MTN Nigeria has received final approval from the Central Bank of Nigeria (CBN) to launch Momo Payment Service Bank, marking the telecom company’s entry into the banking business.

MTN’s entry into the Nigerian financial services industry will increase competition, particularly among commercial banks and Fintechs. Nonetheless, competition is required to advance financial inclusion by providing a varied and heterogeneous range of financial services to the unbanked population.

Furthermore, the MTN Momo PSB license doesn’t give it the same power to operate as a commercial bank. Commercial Banks and PSBs have very clear distinctions on how they are to operate.

What does Momo Payment Service Bank approval mean for MTN?

MTN will be permitted to use its technology and agency banking to mobilize deposits and enable transfers from unbanked consumers in rural regions and any other location in Nigeria where they exist.
PSBs are expected to operate in rural areas and areas where Nigerians do not have bank accounts. This indicates that MTN expects to have at least 50% of physical access points (also known as kiosks) in rural areas.
MTN would start to deploy ATMs in some locations to enable Customers’ withdrawal of cash just like commercial banks.
However, the key contrast is that, whereas deposit commercial banks can provide loans and advances, MTN cannot.

What MTN can do with the PSB License 

MTN can collect deposits and offer savings accounts to its consumers. Individuals and small enterprises are among their clients.
It can also facilitate cross-border transfers through all of Nigeria’s available methods.
It can also provide debit and prepaid cards, as well as run electronic purses.
It can also invest a portion of the deposits they receive in FBN and CBN Securities.

What MTN cannot do

MTN can not issue loans, advances and guarantees.
It is not allowed to trade in foreign exchanges except for remittances
It is also not allowed to issue insurance products.

What would  MTN do with customers’ deposits

PSBs can also utilize client deposits to their advantage. Because consumers may not always come to take their money, the deposits can be placed in short-term assets, allowing the PSBs to generate a rapid profit.

The CBN, on the other hand, states that at any moment in time, not less than 75 percent of the deposits they acquire must be retained in treasury bills and other short-term Federal Government debt instruments, implying that they would put the majority of the funds in secure assets.

The CBN also requires that all funds in excess of a PSB’s operational float (the amount required to operate on a daily basis) be placed with deposit money institutions (commercial banks).

This implies that, while many people see them as a threat to banks, they are to  support by the banks, as their deposits can be placed with any bank of their choice.

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