. Any other entity on the merit of its application subject to the approval of the CBN
Banks and corporate organisations
12
Primary Regulator
Central Bank of Nigeria
i) Central Bank of Nigeriaii) Nigerian Communications Commission
What Difference Will A Payment Service Bank License, Therefore, Make?
A Payment Service Bank (PSB) is a new category of bank with smaller scale operations and the absence of credit risk and foreign exchange operations. In addition to accounts (current and savings), PSBs can also offer payments and remittance services, issue debit and prepaid cards, deploy ATMs and other technology-enabled banking services. Think of them as basically stripped-down versions of traditional deposit money banks, with limited functionality and a focus on onboarding more of the excluded and marginalised population.
Under Nigerian central bank’s regulations, subsidiaries of mobile network operators (aka telcos), mobile money operators, retail chains (supermarkets) and banking agents are welcome to apply for the PSB license, provided they can meet certain requirements, including a 5 billion naira ($12million) capital base, and a combined 2.5 million naira ($6.4k) application and license fee (which are non-refundable).
The new banking licenses for Nigeria’s leading telcos are coming after the CBN issued an updated and revised guideline for the licensing and regulation of Payment Service Banks in Nigeria on August 27, 2020.
MTN has the largest chunk of the Nigerian telco market with over 74 million subscribers, followed by India’s Airtel with over 52 million users; locally owned Glo at 52 million; and then 9mobile with a meager 12 million users. Visaphone (which is merely an extension of MTN, having being acquired by the telecom giant in 2015 to boost its 4G capacity) comes last with just a little over 137, 000 users.
MTN bank Nigeria MTN bank Nigeria MTN bank Nigeria
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
