Post by Trade facilitator on Dec 30, 2021 12:34:50 GMT 1
The Difference Between Deposit Money Banks (DMBs) And Payment Services Banks (PSB) In The Nigerian Banking Sector
Recently in the country, the Central Bank of Nigeria (CBN) issued an approval in principle to two of the nation’s largest communication companies, MTN Nigeria and Airtel Africa to operate as Payment Service Banks (PSB).
When the news reached the banking public and FinTech space it was received with great enthusiasm; the stakeholders in the fintech space believed that it will deepen financial inclusion in the nation as it is bound to increase payment transfers in the country.
It has been the belief of the general public that commercial banks in the country depend largely on the customer deposits to drive their business; therefore this will be a competition for the commercial banks.
However, this may not really be the case as the Deposit Money banks that we know as commercial banks are quite distinct from the Payment Service Banks. Let us go ahead and explain the difference between the two financial institutions.
The Deposit Money Banks (DMBs) and the Payment Service Banks (PSB) have very clear distinctions in the way they operate.
Let us define them one after the other:
The Payment Service Bank (PSB): a PSB is a company allowed by law to leverage on technology and agency banking to mobilize deposits and facilitate transfers from unbanked customers in rural areas and any location where they exist in the country.
While on the other hand, a Deposit Money Bank is a commercial bank or any other bank that is allowed by law to also accept deposits from customers from any part of the country and also engage in accepting deposits and giving out loans and advances. It can also invest in fixed income securities and conduct other banking services as prescribed by the CBN from time to time.
The CBN said that the key objective of issuing PSB licences is to boost financial inclusion especially in rural areas and to facilitate transactions.
“To enhance financial inclusion in rural areas by increasing access to deposit products and payment/remittance services to small businesses, low-income households and other entities through high-volume low-value transactions in a secured technology-driven environment.”
How PSBs will operate:
According to the CBN, there are 7 detailed structures PSBs are expected to perform in carrying out their activities.
“Operate mostly in the rural centres and unbanked locations, with no less than 50% physical access points in ‘rural areas’ as defined by the CBN from time to time.
This suggests PSBs are expected to operate in rural areas and locations where you have Nigerians without bank accounts. They are also expected to have at least 50% physical access points (which also means kiosk) in the rural areas.
PSBs can also have ATMs in some of the locations that it operates. This allows its customers to make cash withdrawals.
Permissible things they can do:
PSBs can accept deposits and also allow their customers operate savings accounts. Their customers include individuals and small businesses.
They can also facilitate cross border remittances using all the channels available within Nigeria.
They can also issue debit and prepaid cards and also operate electronic purses.
They can also invest some of the deposits they collect in FBN and CBN Securities.
Non-permissible things – things they cannot do:
They are not to issue loans, advances and guarantees.
They are also not allowed to trade in foreign exchange, except for remittances.
They are also not allowed to issue insurance products.
Our company is one of the best companies in agro export businesses in Nigeria, we train individuals and corporate organization on how to do export business the right way; if you are interested, please contact the admin of this forum.
Recently in the country, the Central Bank of Nigeria (CBN) issued an approval in principle to two of the nation’s largest communication companies, MTN Nigeria and Airtel Africa to operate as Payment Service Banks (PSB).
When the news reached the banking public and FinTech space it was received with great enthusiasm; the stakeholders in the fintech space believed that it will deepen financial inclusion in the nation as it is bound to increase payment transfers in the country.
It has been the belief of the general public that commercial banks in the country depend largely on the customer deposits to drive their business; therefore this will be a competition for the commercial banks.
However, this may not really be the case as the Deposit Money banks that we know as commercial banks are quite distinct from the Payment Service Banks. Let us go ahead and explain the difference between the two financial institutions.
The Deposit Money Banks (DMBs) and the Payment Service Banks (PSB) have very clear distinctions in the way they operate.
Let us define them one after the other:
The Payment Service Bank (PSB): a PSB is a company allowed by law to leverage on technology and agency banking to mobilize deposits and facilitate transfers from unbanked customers in rural areas and any location where they exist in the country.
While on the other hand, a Deposit Money Bank is a commercial bank or any other bank that is allowed by law to also accept deposits from customers from any part of the country and also engage in accepting deposits and giving out loans and advances. It can also invest in fixed income securities and conduct other banking services as prescribed by the CBN from time to time.
The CBN said that the key objective of issuing PSB licences is to boost financial inclusion especially in rural areas and to facilitate transactions.
“To enhance financial inclusion in rural areas by increasing access to deposit products and payment/remittance services to small businesses, low-income households and other entities through high-volume low-value transactions in a secured technology-driven environment.”
How PSBs will operate:
According to the CBN, there are 7 detailed structures PSBs are expected to perform in carrying out their activities.
“Operate mostly in the rural centres and unbanked locations, with no less than 50% physical access points in ‘rural areas’ as defined by the CBN from time to time.
This suggests PSBs are expected to operate in rural areas and locations where you have Nigerians without bank accounts. They are also expected to have at least 50% physical access points (which also means kiosk) in the rural areas.
PSBs can also have ATMs in some of the locations that it operates. This allows its customers to make cash withdrawals.
Permissible things they can do:
PSBs can accept deposits and also allow their customers operate savings accounts. Their customers include individuals and small businesses.
They can also facilitate cross border remittances using all the channels available within Nigeria.
They can also issue debit and prepaid cards and also operate electronic purses.
They can also invest some of the deposits they collect in FBN and CBN Securities.
Non-permissible things – things they cannot do:
They are not to issue loans, advances and guarantees.
They are also not allowed to trade in foreign exchange, except for remittances.
They are also not allowed to issue insurance products.
Our company is one of the best companies in agro export businesses in Nigeria, we train individuals and corporate organization on how to do export business the right way; if you are interested, please contact the admin of this forum.
