Payment Service Banks (PSBs) in Nigeria: An Overview

Are you one of those who want to know a thing or two about payment service banks or PSBs?  In this article, you will learn what PSBs are, their purpose, their services, and the key players currently operating in Nigeria.

The introduction of Payment Service Banks in Nigeria in 2018 created a vista of opportunities.  It was intended to provide a framework for telecommunications companies (telcos) to render digital financial servicesAMP and ultimately help to drive the financial inclusion agenda of the Central Bank of Nigeria.

It is part of the innovation that’s taking place in the entire Nigerian payment ecosystem and financial landscape. This has seen significant advancements aimed at promoting financial inclusion, especially for the unbanked and underbanked population.

At the moment the CBN has licensed 5 Payment Service Banks (PSBs), largely telco led.

What are Payment Service Banks (PSBs)?

Payment Service Banks are a category of banks licensed by the Central Bank of Nigeria (CBN) that leverage on existing telecommunications infrastructure to expand financial inclusion.

Thus, PSBs are not full-fledged banks but are allowed to provide basic financial services to Nigerians who do not have access to traditional banking services. They are licensed to target rural areas and underserved communities where access to financial institutions is limited.

Why Were PSBs Established?

The primary reason for establishing PSBs was to promote financial inclusion in Nigeria. Though some progress has been made since the efforts to bridge the gap started, about 40 million Nigerians still lack access financial services according reports.

PSBs were introduced to accelerate the rate of financial inclusion  by offering digital financial services to people who are traditionally excluded from the banking system, especially in rural areas where banking infrastructure is either unavailable or sparsely provided.

In addition, PSBs were established to leverage the growing mobile and digital technology infrastructure to provide financial services to underserved Nigerians.

Given the widespread use of mobile phones across the country, PSBs aim to utilize mobile technology to deliver financial services efficiently and at a lower cost.

What Services Do PSBs Offer?

The permissible services of payment service banks are limited to the following:

1. Deposit Taking: PSBs can accept deposits from individuals and small businesses.
2. Savings Accounts: They offer savings accounts, providing users with the ability to save money securely.
3. Remittance Services: PSBs can facilitate domestic and international money transfers.
4. Electronic Payments: These banks can facilitate payments through mobile wallets and other electronic means.
5. Debit and Prepaid Cards: PSBs can issue debit and prepaid cards, enabling customers to make electronic payments.
6. Mobile Banking: Leveraging mobile phones, PSBs offer online banking services such as fund transfers, bill payments, and airtime purchases.
7. Agency Banking: PSBs use agents, particularly in rural areas, to offer banking services where they don’t have physical branches.

Key Payment Service Banks in Nigeria

Since its introduction, the CBN has licensed five PSBs in Nigeria. Here are some of the key players

1. MTN’s Momo PSB
   MoMo PSB, launched by telecom giant MTN, is one of the largest PSBs in Nigeria. It leverages MTN’s extensive mobile network to offer financial services, particularly in rural and underserved areas. MoMo PSB provides savings, transfers, and payment services via mobile phones, making it easy for users to conduct transactions without visiting physical bank branches.
2. Airtel’s Smartcash PSB
   Smartcash PSB, powered by Airtel, focuses on providing mobile-driven financial services to unbanked Nigerians. It allows customers to open savings accounts, send and receive money, and make payments using their mobile phones. Airtel’s large customer base and vast network coverage give Smartcash a strong reach, particularly in rural areas.
3. 9Mobile’s 9PSB
   9PSB, the Payment Service Bank arm of telecom company 9Mobile, offers financial services that allow Nigerians to deposit and withdraw funds, transfer money, pay bills, and access savings products. 9PSB’s operations are designed to reduce financial exclusion, particularly in regions where access to traditional banking is limited.
4. Hope PSB
   Hope PSB is a Nigerian-owned Payment Service Bank that focuses on offering digital banking services to the unbanked. It provides basic banking services such as deposits, transfers, and payments via its mobile app and a network of agents. Hope PSB emphasizes ease of access through mobile phones, enabling rural Nigerians to participate in the financial ecosystem.
5. Glo’s MoneyMaster PSB
   MoneyMaster PSB, backed by Glo, offers services such as deposits, withdrawals, payments, and transfers using mobile platforms. It leverages Glo’s widespread telecommunications infrastructure to bring financial services to underserved communities. The company’s goal is to bridge the financial gap by providing cost-effective banking solutions through digital means.

Final Words

Payment Service Banks are transforming the financial landscape in Nigeria by making basic banking services accessible to millions of Nigerians who have traditionally been left out of the banking system. They are playing a crucial role in driving financial inclusion and contributing to the country’s broader economic development.

As PSBs continue to grow, their impact will play a key role in achieving Nigeria’s financial inclusion targets and boosting the overall economy. However, the major the challenge to achieving these objectives remain high rate of poverty.

Poverty impact on the capacity of people to earn income, hence unable to use the services provided by financial institutions.

EFina reports that close to 50% of adult Nigerians in 2023 didn’t have access to bank accounts due to lack of income.  Therefore, analysts have suggested that government should focus on policies that address poverty such as social investment, vocational skill acquisition, and entrepreneurship.

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