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Nigeria, June, 21 2018 - The recent GSMA report showed that although the adoption of mobile money globally is on the increase, the situation is not the same with Nigeria, writes Emma Okonji
2017, saw a number of new trends in mobile money, ranging from the accelerated growth of bank-to-mobile interoperability, to the emergence of South Asia as the fastest growing region, coupled with innovations designed to reach the most underserved.
However, the recent financial report on mobile money from GSMA, showed that the global mobile money industry is now processing a billion dollars a day and generating direct revenues of over $2.4 billion.
With 690 million registered accounts worldwide, mobile money has evolved into the leading payment platform for the digital economy in many emerging markets.
According to the report, several factors underpinned the success of a growing number of providers: a sustained focus on activity rates, the digitisation of platforms and measures to reduce the net cost of the agent network. On each of these fronts, the trends in 2017 were positive.
A growing number of mobile money services are achieving activity rates of over 50 per cent. While average industry activity rates grew modestly to 36 per cent in December 2017, a closer look reveals significant variation among providers. Many successful providers are seeing a higher number of their customers using the service regularly.
The GSMA report showed that these providers have strong distribution networks, enjoy enabling regulation, and rely more on an account-based business model.
But in Nigeria, the situation is different, where mobile money adoption and growth rate are still dragging, thus making Nigeria a cash nation, which negates the Central Bank of Nigeria (CBN)’s efforts to make the country a cashless economy by 2020.
More funds are entering and leaving the global mobile money ecosystem in digital form. Cases such as bulk disbursements, bill payments and bank-to-mobile transactions have been the main drivers of this trend. As mobile money becomes more digital, it is connecting the wider economy and, in turn, becoming more profitable for providers and more useful to consumers. Whereas nearly 12 per cent of incoming funds were digital in 2012, the figure rose to nearly 25 per cent in 2017, according to GSMA report that was released recently.
Many successful providers are decreasing the net cost of the agent network. Agents remain a crucial and distinguishing asset of mobile money providers.
According to the report, in recent years, economies have seen growth in the number of active agents and average values processed by agents. At the same time, the inflow of digital funds is reducing provider costs, by alleviating the need for subsidised cash-in agent commissions.
As the context changes, so mobile money providers are working to adapt. Important trends include the spread of smartphones and Fintech companies, the digitisation of new sectors of the economy, and renewed efforts by companies and governments alike to reach the underserved and unserved communities. The most successful providers are integrated with a wide range of third parties.
As a burgeoning Fintech community seeks to marry start-up innovation with mobile money scale, these connections and the potential to serve as the gateway to the digital economy will become increasingly central to the story of mobile money.
According to GSMA report, policy objectives and government regulation would play an increasingly important role, as the scope of mobile money regulation broadens. The pace of core regulatory reform slowed in 2017, as the total number of markets with enabling regulatory frameworks rose from 52 to 54 across globe.
“This, however, marked two important trends: the growth of new areas of digital financial services regulation and the spread of national financial inclusion policy frameworks. As regulators confront questions around data protection, regulatory sandboxes, and more, the policy trend game of greater inclusion must remain at the fore,” the report said.
“Amidst this changing landscape, many traditional tools remain relevant. The persistence and scale of the cash economy in emerging markets means that complex distribution networks remain crucial for digital services to interface with physical lives.
In a business that relies deeply on trust, the role of longstanding brands and the understanding of local contexts is integral to the engagement of people outside of the formal system. As governments and regulators take a broader approach to digital financial services, providers and national authorities must continue to work in concert to strike a balance that ensures sustainable and responsible market growth, the report added.
By leveraging these enduring assets and finding new ways to connect scale with innovation, mobile money providers can serve as a gateway to the widening array of digital services in emerging markets,” the report said.
Trends shaping mobile money
Analysing the global trends shaping mobile money from the survey report, the Director General, GSMA, Mr. Mats Granryd, said: “Strong growth in customer registrations in 2017 led to the addition of over 136 million new registered accounts, bringing the global total to 690 million mobile money accounts, a 25 per cent increase from 2016.
“With mobile money now available in 90 countries, including three quarters of low- and lower-middle-income countries, it has become the leading payment platform for a digital economy in emerging markets.”
He said sub-Saharan Africa had long been the epicentre of mobile money, and that growth in this region shows no sign of slowing. Yet, as the mobile money industry has matured, it has taken hold in other parts of the world, too.
In 2017, for the first time, most industry growth came from outside Africa. South Asia saw the highest year-on-year growth in accounts of any region, reaching 47 per cent and now represents 34 per cent of registered accounts globally.”
Granryd explained that the spread of mobile money beyond traditional footholds grew within sub-Saharan African countries in 2017, such as Kenya, Ghana, Côte d’Ivoire and Cameroon.
For example, M-Pesa in Kenya, contributed over 27.3 per cent of Vodacom’s revenue in Kenya and Tanzania.
Granryd, who attributed the growth of mobile money to the increased adoption of mobile phones, said the percentage of operators who offer mobile money through a smartphone app had increased from 56 per cent in 2015 to 73 per cent as of June 2017.
“While smart phones are the future of the industry, feature phones and Unstructured Supplementary Service Data (USSD) transactions continue to be the choice for the vast majority of mobile money users. This is likely a reflection of the role the service has played in including those at the base of the economic pyramid,” Granryd said.
Mobile money usage
According to GSMA global report, the industry continued to experience high growth in mobile money transactions. Total transaction values grew by 21 per cent from $26 billion in December 2016 to over $31.5 billion in December 2017.
On average, an active customer moved $188 per month, primarily cashing in and out and sending person-to-person (P2P) transfers.
Increasingly, customers are also paying bills, topping up airtime and conducting other transactions through their mobile money accounts. 2017 saw the beginning of a potentially significant shift for mobile money to serve as a tool for saving money and earning interest.
The Nigerian challenge
While mobile money growth is increasing globally, Nigeria, as a nation, still relies heavily on physical cash transactions as against digital cash transactions, where money is transmitted electronically via the Internet, Mobile Phones, Point of Sale (PoS) machines and other mobile devices, for the payment of goods and services.
In order to change the situation in line with global standard in today’s digital era, CBN, the financial services regulator, introduced cashless policy, in order to encourage Nigerians to do more of electronic transactions for payments of goods and services.
To achieve this, CBN set a target to reduce the number of financial excluded Nigerians from 46 per cent in 2010 to 20 per cent in 2020, but only succeeded in reducing the number to 41 per cent as at the last count in 2018, which is a five per cent reduction in eight years.
This situation has made Nigeria to become a predominant cash nation.
In addressing the Nigerian challenge in mobile money transactions, experts at a recent 2018 Digital PayExpo, identified obstacles impeding the growth of mobile money in Nigeria to include poor infrastructure, lack of trust, poor training, poor awareness, inadequate consumer protection, high cost of transaction, distance of bank customers, and complexities in payment system.
They stressed that the challenges must be addressed, to enable Nigeria deepen its growth in financial inclusion through mobile money transactions.