Telco Incursion into Financial Services: Gains, Risks and Opportunities (Feb 2023)


  • Many African countries including Nigeria suffer from high rates of financial exclusion which makes it hard to build wealth and protect incomes. Financial services offered by traditional financial institutions such as banks simply lie outside the reach of many, due to factors such as relatively complex requirements, high service cost, long distance to service centres etc.
  • Telecommunications service providers (TSPs) believe that they can help bridge the access gap by offering mobile-based financial services (MBFS), given high mobile penetration rates. So far, financial services regulators seem to agree. Consequently, the last decade has witnessed a shift in the business models of African TSPs to accommodate financial services such as savings, loans, payments, investments, and insurance. This move has been backed by regulatory, technical, as well as funding support from governments, multilateral institutions, and the investing community.
  • Mobile-based financial services adoption is relatively low in Nigeria. This could change with the acquisition of Payment Service Bank (PSB) licences by two of Africa’s leading players- Airtel Africa and MTN Group Limited, and other big players in Nigeria such as Globacom Limited and Emerging Markets Telecommunication Services Limited (9mobile). Renewed cashless policy by CBN could serve as the much-needed catalyst for growth in the MBFS sector.
  • The telecommunications sector’s diversification into mobile-based financial services is a potentially positive ratings factor for telcos from a financial profile, as well as sector risk point of view. However, GCR notes that the financial services sector is arguably riskier due to increased regulatory burden and cyberattacks among risks.
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