Should Banks Worry Over Rising Telecoms Firm's Interest in financial Services Business?

By United Capital

In a bid to leverage technology to promote financial inclusion and enhance access to financial services for the rural poor, low-income earners and financially excluded of the society, the Central Bank of Nigeria (CBN) recently issued guidelines for licensing and regulation of Payment Service Banks (PSBs) in Nigeria.
According to the guideline, telecommunications companies (Telcos) are permitted to serve as a promoter of PSBs via a subsidiary company. 

Thus, it is no surprise that major Telcos are now being touted to take advantage of this new regulation to operate in Nigeria’s financial services space, leveraging their capabilities; technology, infrastructure, distribution network, and subscriber base to drive financial inclusion. 

On the other hand, there is growing concern that the rising interest of Telcos in the financial services sector portends a negative outlook for the Deposit Money Banks (DMBs).
In our view, the emergence of Telcos might impact negatively on DMBs transaction fee income. However, given the regulatory limitations of PSBs (restricting their service provisions to lower end customers with high-volume low-value transactions), we expect the impact to be mild. 

Also, we believe this is likely to drive increased partnerships and collaborations between both institutions, to offer more innovative services.