Analysts enjoin banks to prepare for significant threat to e-banking income

AS the Payment Service Banks (PSBs) begin to integrate operations and roll out their services, e-banking income of banks may come under significant threat in the long term, according to the duo of United Capital Research, and analyst at Vetiva Research, both, investment advisory and brokerage firms.

United Capital Research, in its previous publications, highlighted the possibility of non-interest income for banks coming under pressure due to the new non-banking entrants in the banking space.

Specifically, in the fought quarter 2021, those concerns further strengthened after the Central Bank of Nigeria (CBN) granted an approval in principle to the two largest telecoms service providers, MTN and Airtel.

“Looking closely, we do not see this as a threat in 2022 but rather a long-term concern. In the short term, due to the reduced adoption in the early stages and inter-operability of these platforms, we see e-banking income for banks returning modest growth even in the face of price competition between fintechs and new entrants in 2022 for consumers,” it stated in a research note made available to clients over the weekend.

Commenting, analyst at Vetiva Research expressed that the new PSB licences issued by CBN to MTN Nigeria and Airtel posed a threat to some lines of the banks’ businesses in 2022.

In its 2022 outlook titled, ‘Running scared,’ Vetiva Research projected that the headwinds observed in the banking sector in 2021 will start to ease.

The analyst, in a statement, observed the possibility of the new PSBs taking away a significant share of transaction fees and potentially lower revaluation gains.

Also, United Capital Research said the trading gains are unlikely to see an uptick due to the relatively higher yield environment in 2020 and 2021.

“We note that the introduction of trading fees and other associated charges could have the double whammy impact of weaker transaction volume and value and reduced capital gains (due to the impact of the fees),” it further stated.

It should be remembered that the dispute between banks and telecommunication operators over N42 billion debts from Unstructured Supplementary Service Data (USSD) transactions forced the CBN and Nigerian Communications Commission (NCC) to intervene with new charges of N6.98 on any successfully USSD transaction.

Banks, in April 2021, disconnected MTN subscribers from their banking channels, including the USSD and banking apps, as the mobile network operator switched its customers to alternative electronic payment platforms.

The telecommunication companies reduced the banks’ commission from an average of 3.5 per cent to 2.5 per cent per transaction, prompting the actions of the banks to disconnect MTN subscribers from their service.

Senior Manager, External Relations, MTN, Mr Funso Aina, had stated that their customers could recharge airtime and carry out other online transactions through payment solutions platforms.