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MTN Nigeria is Coming for Banks and They Should be Scared

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MTN Nigeria the largest telecommunications firm in the country is quietly building up its mobile money and Fintech business and Banks should be worried about the latest numbers.

Revenues for value added services which includes mobile money (Fintech) jumped by 32 percent in the first 9 months of 2020 to N33.38 billion.

More ominously for entrenched Nigerian Banks, MTN expanded its Mobile Money (MoMo) agent network with the addition of over 90,000 registered agents during the third quarter of 2020.

The Telco also broadened its service offerings to include bill payments as well as bank deposits and withdrawals through the agents.

“At the end of Q3, we recorded 311,770 registered MoMo agents, surpassing our year-end target and processing more than 29.4 million transactions (up 101% quarter on quarter in Q3), from an active base of 3.4 million subscribers,” MTN said.

MTN’s fintech subscribers increased by 1.2 million in the quarter to 3.4 million, helping to drive higher transaction volumes and fintech revenue growth. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) rose 9.1 percent to N497 billion.

The banks should indeed be worried by MTN Nigeria coming for their lunch as the Telco had 75 million subscribers connected to its networks as at September 2020. MTN wants to leverage this to gain a significant footing as a financial provider.

MTN Nigeria has been pretty open about its ambitious plans for its Fintech and mobile money business in Nigeria.

Yello Digital Financial Services (YDFS), a subsidiary of MTN Nigeria in 2019, secured a license from the Central Bank of Nigeria (CBN) to operate financial services in the country.

MTN Nigeria invested N5.54 billion in the subsidiary as at September 2020, a 208 percent increase from December 2019.

YDFS is the company’s main pivot into the financial sector of Nigeria. The company was registered as a financial technology company in order to qualify for a CBN license.

MTN Nigeria is also hoping to get a Payment Service Bank license from the CBN to deepen its fintech offerings.

Payment Service Banks (PSB) according to an updated guideline from the CBN are allowed to offer only high-volume, low-value transactions in remittance services, micro-savings, and withdrawal services. Their services are mainly targeted at rural areas and places with unbanked populations

They are expected to have at least 25 percent physical access points in rural areas where they must maintain ATMs and point of sale devices.

The updated PSB provisions allow them to sell foreign exchange realised from remittances to authorised forex dealers, issue branded debit cards, and also invest in government securities.

They however cannot grant loans, guarantees, or advances of any form; they also can’t underwrite insurance or accept deposits in foreign currencies. In addition, debit cards they issue cannot perform foreign transactions.

Adding a PSB license to its mobile money offerings will enable MTN Nigeria to further deepen financial inclusion in the country with its 75 million customers compared to just about 44 million BVN users in Nigeria as at October 2020.

“Progress in our MoMo business remains on track as we continue to expand the agent network and Financial Service offerings to drive adoption,” Ferdi Moolman, MTN Nigeria CEO said.

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