Nigeria approves three new ‘Payment Service Banks’

Central Bank of Nigeria (CBN)
Central Bank of Nigeria (CBN)

The Central Bank of Nigeria on Wednesday granted approvals-in-principle (AIP) to three new Payment Service Banks (PSBs) in the country.

The CBN spokesperson, Isaac Okorafor, said the new institutions, issued approvals in principle to operate as Payment Service Banks, are Hope PSB, Money Master PSB and 9PSB.

Mr Okorafor said, in a statement in Abuja, that the approval was in line with the CBN’s objective of enhancing financial inclusion in the country.

The CBN said the decision is also to boost the development of the payment system by increasing access to deposit products and payments services through a secured technology-driven environment.

The approval was part of the processes the institutions had to fulfil in order to be granted a license to operate as fully-fledged Payment Service banks.

“The decision of the CBN to issue the AIP to the applicants followed the institutions’ satisfaction of documentation and other laid down conditions,” he said.

Sequel to the issuance of the AIP to the three banks, he said they were expected to submit their respective applications for the grant of a final licence, not later than six months after the AIP.

Mr Okorafor said the CBN’s code of corporate governance for banks would also be applicable to the new PSBs.

Financial inclusion strategy

In line with the National Financial Inclusion Strategy (NFIS), the CBN seeks to ensure that over 80 per cent of the bankable adults in Nigeria have access to financial services by 2020.

Despite several initiatives, including the introduction of microfinance banking, agency banking, tiered know-your-customer requirements and mobile money operation (MMO) in pursuit of the objective, the CBN noted that inclusion rate remains below expectation.

To drive financial inclusion, the CBN said it was collaborating with agencies, like the Nigerian Communication Commission, commercial banks, mobile money operators and telecommunications companies to conduct several studies.

The studies were to facilitate the licensing and operations of PSBs in the country to utilise the mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through financial services.

Scope of PSB operations

The PSBs would operate mostly in the rural areas and unbanked locations with the financially excluded persons as targets including not less than 25 per cent of financial service touchpoints in such rural areas as may be defined by the CBN.

Besides, operators would be expected to enter into direct partnership with card scheme operators, with such cards not eligible for foreign currency transactions.

Also, operators would be allowed to deploy automated teller machines (ATMs) as well as point of sale (POS) devices in some of the rural areas.

They would also be free to operate through banking agents and roll out agent networks with the prior approval of the CBN, while other channels, including electronic platforms, would be used to reach out to customers.

Guidelines

Under the guidelines to PSB operators, the CBN said they would be allowed to accept deposits from individuals and small businesses covered by the deposit insurance scheme.

They will also carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria.

Also, PSB operators would be allowed to handle sale of foreign currencies realised from inbound cross-border personal remittances to authorised foreign exchange dealers as well as issue debit and pre-paid cards on their names.

Other approved services for the PSBs include the operation of the electronic wallet; render financial advisory services; invest in federal government and CBN securities as well as carry out such other activities as may be prescribed by the CBN.

Under the guidelines, PSB operators are barred from granting any form of loans, advances and guarantees (directly or indirectly), or accept foreign currency deposits; deal in the foreign exchange market and undertake insurance underwriting.

Operators are also not allowed to undertake any other transaction not prescribed by under the guidelines, by accepting any closed scheme electronic value (airtime) as a form deposit or payment or establish any subsidiary.

Promoters

Promoters of PSBs may include banking agents, telecommunications companies (Telcos), through subsidiaries, retail chains (supermarkets, downstream petroleum marketing companies) and postal services providers and courier companies.

Others are mobile money operators (MMOs desirous of converting to PSBs), financial technology companies (Fintech), financial holding companies and other entities subject to CBN’s approval.

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