By AYOOLA OLAOLUWA
The decision of the Central Bank of Nigeria (CBN) to regulate Mobile Money Operators (MMOs) operating in the country has unsettled the mobile money sector, with payments experts predicting that strict implementation of the new regulations will disrupt MMOs’ businesses and hit their revenues.
Mobile money, according to Business Hallmark research, involves the use of financial technology (fintech), particularly mobile phones or internet enabled devices for the initiation, authorization and confirmation of the transfer of a value out of a current, checking, savings, or stored value account.
In other words, mobile money is a technology that allows a user to save, receive ,and spend money from the convenience of a mobile phone or device.
List of licensed mobile money operators already approved by the CBN include Paga Mobile, MTN’s Momo, First Banks’ Firstmonie, Kudi Mobile, UBA Moni Agent, Polaris Sure Padi, 9Mobile’s 9PSB and others.
And in a move to create an enabling environment for orderly introduction and management of the services, the CBN had on July 9 2021, released Regulatory Guidelines and Framework for mobilemoney services in the country.
According to the new guidelines, mobilemoney operators shall not grant any form of loans, advances and guarantees (directly or indirectly); accept foreign currency deposits; deal in the foreign exchange market except as prescribed in Section 4.1(ii&iii) of the extant Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria; Insurance underwriting, as well as accepting any closed scheme electronic value(e.g. airtime)as a form of deposit or payment.
Other businesses the MMOs were banned from providing is the establishment ofsubsidiaries;undertakinganyothertransactionwhichisnotprescribedbythe guidelines and any other activities that may be prohibited by the CBN.
Specifically, the CBN instructed MMOs that fees and charges for the management of the investment shall not be more than 10 percent of interest income on savings wallet funds investment.
‘‘Where an MMO operates a savings wallet, i.e., a wallet earning interest, it shall expressly inform subscribers of the following:
“The minimum balance on the savings wallet that qualify to earn interest; The allowable number of withdrawals to been titled to earn interest; The minimum savings period to earn interest; The applicable balance that would earn interest; The procedure for determining interest amount distributable to subscribers which should stipulate the minimum percentage of interest income to be distributed to subscribers and the proportion to be retained by the MMO, if applicable; The applications of section 10.1.3(b) (i) to (v) in distributing interest shall be automated.”
The CBN also barred MMOs from charging fees on account holders savings accounts. “On no account whatsoever, shall a MobileMoney savings wallet accountholder suffer diminution in the principal sum on his/her wallet as a result of fees or charges; Deposit Money Banks serving as settlement banks are prohibited from off-setting any other transactions of the MMO, including the transaction wallet pool accounts, against the savings wallet principal pool accounts and savings wallets interest pool account; and MMOs shall comply with the minimum disclosure requirements on the financial statements as stipulated by the Bank.”
MMOs were also prevented from investing savings in account holders wallets in other ventures, but in Federal Government issued instruments like the treasury bills.
“Funds on saving wallets shall be invested in only the Nigerian Treasury Bills (NTB); MMOs shall be treated as mandate customers of CBN for NTB subscription through the CBN NTB window and MMOs shall have a process to determine appropriate cash balance on its SavingsWallet Principal Pool Account that will meet its savings wallets customers’ withdrawal requirements at every point in time,” the CBN mandated in the new guidelines.
The apex bank’s intervention followed similar action in December 2020 when it set N5billion as minimum capital base for MMOs Cooperating in Nigeria.
While stating that telecom firms, banking agents, retail chains and postal services could apply for licences to become payment banks, the CBN insisted they would need to setup a separate company for it with a minimum capital of N5 billion and run it as an independent entity from their existing operations.
Meanwhile, the move by the CBN to further regulate the MMOs is causing ripples in the industry, with most operators them insisting that if would impact negatively on their businesses.
According to some representatives of the MMOs who spoke with BH on the condition of anonymity, Nigeria supposed to be the leading country in Africa in the spread and penetration of mobile banking, but due to political and selfish considerations, the country is lagging behind countries like Kenya, Uganda and Rwanda, despite the fact that it accounts for over 40percent of phone lines in West Africa.
BH reliably gathered that the mobile money business is plagued by intense lobbying from lenders (banks) seeking to protect their turf in the wake of intense competition from telecomunication firms and fintechs.
A source in one of the telecom firms already licensed to operate in the country told our correspondent that licensing requirement in Nigeria is putting off telecom companies.
“You can recall that when the CBN issued preliminary guidelines for payment banks in 2018, we protected, arguing that we are not banks and do not need a capital base.
“Yet, the CBN still went ahead to impose a N5billion capital base limit for operators, insisting that it could ask payment banks to recapitalize for specific risks.
“We have not yet overcome this challenge when the CBN came up with these new sets of crippling regulations. As we talk, only Glo and 9mobile have been able to meet the tough requirements.
“Though they are claiming otherwise, It seems that the CBN is more concerned with protecting the banks and is bent on frustrating our efforts”, said the source.
The biggest restriction placed on MMOs is the regulation, Subsection(a), Part7.2.2, which prevents them from granting any type of loans and advances, issuing insurance coverage, as well as accepting international deposits.
BH gathered that virtally all MMOs indulge in the business of granting loans and advances which attract handsome interests, selling insurance coverage (life and health), as well as accepting international deposits from and to foreign countries.
With the new regulations, the fate of mobile money operators and payment processing companies already granted license to operate international money transfers now hang in the balance.
Some of the companies, including Paga, Interswitch, eTranzact, and Flutterwave, were licensed as IMTO licence by the CBN February2019.
“Since most Nigerians don’t have access to bank loans, they flock to local loan sharks, Isusu agents, MMOs and instant loan firms whenever they are in need of urgent money.
“With the new law banning us from engaging in these financial activities, a major source of revenue has been shut. CBN is crowding out non-traditional banking players in favour of banks.
“The CBN is harmstrung as practising bankers often ended up being the governor. Also, most of the members of the CBN board are bankers. This gives them the chance to control things in the apex bank. In essence, you don’t have a chance if you are not one of them.
“A case in hand is the imbroglio over banks refusal to pay telecom operators for USSD services provided by them (GSM) firms. Despite charging users for using the USSD technology deployed by us, they were pocketing the proceeds.
“Rather than been a neutral umpire, the CBN was biased towards the banks. The banks were supported while the protracted crisis lasted. I didn’t expect anything less as the CBN is saddled with the task of overseeing the banks and will naturally favour its own.
“Unfortunately, the NCC that should be protecting our interest has not lived up to expectations. It took a threat of withdrawal of our services for common sense to prevail”, a source in one of the telecom companies noted.
In a move seen by industry watchers as an attempt to ward off an incursion into their territories, many of the banks operating in the country, BH findings revealed, have set up their own mobile money arms.
They include FirstBank’sFirstmonie, UBA’s Moni Agent, Polari’s Sure Padi and Wema Bank’s ALAT.
The Technology, Media and Technology (TMT) Practice Group partner at Advoca at Law Practice, a commercial law firm based in Lagos, Rotimi Akapo, said the ban on the granting of loans by MMOs and PSBs is an opportunity missed to promote financial inclusion further.
According to him, access to loans from banks and financial institutions continues to be a major issue for the informal sector.
“Micro, small and medium enterprises which only require minimal capital for their businesses should be able to benefit from any financial inclusion drive.
weexpectthetelcostocontinuetobeimportantstakeholdersinachievingthegovernment’sfinancialinclusiontargetsbyplayingasignificantroleinprovidingaccesstofinancialservices, economic growth of the target areas and the alleviation of poverty,” Akapo stated.