ABA Editorial · Jun 15, 2025 · 9 min read
Three years after MTN MoMo and Airtel SmartCash launched their Payment Service Banks in Nigeria, the telco-led mobile money revolution never arrived. OPay and PalmPay dominate a market that was supposed to belong to the telcos. A close look at why, and what comes next.
When the Central Bank of Nigeria granted final Payment Service Bank (PSB) licences to MTN and Airtel in 2022, most observers expected a repeat of the M-Pesa story in Kenya: telcos with massive subscriber bases would use their distribution muscle to onboard tens of millions of financially excluded Nigerians, and within a few years, mobile money would dominate retail payments the way it does in East Africa. Three years in, that has not happened. The mobile money market in Nigeria is thriving, but it belongs to fintech-native players OPay and PalmPay, not to the telcos that the PSB framework was designed for.
This is a market report on what actually happened, why the telco PSBs have struggled, and how the regulatory framework that created them is now being adapted.
Nigeria's PSB framework dates to October 2018, when the CBN issued its original guidelines for licensing and regulating PSBs. The stated objective was to accelerate financial inclusion in rural areas and among unbanked populations, using mobile phone infrastructure to reach households that traditional banks had not. The CBN set a target of 95% financial inclusion for adult Nigerians by 2024, a target the country did not meet, with roughly 38 million adults still completely excluded from formal financial services when the policy was written.
After years of regulatory friction with telcos, the CBN granted PSB licences in two waves. In August 2020, three non-telco PSBs were licensed: Hope PSB (Unified Payments), Moneymaster PSB (Globacom), and 9PSB (9mobile). In 2022, the two largest telcos by subscriber count, MTN and Airtel, received their final PSB approvals and launched MoMo PSB and SmartCash PSB respectively. The framework was now complete: five PSBs in total, covering the full range of mobile network operators.
Three years later, the numbers tell a clear story. In Q1 2025, Nigeria's mobile money transactions reached ₦20.71 trillion (approximately US$14.42 billion) according to the Nigeria Inter-Bank Settlement System (NIBSS). That is real, substantial volume. But the dominant players are not the telco PSBs. OPay, a fintech backed by SoftBank and Sequoia, reported 10 million daily active users and 100 million daily transactions in 2024. PalmPay, founded in 2019, recently disclosed that it processes 15 million daily transactions. Neither company holds a PSB licence, both operate under the CBN's older Mobile Money Operator framework.
The telco-backed PSBs, by contrast, have struggled to gain scale. On Airtel Africa's fiscal Q1 2026 earnings call in July 2025, CEO Sunil Taldar acknowledged that Nigeria remains a small piece of Airtel's continental mobile money business. Airtel Nigeria's mobile money operations processed only US$1.5 billion between April and September 2025, just 1.7% of Airtel Africa's US$88.8 billion total mobile money transaction value for the period. Revenue from Nigeria contributed US$4 million, or 0.64%, of Airtel Africa's US$623 million in fintech earnings.
MTN's story is better but still far from the original thesis. MTN Nigeria's fintech arm generated ₦131.62 billion (US$91.64 million) in the first nine months of 2025, according to slides presented during MTN's investor call on 31 October 2025. But the bulk of that came from Xtratime, MTN's airtime lending service, not from core mobile money. Core fintech revenue excluding airtime lending stood at just ₦6.8 billion (US$4.73 million), up from ₦2.8 billion a year earlier. MoMo PSB's active wallet base was 2.9 million as of September 2025, a marginal 1.6% increase from the prior year, while customer deposits jumped 146% year-on-year to ₦6.9 billion (US$4.80 million).
Several factors explain why Nigeria did not replicate the Kenyan playbook, despite having larger telcos with larger subscriber bases. The first is timing. OPay and PalmPay had a multi-year head start while the CBN was still debating whether to grant telco PSB licences. By the time MTN and Airtel launched their PSBs in 2022, the fintech-native players had already built the agent networks, consumer brands, and app-based user experiences that define modern Nigerian mobile money.
The second is regulatory posture. Nigeria's PSB framework explicitly prohibits PSBs from granting loans, a restriction that neither M-Pesa in Kenya nor fintech-native operators in Nigeria face in the same way. When OPay offers credit through EaseMoni and PalmPay extends overdrafts, the telco PSBs cannot compete on the same feature set. The ALTON industry body has argued for years that Nigeria's bank-led payment model restricts the operational freedom telcos had in Kenya, and the results in the field appear to support that argument.
The third is distribution economics. OPay and PalmPay built their agent networks as independent commercial ventures from day one, compensating agents aggressively and iterating quickly on commission structures. Telco PSBs, operating as regulated subsidiaries of listed parent companies, face different internal cost disciplines and slower decision cycles. Airtel's active mobile money users in Nigeria reached 1.5 million by December 2024, respectable, but an order of magnitude smaller than OPay or PalmPay.
Both MTN and Airtel have publicly pivoted their Nigeria fintech strategies. Airtel is leaning into its agent network, now approximately 100,000 agents nationwide, and betting that brand recognition plus aggressive user acquisition can recover ground. MTN is focusing on what it calls "advanced services" and "high-value customers," with its active agent network growing 73.6% and its merchant network 42.6% between December 2024 and September 2025. Both companies are essentially adopting the OPay/PalmPay playbook: build the agent network, issue cards, add savings and credit features, and compete head-on with the fintech natives rather than trying to win purely on subscriber-base leverage.
Whether this works depends on regulatory evolution. If the CBN continues to hold PSBs to stricter lending restrictions than fintech-native operators, the telcos will remain structurally disadvantaged. If the framework eventually converges, either by loosening PSB restrictions or by extending PSB-style supervision to OPay and PalmPay, the competitive dynamics could shift quickly.
For African central banks watching Nigeria, the PSB experience offers a clear lesson: licensing frameworks designed for specific operator types (telcos) create unintended advantages for the operator types they were not designed for (fintech-native players). If the objective is financial inclusion, licensing by capability rather than by industry origin is more effective. Nigeria's financial inclusion gains in 2023-2025 came primarily from OPay and PalmPay, which were not the intended beneficiaries of the 2018 policy framework.
Three years in, the telco PSB experiment in Nigeria is not a failure, 2.9 million active wallets and ₦6.9 billion in deposits is real progress, and the agent network investments will compound over time. But the structural winners of the Nigerian mobile money boom were the companies that did not hold PSB licences at all. That is not the outcome the 2018 framework was designed to produce.
This report draws on CBN PSB guidelines (2018, revised 2020); Airtel Africa fiscal Q1 2026 earnings call (July 2025); MTN Nigeria investor presentation (31 October 2025); Nigeria Inter-Bank Settlement System (NIBSS) Q1 2025 data; and reporting by TechCabal and Paystack's engineering blog.