What can we learn from recent acquisitions of banks by mobile network operators? Over the last year we have seen a number of mobile network operators (MNOs) buying stakes in banks or looking to acquire their own banking licenses. Are these isolated incidents or does this point to an industry trend?

On November 21, 2008 Telenor Pakistan entered into an agreement to acquire 51% of the shares in Tameer Microfinance Bank. A year later, in October 2009, Globe Telecom received permission from the Central Bank of the Philippines to acquire a 40% stake in Pilipinas Savings Bank with their parent company taking a further 20% stake. And, most recently, China Mobile confirmed earlier this month that they are in talks to buy a stake in Shanghai Pudong Development Bank in an explicit strategy to enter the m-payments market.

Industry attention has often focused on the successes of M-PESA in Kenya and G-CCASH in the Philippines which have been permitted under progressive regulation in these two countries which allow nonbank actors like MNOs to offer mobile banking services. But regulators in other countries have been less willing to allow non-prudentially regulated actors to enter the market for branchless banking. Lobbying efforts by MNOs and those in the financial access camp who think that consumers will be better served by allowing new entrants into the market have fallen on deaf ears.
So does the recent spate of acquisitions mean that MNOs are changing their tactics and looking to acquire banks to ensure that they maintain control over services that they want to launch and to allow them to offer their customers a broader range of services?

In Pakistan, a country that has issued clear guidelines on branchless banking in a 2008 circular on Branchless Banking Regulation, the central bank is explicit that only bank-led models will be permitted. This clear signal from the regulator would have been an important factor in Telenor’s decision to take a controlling stake in a microfinance bank with whom they later launched the EasyPaisa mobile wallet. Last week there was speculation that Orascom (owner of Pakistan’s largest network operator Mobilink) had entered into discussions with an un-named microfinance bank about acquiring a controlling interest. We know that the other operators in the Pakistani market are also exploring this strategy and several smaller banks have confirmed that they have been approached as possible targets.

In Nigeria the Central Bank has received two applications from banks that had partnered with different MNOs to offer mobile banking solutions which have not been approved yet. There have been suggestions that this may be related to concerns that it was the MNO who was the main actor in the model. Some operators have said that they are considering the acquisition of banking licenses as a possible strategy to get access to Africa’s most populous market.

Even in countries like the Philippines where a non-bank based model is allowed, network operators seem to be coming round to the idea that they can offer a far broader range of financial services, such as savings or insurance products, if they have a banking license.

If this trend continues, what will the implications be for branchless banking? Firstly, it may be that M-PESA is shown to be the exception rather than the rule in the way that MNOs offer enter the market for mobile financial services. Secondly, it will put even more pressure on the large banks to form partnerships with MNOs or risk losing out to smaller banks who may be more willing to give up some level of control to, or even be acquired by, cash-rich MNOs.

Thirdly, it may increase the barriers to entry for smaller MNOs that do not have the cash to acquire a bank. And fourthly, and to the chagrin of those who think that the banks have failed in their efforts to reach large parts of the population, it may reduce the pressure on financial regulators to allow a non-bank led model in the future.

-Chris Bold