CBN makes case for PSBs, cautions Banks, PSBs against demarketing 

When the second tenure of the governor of Central Bank of Nigeria (CBN), Godwin Emefiele began, he promised to deepen the financial inclusion sector by providing a level playing field for all.

Part of those reforms is the introduction of Payment Service Banks (PSBs) which are expected to provide banking services for the unbanked population in the country.

The apex bank has now issued a warning to banks and PSBs to shun demarketing practices.

The statement was made by the Director, Payments System Department, CBN, Ademola Adeleke, at a forum organised by the Chartered Institute of Bankers in Lagos on Thursday.

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Adeleke noted that de-marketing might arise since the banking industry had been expanded to accommodate PSBs. He, however, warned industry leaders to disengage from de-marketing practices.

“While we reckon that competition will be stronger, it is important that we eschew the tendency for de-marketing practices to avoid weakening the banking industry. We must desist from such practice and collaborate for the benefit of participants and most importantly the banking public and the financial system,” he stated.

He said there was a need to ensure that the PSBs do not heighten risks in the industry.

“As you are aware, PSBs will evolve from telecommunication companies, fast-moving consumer goods companies, chain store and postal services, hence there is a need to ensure that we ramp up capacity in the industry,” he said.

What you should know: PSBs were established in line with the mandate of the apex bank to promote a sound financial system and enhance access to financial services for low-income earners and unbanked segments of the society. The operational guidelines were set at the end of 2018.

• They are permitted to deploy ATMs and Point of Sale devices in some areas.
• They are at liberty to operate through banking agents (in line with the CBN’s Guidelines for the Regulation of Agent Banking and Agent Banking Relationships in Nigeria).
• They can enter a direct partnership with card scheme operators but the cards are not eligible for foreign currency transactions.

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What this means: Competition is sure to arise in the banking sector with the introduction of banks and Payment Service Banks (PSBs).

Demarketing, which comes in many forms, occurs when a company discourages demand from certain classes of consumers. Banks could discourage banking with PSBs because they offer certain extra services better than PSBs. They can also use their physical structure as an advantage. PSBs on their part can discourage customers from using banking services because they lend faster. Hence, the CBN’s warning to discourage demarketing.