Nigeria is increasingly innovating its financial service sector in the country. Over the years, it has been quite difficult for Nigerians to process some financial transactions across the country. In the plight of implementing positive changes, Nigeria's telecom companies are getting banking licences to support the development of the financial service sector in the country.
On 5th November 2021, Airtel and MTN confirmed that they have gotten the Approval-In-Principle(AIP) by the Central Bank of Nigeria(CBN) for the Payment Service Bank(PSB) license. This approval is a big step forward towards fulfilling positive changes in the financial sector.
Beforehand, the telcos have always shown their interest to be fully involved in financial services in the country. Their large number of subscribers is a good potential to invest in corporate banking operations in the Telecom industry. They plan to actualize these through Airtel Smart Cash and MTN MoMo Agent.
This suggests that many things have to be done. The AIP granted implies telcos can overcome any issues in financial consideration and develop their hands in the financial area. The telecom financial service process is improved by making individual sim cards the essential requirement for partaking in the service since many people have access to mobile networks.
The move will become a major competition to banks whose essential prerequisites for ordinary financial exchanges are depicted as exorbitant, inflexible, and to some degree unsuitable. Nigerians have been persevering through the tedious course of making accounts, lines at banks, administration costs, administration disappointments and so forth since there are no choices.
Telecom financial administrations will probably win more than regular banks in that they may not need a bank account or physical presence of customers. Their administrations will be savvy, more dependable and won't discriminate past the necessities of claiming an enlisted sim card. The significant increases would be market proficiency, financial transparency and responsibility.
Telcos will play an indispensable role in lessening the gap between financial consideration and guaranteeing sufficient strategy execution. For example, the companies will provide a better database of users due to simplicity of enrollment, thereby widening the tax net and boosting revenue. It will likewise be easier to extend government incentives like loans and subsidies to the public.
Telcos and banks might choose to partner to partake in the advantages of market share. Telcos might move first due to their bigger customer base, global reach and financial muscle. Banks and telcos will unavoidably find a road to strategically pitch items to existing clients, through relationship-based item packaging and pricing that takes advantage of a reduced cost structure.
If such an event occurs, banks that move first to work together with the telecoms will take advantage of their exceptional properties to promote brands that inspire security and dependability, skills in credit management and distribution channels. They will likewise amortize their interests in web-based administrations since the recent fad will not be so expensive but rather more proficient.
The digitization drive by telcos will assist with decreasing wrongdoing across the country. The digital move implies exchanges can be tracked and surveilled. This will tackle financial transactions used for criminal activities. The digital signature requirement will wipe out the hazard of phoney, a factor that fuels corruption. Also, trading stolen commodities will be hard, since the payment will go through telcos.
However, the limit of telcos breaking into the financial business is debatable, how will they adapt to the difficulties of the business? It is vital to recognize that payment is just the start. The chance of anything more happening relies upon the telcos getting on their customers’ minds with safe and secure transactions.
Provided that this is true, they will be better positioned to pursue credit for the board, stores, and other financial items. They would be prepared to investigate leases, insurance arrangements, and administration policies when they mature; making accessible event linked item and service purchasing; organise money and reserve funds for redistributions and exchanges, among others.
Should telcos gain the license to issue loans, how they will deal with irrecoverable loans and debts, and what the CBN expects of them in terms of reserve ratio will be intriguing. They must keep in mind that despite their competitive edge, their products are vulnerable to hackers and scammers. In all, to attract millions of Nigerians, telcos must come up with easy-to-use but reliable banking services.