The Central Bank of Nigeria (CBN) has issued a new operational guidelines for Payment Service Banks, PSBs, as part of measures to promote a sound financial system and enhance access to financial services for low income earners and unbanked segments.
The PSBs are to operate mostly in the rural areas and unbanked locations, targeting financially excluded persons, with not less than 25 per cent financial service touch points in such rural areas as defined by the CBN from time to time.
According to the CBN, the key objective of setting up PSBs is to enhance financial inclusion by increasing access to deposit products and payment/remittance services to small businesses, low-income households and other financially excluded entities through high-volume low-value transactions in a secured technology-driven environment.
The new banks are to also enter into direct partnership with card scheme operators but such cards shall not be eligible for foreign currency transactions.
They are to deploy ATMs in some of these areas; deploy Point of Sale devices and be at liberty to operate through banking agents (in line with the CBN’s Guidelines for the Regulation of Agent Banking and Agent Banking Relationships in Nigeria).
The National Financial Inclusion Strategy (NFIS), which supports PSBs, seeks to ensure that over 80 per cent of the bankable adults in Nigeria have access to financial services by 2020.
The CBN, in collaboration with stakeholders, launched the NFIS on October 23, 2012 with a view to reducing the exclusion rate to 20 per cent by 2020.
Despite several initiatives, including the Introduction of Microfinance banking, Agent Banking, Tiered Know-Your-Customer Requirements and Mobile Money Operation (MMO) in pursuit of this objective, the inclusion rate remains below expectation.
The CBN, in the circumstance and in collaboration with critical stakeholders in the digital financial ecosystem, such as the Nigerian Communication Commission, commercial banks, mobile money operators and telecommunication companies have conducted several study tours of other jurisdictions that have made significant progress in driving financial inclusion.
In view of the challenges to effective outreach to rural communities as well as the need to complement the services provided by other licensed entities, the CBN issues this regulation to provide for the licensing and operations of Payment Service Banks (PSBs) in Nigeria. It said PSBs are expected to leverage on mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services.
Accordingly, PSBs are envisioned to facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion and help in attaining the policy objective of 20 per cent exclusion rate by 2020.
The guideline is issued pursuant to powers conferred on the CBN Governor by the CBN Act 2007 and BOFIA 1991 (as amended). It covers the definition; objectives; eligible promoters; licensing requirements; corporate governance; business conduct; and permissible activities. The requirements for prudential regulation; supervision; Know Your Customer (KYC), consumer protection as well as Risk Management of the proposed Payment Service Banks in Nigeria are also covered