Nigeria’s Financial Inclusion Journey; Beaming the Searchlight on Payment Service Banks


By Abdulwahab Muhammed Yusuf and Chisom Morris Nwadike


Seeing that a vast majority of adult Nigerians are financially underserved and unbanked, especially those in rural areas where financial institutions are not in operation, the Central Bank of Nigeria (“CBN”) adopted the National Financial Inclusion Strategy (NFIS) in 2012 (revised in 2018). The need to enhance and expand the NFIS ushered in the Payment Service Bank (PSB) regime. In line with the inclusion strategy and leveraging on the experience from India, Nigeria’s apex bank introduced PSBs to achieve financial inclusion. Consequently, riding on the back of the NFIS in July 2021, the Central Bank of Nigeria (“CBN”) issued a Supervisory Framework for Payment Service Banks (“the Framework”), to supplement the existing Guidelines for the Licensing and Regulation of Payment Service Bank (“the Guidelines”), (issued in 2018 and revised in 2020).

In November 2021, two telecommunication giants – MTN Nigeria and Airtel Africa Plc were granted an Approval-In-Principle (AIP) by the CBN to operate a Payment Service Bank in the country. The fact that more Telcos are joining the banking business is an indication that Nigeria is set to boost its financial inclusion goal. This is coming barely two years after the CBN in September 2019 granted AIP to three PSBs – Hope PSB,(a subsidiary of Unified Payment) Money Master PSB (a subsidiary of Globacom Limited)  and 9PSB (a subsidiary of 9Mobile Telecommunications).

The basic premise for the introduction of payments banks was to increase penetration in the unbanked and underbanked population. As such, their services are novel and they are not allowed to venture into the entire window of banking services, such as asset products and fixed deposits. Be it as it may, traditional banks still retain significant headroom for growth and also an opportunity to partner with payments banks to offer their products to an unexplored customer segment.

The foregoing said, it is important to state that both the Guidelines and the Framework attempts to lend credence to the NFIS which seeks to reduce the percentage of adult Nigerians that are excluded from financial services. The NFIS is also focused on outlining a framework for increasing the formal use of financial services from 36.3% of the adult population in 2010 to 70% by 2020.[1]


One of the critical financial inclusion objectives is to increase access to and use of financial services and promote a sound financial system in Nigeria. This is key in facilitating Cash-inflow and Cash-outflow[2] for customers especially in rural and semi-rural areas of Nigeria.

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The Payment Service Banks are mandated to use the words “Payment Service Bank” in their names to differentiate them from other banks. The name of a PSB shall not include any word that links it to its parent company. Most probably, this is to avoid confusion and conflicts of interest as the CBN intends to ensure that PSBs are separate entities from their parent company.

Under the Guideline the following can promote PSBs, to wit: Banking Agents, Telcos, (through their subsidiaries) Retail chains supermarkets, downstream petroleum marketing companies, Postal services providers and courier companies; Mobile Money Operators (MMOs that desire to convert to PSBs are mandated to comply with the requirement of this Guideline); Financial Technology Companies (Fintech); Financial Holding Companies; and any other entity, on the merit of its application, subject to the approval of the CBN.[3]

Interestingly, a license is required before a promoter can commence operation and it’s of two types:[4]

  • Approval-In-Principle (AIP): is the first license issued by the CBN upon an application to the Governor of CBN with other accompanying documents as prescribed by the Guidelines.
  • Final license: usually granted not later than six (6) months after obtaining the A.I.P. The promoters of a proposed PSB shall submit an application for the grant of a final licence to the CBN. The application shall be accompanied with other documents as contained in the Guidelines.

While it is conceded that the granting of a semblance of banking licences to the promoters will set off a new competition between them and the existing commercial banks, especially in respect of some glaring similarities between them, it is not true that PSBs have come to take over in its entirety, their activities as such. There are some differences between the PSBs and commercial banks as tabulated below:

Capital Requirement 5 Billion naira 25 Billion naira
Service distribution Mostly targeted to operate in rural areas with at least 25% financial touchpoint in those rural areas. Not expressly regulated.
Loans/credit facilities Not permitted to give loan Permitted to give loan
Card issuance Debit and prepaid card only Credit, debit and prepaid card only.
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Notwithstanding the differences enumerated above, there are some similarities between PSBs and commercial banks. Most notably, is that both allows for:

  • The deployment of ATMs
  • The store of value in the form of a Bank account/wallet
  • Agent banking


The use of data is the key to being a successful digital platform and PSBs are expected to integrate digital strategies in the process of acquiring customers and operating their business. The design of PSBs must be rooted in technology to facilitate seamless digital interaction with customers. Without technology, PSBs may not be able to offer consistent customer-based digital services to their customers. All areas of the PSBs will be digitalized to offer a complete banking operational efficiency to customers across Nigeria. And at the core of this digital interaction is data. Data plays a huge role in customer acquisition, transaction processing, customer service and management reporting.

Asides from the aim of ensuring that PSBs leverage digital services to boost financial inclusion, the Central Bank of Nigeria Supervisory Framework for Payment Service Banks (the Framework) was issued to strengthen day-to-day operations to promote transparency in their anti money laundering, data and cybercrime activities. In this regard, it is hoped that the Framework is completely integrated with the business activities of PSBs to ensure the safety of data, funds and to boost customers’ confidence.


Generally, financial institutions should undertake due diligence in their dealings with customers.[5] They should also take appropriate measures to mitigate money laundering and terrorism risks.[6] In addition, they must take appropriate steps to identify, assess and understand their money laundering risks for specific customers, countries and geographical areas of operations as well as report suspicious funds transfer.[7]

However, with the digitization of products and services, PSBs would have to do more than know their customers. They would have to monitor their customers online and offline activities, record their internet purchase habits, process data history from social media as well as request additional data from customers and if need be, follow their customers on social media.[8] This raises some delicate data concerns as PSBs should always seek the customers’ consent and follow customer privacy laws.

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The Framework states that PSBs shall comply with the provisions of the Nigerian Financial Services Industry IT Standard Blueprint, Risk-Based Cyber Security Framework and other regulations the Central Bank may issue regarding ICT infrastructure. Cybercrime is increasing each year as financial institutions lose billions of Naira to fraud and data theft. The day-to-day business of a bank involves managing customers’ information. The volume and value of data used should not be exposed to criminals as any attack on the PSBs brand would dent its image and make it lose its customers. Consequently, customers need to be assured that their personal information is not attacked through email scams/spams, ATM frauds, electronic banking frauds, man in the middle attacks, falsifying customers information, card cloning, collision with insiders among others.


The rise of fintech banks in Nigeria has increasingly disrupted the growth of the traditional financial industry and made it better in terms of delivering cutting edge digital finance solutions. Therefore, the Approval-in-Principle granted to Telcos is a welcomed initiative in the financial sector as this means that the large financial inclusion gap would be reduced. The Telcos have millions of subscribers in their customer database and as such is set to boost access to financial services in Nigeria. However, as the saying goes: “with great power comes great responsibility” (greater risks and complexities). One of these great risks is the issue of data and cybercrime and how well it will be managed and approached by PSBs. It is hoped that all PSBs complying with the Framework will give the banks a professional outlook on approaching data management/protection and boost customers trust and loyalty.

The authors write from Abuja and can be reached at and respectively.


[1]The National Financial Inclusion Strategy adopted by the CBN in 2012 and revised in 2018.

[2]Cash inflow include the transfer of funds to a company from another party. On the other hand,Cash outflows include the transfer of funds by a company to another party.

[3] Section 5 of the Guideline.

[4] See generally section 6 of the Guideline.

[5] Section 6.1 (ix) of the Framework

[6] Section 6.1 e (i)

[7] Section 3.5 (i)(ii) & 3.6 (a)

[8] This is regulated by the Guidelines for the use of Social Media Platforms in Public Institutions by NITDA


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