Kuda Bank, others to get rival as CBN grants approval-in-principle to new bank

The Central Bank of Nigeria (CBN) has issued an approval in principle to Bloc Microfinance Bank.

The new bank will receive a license to operate microfinance banking services in Nigeria pending final approval from the apex bank.

Bloc to issue virtual cards and account numbers Bloc

MfB CEO Edmund Olotu said the move sets the right tone for the new bank as a financial technology firm and puts it on a path to global success.

CBN issues an approval in principle to promoters of a microfinance bank before incorporation.

While the approval is not a license, it shows a willingness by Bloc to engage CBN and usually leads to a license.

Bloc can issue virtual account numbers with advanced features for its customers when licensed.

A statement by the company said all virtual accounts owned by Bloc MfB will also be insured by the Nigeria Deposit Insurance Corporation (NDIC).

In August 2023, the fintech firm provided APIs for businesses to offer banking and financial services to their customers.

It also launched a business banking solution, allowing businesses to create virtual naira, dollar cards, and bank accounts to make and receive payments.

According to reports, Bloc also offers an embedded finance service that allows third parties to issue virtual accounts and cards.

“With this, we solved the access problem for all types of businesses by fundamentally changing how banking and payments happen for all companies while enabling them to deploy bespoke financial services that guarantee business growth and sustainability,” Olotu said at the launch.

Block to compete with entrenched industry players

In April this year, Bloc acquired Orchestrate, a two-old wallet service provider, in a cash and equity deal.

Bloc stated that it will be doubling its banking API products, while orchestrate will focus on improving its payment solution.

It also revealed that it had processed over $30 million via its bill payment API. If fully operational, Bloc will lock horns with entrenched players in the digital banking space, such as Kuda Bank, Carbon, and other microfinance banks providing seamless services to Nigerians.

CBN lists payment service banks to drive financial inclusion

In April this year, the apex bank unveiled the list of payment service banks to drive financial inclusion in the country.

According to CBN, the need to bring in more Nigerians and the financially excluded into the banking network was the driving force behind the licensing of this particular banking segment.

The immediate participation of telephone companies in Nigeria’s mobile money licensing operations has been delayed since the CBN introduced mobile money in Nigeria.

Taking a cue from India’s Reserve Bank, Nigeria’s apex bank began to explore introducing a new bank model known as Payment Service Banks (PSBs).

Payment Service Banks are a new banking category with smaller-scale operations, no credit risk, and forex operations.

PSBs empowered to offer payment and remittance services

PSBs can offer payments and remittance services, issue debit and prepaid cards, and deploy ATMs and technology-enhanced banking services.

Telecos’ subsidiaries, such as mobile money operators, and retail chains like supermarkets and banking agents, can operate Payment Service Banks if they meet certain conditions, including N5 billion capital base and a joint N2.5 million non-refundable application and license fee.

The PSBs are not allowed to offer loans or credit facilities to customers but can only receive deposits, meaning they cannot replace deposit money banks.

PSBs rely heavily on technology through financial services and have a robust agent banking model, reducing overhead costs.