Interswitch, a leading Nigerian payments giant backed by Visa, has diversified its business by acquiring a Tier 5 Mobile Virtual Network Operators (MVNO) license from the Nigeria Communications Commission (NCC) for ₦500 million ($1.08 million).
With this move, Interswitch ventures into Nigeria’s telecommunications sector, aiming to combine payments and telecoms services to serve both business to business (B2B) customers and consumers, TechCabal reported.
The company’s financial report indicates a strategic focus on a low level of capital expenditure virtual telecoms model using the newly acquired license.
Nigeria’s telecommunications market, the largest in Africa, operates MVNOs on a tiered basis. Interswitch, holding the highest tier license, Tier 5, can collaborate with one of Nigeria’s four major telcos to provide asset-light telecom services, particularly in underserved areas.
“By leveraging the infrastructure of its telco partner, Interswitch plans to offer value-added services to segments overlooked by traditional telcos, potentially providing cheaper 4G or 5G services and extending telecom coverage to rural regions,” the report stated.
Despite a recent decline in growth in Nigeria’s telco sector due to reduced foreign investment and capital expenditure, the NCC issued 25 MVNO licenses in 2023 to enhance competition and address connectivity gaps. With only 60% of the population having access to mobile connectivity and limited access to advanced networks like 4G and 5G, there’s a significant market opportunity for innovative telecom solutions.
Interswitch, through its Verve platform, boasts a large customer base, having issued over 50 million debit cards. This established presence in the payments sector provides a strong foundation for the firm to introduce alternative telecommunications options and compete effectively in Nigeria’s mobile sector, which serves over 200 million subscribers.
Additionally, Interswitch’s pursuit of a Payment Service Bank (PSB) license from the Central Bank of Nigeria (CBN) underscores its commitment to offering comprehensive financial services. The merger with M-Kudi, a mobile money provider, aims to facilitate the provision of non-payment services, such as account holding and deposit-taking, further expanding Interswitch’s offerings.
“While the PSB license will enable Interswitch to handle foreign currencies and offer agency banking services, the company must innovate to attract Nigerian consumers, known for their resistance to change. Regulatory requirements mandate PSBs to focus on rural financial inclusion, necessitating investments in physical agent networks.”
Despite restrictions limiting PSBs from engaging in certain revenue-driving activities of traditional banks, Interswitch’s extensive experience in Nigeria’s financial sector positions it well to navigate these challenges.
Overall, Interswitch’s strategic moves reflect its ambition to diversify its offerings, enhance financial inclusion, and capitalize on Nigeria’s dynamic market landscape.