The entry of telecom giants MTN and Airtel Africa into Nigeria’s payment services sector in 2022 was initially expected to disrupt traditional banks and fintech players. With MTN’s mobile money operations spanning 24 African countries and boasting over 200 million wallets, and Airtel Money serving 38 million users across 14 markets, both companies were seen as formidable competitors. However, their impact has been more nuanced than initially anticipated.
The Role of Payment Service Banks (PSBs)
MoMo PSB is one of five Payment Service Banks (PSBs) licensed by the Central Bank of Nigeria (CBN) between 2021 and 2022. Alongside 9mobile’s 9PSB, Airtel’s Smartcard PSB, Unified Payment’s Hope PSB, and Globacom’s Money Master PSB, MoMo PSB was established to drive financial inclusion, particularly in rural and underserved areas. However, PSBs face regulatory limitations: they cannot offer loans, provide forex services, or invest beyond government-approved securities, which restricts their revenue potential.
Despite these constraints, PSBs were expected to bridge the gap in financial access. However, they have struggled to match the market traction achieved by fintech giants like Opay, Moniepoint, and Palmpay, which have successfully onboarded millions of users.
Challenges in Mobile Money Adoption
In Nigeria, mobile money adoption is heavily reliant on banking agents due to poor internet connectivity and low smartphone penetration, particularly in rural areas. Many individuals lack access to smartphones or stable internet, making digital banking services inaccessible. As a result, banking agents have become the primary channel for reaching unbanked populations.
MoMo PSB has built an extensive agent network but has primarily relied on MTN Nigeria’s infrastructure to offer services such as money transfers, savings, insurance, and payment solutions. The company has also received substantial financial backing from its parent company to strengthen its digital banking infrastructure.
Investments and Initial Growth
By the end of 2022, MTN Nigeria had invested ₦16.4 billion to establish and scale MoMo PSB’s operations. In 2024, it injected an additional ₦9.4 billion after acquiring the remaining 7.17% stake from Acxani Capital, making MoMo PSB a fully owned subsidiary. These investments initially yielded strong results.
MoMo PSB’s active mobile money wallets grew from 2 million in December 2022 to 5.3 million by the end of 2023. This growth was driven by the expansion of its agent network, which increased from 103,000 to 327,000 during the same period. Additionally, the company launched a merchant ecosystem in March 2023, which quickly scaled to 324,000 merchants by year-end.
Decline in 2024 and Strategic Shifts
However, 2024 marked a turning point for MoMo PSB. The number of active wallets dropped to 2.8 million, and cash deposits from wallet users fell by 50%, from ₦7.6 billion to ₦3.8 billion. The agent and merchant networks also experienced significant declines, shrinking by 76.8% to 75,168 merchants and 79.2% to 68,016 agents, respectively.
While some industry experts view this decline as a strategic shift away from agent banking toward digital banking, others see it as indicative of broader challenges. “Many payment service banks are focusing on urban areas and competing for existing bank customers, rather than targeting the rural communities they were designed to serve, due to the high cost of banking the unbanked,” a fintech executive said on condition of anonymity.
Despite these setbacks, transaction volume increased by 4.3% in 2024, which CEO Karl Toriola interprets as a sign of a higher-quality wallet base and sustained underlying demand.
Fraud Incident and Strategic Overhaul
Victor Asemota, Growth Partner at AnD Ventures, suggests that MoMo PSB’s strategic shift may have been influenced by a significant fraud incident. In May 2022, the company experienced a security breach resulting in the loss of approximately ₦22.3 billion ($53 million).
“They are deliberately reducing reliance on agents and merchants, many of whom engage in transactions solely for commissions,” Asemota explained. “They are also forcing a change in the type and quality of customers.”
Future Prospects and Diversification
MoMo PSB is actively diversifying its service offerings to reduce reliance on agents and better serve small and medium-sized enterprises (SMEs) and individual customers. The company has applied for Payment Service Solutions Provider (PSSP) and Payment Terminal Service Provider (PTSP) licenses, which would enable it to handle payment gateways, provide merchant aggregation services, and manage point-of-sale (PoS) terminals.
Looking ahead, Toriola emphasized that the company will focus on user engagement and retention to reverse the decline in wallet usage and increase activity within the ecosystem by the end of the year.