Moniepoint, the Nigerian fintech unicorn, is working to secure a commercial banking license from Nigeria’s central bank, according to three people familiar with the matter. While regulatory approval could take up to a year, these discussions are a key milestone in the nine-year-old startup’s strategy to expand its retail banking operations and increase its share of Nigeria’s financial services market.

A commercial banking license would enable Moniepoint to expand its product offerings across Nigeria, including international transactions and treasury operations—both stable revenue drivers for banks. It would also allow the fintech to open physical branches, building trust in Nigeria’s historically low-trust banking environment.

Foreign currency transactions could significantly boost Moniepoint’s revenue, tapping into a lucrative market that earned seven of Nigeria’s biggest banks around ₦3.37 trillion in the last nine months.

The license would also give it a major edge over competitors like OPay and make it the first Nigerian fintech to own a commercial banking license. A similar strategy worked for Nubank in Brazil, where its banking license allowed it to become the primary bank for nearly 60% of its customers, serving more than half of the adult population.

Pursuing a commercial banking license underscores Moniepoint’s goal to distribute financial services more efficiently than its competitors. Despite being a late entrant, the fintech has already become a key player in the agency banking sector by leveraging technology and a vast network of agents.

Moniepoint declined to comment.

If granted a commercial banking license, it will again be a late entrant. With 24 commercial banks, Moniepoint will hope its momentum in retail banking, launched in August 2023 will help it stand out. While its exact number of customers is unclear, industry experts claim it is second only to OPay and ahead of Kuda, which has 7 million users. This rapid growth places Moniepoint’s customer base ahead of relatively new commercial banks like Globus Bank, which had 60,000 customers in 2022. 

There’s significant potential for disruption in the market, as Nigeria’s largest banks are often criticized for serving millions of customers with subpar services. A fintech-driven commercial bank could shake up the sector. If successful in acquiring the license, Moniepoint will join other major commercial banks like FirstBank and Zenith, which have vast networks of banking agents.

The fintech began preparing for the license in the first quarter of 2024, shortly after hiring Bayo Olujobi as its new Chief Financial Officer (CFO) from Stanbic IBTC, one person familiar with the discussions said. Acquiring the license could take a year, as the central bank’s lengthy vetting process must be completed before granting approval to commence banking operations. Moniepoint has significantly bolstered its compliance team, hiring more than a dozen new employees in compliance and fraud monitoring since the beginning of the year.

At $15 million, the capital required for a commercial bank license is a fraction of Moniepoint’s recent $110 million raise, which elevated it to unicorn status. Besides the cost, the fintech will also have to set up physical branches across Nigeria with regulatory requirements like a strong room, loading bay, and banking hall. 

While commercial banks operate under stringent regulations, acquiring a license would signal Moniepoint’s maturity and its readiness to embrace a more established regulatory framework. This would be an important step, especially as the central bank has adopted a more stringent regulatory stance toward fintechs since December 2023, which has created challenges for many startups.

A commercial bank license would allow Moniepoint to overcome the restrictions of its microfinance bank license, which limits both product offerings and geographic expansion beyond Nigeria’s South-West region—a significant barrier in a country with such a large and diverse market.

The fintech has worked around its geographical limits by opening “support offices” nationwide to maintain a physical presence in regions where it cannot operate branches. However, there is no workaround for its product limitations. 

Nigerian microfinance banks cannot offer complex financial services such as large-scale corporate banking, investment banking, foreign currency transactions, or extensive treasury operations that are typically profitable segments for commercial banks. A commercial banking license removes these limitations for Moniepoint and allows the fintech to generate multiple income sources beyond microloans and savings accounts.

In 2023, Access Bank, Nigeria’s largest bank, generated only 29.4% of its total profit from retail banking, with most profits coming from commercial and corporate banking. Similarly, most banks rely heavily on corporate deposits. United Bank for Africa, a tier-1 bank valued at ₦1.06 trillion, reported ₦8.2 trillion in retail deposits compared to ₦23 trillion from corporate clients.

The fintech has also gone on a compliance hiring spree, hiring more than a dozen compliance and fraud monitoring employees since the start of the year in response to the central bank’s ban on fintechs in April. 

Although a commercial banking license comes with higher regulatory standards and capital requirements, the long-term advantages—such as diversified services, increased credibility, and expanded growth potential—make it an appealing move for Moniepoint.