To License or Not – Nigeria’s Evolving Approach to Mobile Money Licensing
Nigeria now allows non-financial companies to apply for mobile banking licences — part of an effort via mobile banking aimed at transforming Africa’s biggest economy and unlocking the Continent’s largest unbanked population. According to Enhancing Financial Innovation and Access (EFInA) 2018 access survey estimates that 60 % of the 100 million adult population are “unbanked” or financially excluded.
The move permits mobile telecoms providers, including larger operators like MTN and Airtel, to tap into the approximately 60 million adult Nigerians who do have and operate bank accounts, in a country where most transactions are still made using cash. In practice, in the two years since Nigeria’s central bank announced the new licensing regime, the process has been very slow, as only two of four the Mobile Network Operators (MNOs) operating in Nigeria have been granted the license. Glo Mobile and 9-Mobile (formerly Etisalat) have been licensed as “mobile money operators” and have commenced operation, whereas both Airtel and MTN are yet received their “mobile money” licence.
There are indications that the slow pace of granting of licenses to some telcos could be the lobbying by the banks who are wary of relinquishing any market share to the large mobile providers. The MNOs argue that their participation in mobile money will increase the market size for all, not to mention the scale increases in financial inclusion.
Despite the lack of progress on licences, some steps towards financial inclusion have been taken by digitally savvy Nigerian banks, with mobile-to-mobile and SMS-based transfers now commonplace. Nigeria’s fintech companies, notably in the Lagos hub, have been relatively successful despite licensing roadblocks, attracting some of the largest amounts funding amongst all those in Africa since 2019. These companies provide an alternative form of banking through their own agent networks and mobile payments infrastructure.
One such successful Nigerian fintech is Capricorn Digital, a digital payments and financial services company, providing aggregated payments and collections services to a broad array of digital service providers and consumers across the country through its multi-channel. Capricorn’s financial services provision will further be enhanced by the licences it has applied for from the CBN: Payment Terminal Service Provider (“PTSP”) and Payment Solutions Service Provider (“PSSP”). The company’s services are therefore achieving scale – and real financial inclusion – while working in partnership with a variety stakeholders, including both banks and telcos. Verdant Capital is currently advising Capricorn on an equity capital raise.