October 8, 2018/CBN
Banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos), which through their subsidiaries, desire to convert to Payment Service Banks (PSBs) should have a minimum capital requirement of N5 billion, the Central Bank of Nigeria (CBN) has proposed.
Nigeria’s central bank is also proposing that entities applying for a PSB license should pay a non-refundable application fee of N500,000 as well as a non-refundable licensing fee of N2 million.
These proposals are contained in the exposure draft on the guidelines for licensing and regulation of PSBs unveiled by the CBN at the weekend.
In a circular to banks, telecommunication companies, MMOs, banking agents and the Nigerian Communications Commission (NCC) posted on its website, the CBN stated that the PSB initiative was part of its efforts to: “promote financial inclusion and enhance access to financial services for low income earners and unbanked segments of the society through leveraging on technology.”
It noted that six years after the launch of the National Financial Inclusion Strategy (NFIS), which seeks to ensure that over 80 per cent of the bankable adults in Nigeria have access to financial services by 2020, the country’s inclusion rate continues to remain “below expectation” despite the introduction of several initiatives.
According to the CBN, the decision to license PSBs followed several study tours of other jurisdictions that have made significant progress in driving financial inclusion that it conducted in collaboration with the NCC, banks, MMOs and telcos.
It stated that: “PSBs are expected to leverage on mobile and digital services to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services. PSBs will also enable high-volume low-value transactions in remittance services, microsavings and withdrawal services in a secured technology- driven environment. Accordingly, 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 of 20% exclusion rate by 2020.”
Specifically, in the draft guidelines, the PSBs will operate: “mostly in the rural centres and unbanked locations, with not less than 503 physical access points in ‘rural areas’ as defined by the CBN from time to time; establish ATMs in some of these areas; be at liberty to operate through banking agents; use other channels including electronic platforms to reach-out to its customers and set up consumer help desks at its main office and coordinating centres to attend to consumer-related issues.”
Furthermore, permissible activities for PSBs, according to the guidelines, include, maintaining savings accounts and accepting deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carrying out payments and remittance (including inbound cross-border personal remittances) services through various channels within Nigeria; issuing debit and pre-paid cards; investing in FGN and CBN securities and operating electronic purse.
However, the CBN is proposing that PSBs will not be permitted to among others, grant any form of loans, advances and guarantees; trade in the foreign exchange market except when maintaining savings accounts and accepting deposits from individuals and small businesses and undertake insurance underwriting.
In addition, the regulator has proposed that a PSB will not be permitted to declare or pay dividends on its shares until such a PSB has among others: “Completely written-off all its preliminary and pre-operational expenses; made adequate provisions to the satisfaction of the CBN for actual and contingent losses; satisfied the minimum Capital Adequacy Ratio requirement and met all matured obligations.”