by 
If fintech companies and PSBs get a license to operate in the deposit market in Nigeria, what happens to banks?
Fintech companies in Nigeria are using technology to achieve tasks that brick and mortar banks struggle with.
In a similar manner, Payment Service Banks, PSB, are mini banking systems that operate in Nigeria outside the traditional banks.
The banks had been slow to seize the digital payments activities in Nigeria and cash transactions are still dominant – approximately 90 per cent.
Having captured this item, fintech companies and PSBs are personalizing it, as the use of digital payment becomes wider, simpler and profitable. These operatives also function fully automated businesses on low costs, therefore, increasing productivity. Could PSBs and fintech companies get ahead of banks in Nigeria?
Banking in Nigeria
Despite failing to employ better technology to get past challenges and risks of digital transactions, banks are still the sole entities licenced for several financial operations.
They have direct links to loans, credit, forex, investment commodities, settlement and various complex finance systems.
- Cavmont Bank in Zambia To be Acquired By Access Bank Plc
- CBN Will Give N2 Billion Under Agriculture Development Scheme
Therefore, fintech companies and PSBs still need a licence to get in the banking space and to run cash deposit accounts or offer loans.
Payment services in Nigeria
The Central Bank of Nigeria, CBN is committed to driving financial inclusion which saw it grant licenses to three PSBs – Hope PSB, Money Master PSB and 9PSB – in 2019.
If the fintech companies are going to get the same license as the PSBs in Nigeria, that is yet unknown.
At least 90% of the 200 fintech companies in Nigeria on the other hand are successfully securing external funding.
In the last year, millions of dollars have gone into Flutterwave, OPay, Paystack, Interswitch and PalmPay all combined.
- Uber, Nigerian Fintech in SF, Flutterwave Partner in Uber Cash For Africa
- Blockchain technology could provide Nigeria with over $6bn revenue in 2030 – FG
In November 2020 alone, payments companies based in Lagos accessed funding amounting to about $400 million. Nigeria also took the lead in Africa in 2019, attracting $122 million in funds.
The Nigerian Stock Exchange (NSE) is facilitating access to fund for fintech startups in Nigeria.
- Drone Tech Startup In Nigeria Secures $100 000 Funding From UK
- Stripe Reportedly Make Biggest Acquisition With Nigerian Fintech, Paystack
Financial operations outside traditional banking system in Nigeria
Despite handling half of all online payments in Nigeria – with Paystack at the lead- fintech companies still depend on the banks and so does PSBs.
- Banks holds customer fund for fintech, they need the banks to make payments since they do not have the power to make cash transactions.
- The operations of the PSBs are limited to local currency transactions and no foreign exchange operations.
The CBN is also collaborating with several tech companies to study the chances of granting licenses to more PSBs.
Follow us on Facebook and Twitter and send us stories on contact@africareinvented.com
