Kelvin Bowoto
Interswitch, a Visa-backed Nigerian payments company, has merged with M-Kudi, a mobile money provider, as it pursues a payment service bank (PSB) license from the Central Bank.
The combination, which is subject to regulatory clearance, will allow Interswitch to construct accounts and store customer deposits, marking the fintech’s first foray into non-payment services. This follows Fintech’s purchase of a mobile virtual telecommunications license.
“The PSB use case for these companies (payment companies) is the same: to keep some float of their transaction volumes in-house and consolidate on their already established strengths,” a person familiar with the matter told TechCabal.
“A PSB is the sensible consolidation for them (Interswitch), even if it means they bank themselves,” he said in a statement.
Interswitch declined to comment on any aspect of the story.
Interswitch, which earned $42 million in sales for the fiscal year ending March 31, 2023, will be able to accept foreign currencies for its customers and directly offer agency banking services with the PSB license.
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Nonetheless, Interswitch must provide novel offerings to persuade Nigerians, known for customer inertia, to use its remittance or agency banking services. Interswitch’s longstanding presence in Nigeria, where it generates 94% of its revenue, would be beneficial.
With ₦1.1 trillion in transactions, Firstmonie is the largest bank-led agency banking service.
In 2018, the CBN issued regulations for payment service banks with the goal of increasing financial inclusion in rural communities. These license holders are required to provide 25% of physical activity in “rural areas with a high unbanked population.”
Interswitch, which makes the majority of its money by providing services to banking customers, will need to invest in a statewide physical network of agents.
Mobile money operators are also barred from participating in other banks’ revenue-generating areas because they cannot directly provide loans, hold foreign currency deposits, or engage in foreign exchange transactions other than receiving remittances. These restrictions significantly reduce the attractiveness of PSBs in Nigeria.
Techrectory with Agency Report.
