MoMo PSB, the fintech subsidiary of MTN Nigeria, lost 2.5 million active wallets in 2024—two years after its launch. However, CEO Karl Toriola reassured investors that this decline was part of a deliberate strategy to improve service penetration, optimize monetization, and lower customer acquisition costs.
When MTN and Airtel Africa entered Nigeria’s payment service sector in 2022, they were expected to disrupt traditional banks and fintech firms. With MTN’s mobile money services spanning 24 African countries and over 200 million wallets, and Airtel Money operating across 14 markets with 38 million users, both telecom giants were viewed as formidable competitors. However, their influence has been more measured than initially anticipated.
MoMo PSB is one of five Payment Service Banks (PSBs) licensed by the Central Bank of Nigeria (CBN) between 2021 and 2022 to enhance financial inclusion in rural areas. The other licensed PSBs include 9mobile’s 9PSB, Airtel’s Smartcash PSB, Unified Payment’s Hope PSB, and Globacom’s Money Master PSB. These banks were designed to provide essential financial services to individuals and businesses beyond the reach of traditional banks. However, restrictions on lending, forex transactions, and investment opportunities have limited their revenue potential.
Despite these limitations, fintech players like Opay, Moniepoint, and Palmpay have gained significant market share, overshadowing PSBs. The adoption of mobile money in Nigeria is largely driven by banking agents due to limited internet connectivity and low smartphone penetration, particularly in rural areas. As a result, many PSBs have struggled to establish deep market penetration.
Initially, MoMo PSB leveraged MTN Nigeria’s infrastructure to expand its services, offering money transfers, savings, insurance, and payment solutions. The company also received substantial financial backing from its parent company to build a robust digital banking ecosystem. By the end of 2022, MTN Nigeria had invested ₦16.4 billion to establish and scale MoMo PSB’s operations. This was followed by an additional ₦9.4 billion investment in 2024 after acquiring the remaining 7.17% stake from Acxani Capital, making MoMo PSB a fully owned subsidiary.
These investments fueled early success, with MoMo PSB’s active wallets growing from 2 million in December 2022 to 5.3 million by the end of 2023. The company also expanded its agent network from 103,000 to 327,000 and launched a merchant ecosystem that onboarded 324,000 merchants within a year.
However, in 2024, MoMo PSB saw a significant downturn. Active wallets declined to 2.8 million, while cash deposits from wallet users fell from ₦7.6 billion to ₦3.8 billion. The agent and merchant networks also shrank drastically, with merchants dropping by 76.8% to 75,168 and agents reducing by 79.2% to 68,016.
Industry experts suggest that this decline is linked to PSBs shifting their focus toward urban centers and existing banked customers, rather than prioritizing rural communities, due to the high costs associated with reaching the unbanked. MoMo PSB appears to be moving away from agent banking, emphasizing digital banking investments instead.
Despite the setbacks, MoMo PSB reported a 4.3% increase in transaction volume in 2024, which Toriola sees as an indication of a more engaged and high-value customer base. According to Victor Asemota, Growth Partner at AnD Ventures, the company is deliberately reducing its reliance on agents and merchants, many of whom transact mainly for commissions. He also speculates that a fraud incident may have triggered MoMo PSB’s strategy shift.
In May 2022, the company suffered a major security breach, resulting in a ₦22.3 billion ($53 million) loss. This incident may have prompted an overhaul of its business model.
MoMo PSB is diversifying its services by applying for Payment Service Solutions Provider (PSSP) and Payment Terminal Service Provider (PTSP) licenses. These licenses would enable it to operate payment gateways, provide merchant aggregation services, and manage point-of-sale (PoS) terminals. This move aligns with the company’s strategy to reduce its dependence on agent banking while strengthening its appeal to small and medium-sized enterprises (SMEs) and individual customers.
As MoMo PSB recalibrates its operations, its primary focus remains on user engagement and retention to reverse the decline in wallet activity before the end of the year.
