African telecommunication giant, MTN, is planning to acquire a full banking licence in South Africa.
According to reports, the telco plans to do this once the South African Reserve Bank (SARB) opens up its national payments system to fintechs and other non-banking entities.
MTN already has a banking service known as MTN Mobile Money (MoMo), but this supports limited transactional banking services.
MoMo offers payments and money transfers to individuals and businesses and customers use their phone numbers to carry out transactions like cash transfers and bill payments.
Due to stringent regulations, MTN and other fintech companies that offer these services work through a licenced bank as a sponsor. For MoMo, MTN uses the African Bank.
Now, this may change as SARB is reportedly working to enable non-banking entities like fintechs and telcos to gain direct access to the core clearing and settlements system.
The SARB is currently developing frameworks to authorise fintechs and other non-banking entities to access the national payment system directly.
According to the South African central bank’s head of the National Payments System, Mr Tim Masela, although banks were the backbone of the financial system in terms of savings and accounts, non-banks were offering convenient transactional services.
“We believe that we should move with the times and open up the system for the entry of non-banks,” Mr Masela said.
According to MTN South Africa’s chief fintech officer, Mr Kagiso Mothibi, entities like fintechs will be given an opportunity to participate in the banking system following an ongoing review of the payments system.
“When that is rolled out, we’ll definitely be looking to pursue our own licence,” Mr Mothibi said.
MoMo is one of several fintechs that participated in the SARB’s working groups to develop the regulatory framework that will enable greater direct participation in core banking services.
The frameworks are necessary to balance innovation with the risks associated with a more flexible and open financial system.
Mr Mothibi said that bypassing a traditional banking partner would allow MTN to exercise much more control over the future of its banking services.