Nigeria: The Rise and Rise of Mobile Money

Sep 2014
Nigeria, September, 12 2014 - Experts believe that if mobile operators are allowed to be in the front seat of mobile money, Nigeria has the mass market to be the leader in mobile money which will lead to an avalanche of technology innovations, job and wealth creation as well as an increase in the contribution of ICT to the GDP.

Mobile Money transactions are gradually taking off in Nigeria after a very slow start due to inability to fully comprehend the scheme, lack of technology by those licensed to operate it and low level of the awareness by the public. There are 18 licensed mobile payment services providers in Nigeria, comprising banks and companies established for this purpose under the 2009 Regulatory Framework for Mobile Money transactions are gradually taking off in Nigeria after a very slow start due to inability to fully comprehend the scheme, lack of technology by those licensed to operate it and low level of the awareness by the public. There are 18 licensed mobile payment services providers in Nigeria, comprising banks and companies established for this purpose under the 2009 Regulatory Framework for Mobile Payment Services. No other country in the world has such a higher number of mobile money providers.

Nigeria’s regulatory framework allows three models, which the Central Bank of Nigeria (CBN) describes as: i. Bank-led ii. Non-bank-led, and iii. Bank-focused.

It specifically excludes telecom operators from providing mobile payments services, limiting their role to merely the provision of the channel (infrastructure) through which other providers’ services can be offered. Those earlier given provisional licence by CBN include FirstBank/FirstMonie, Fortis Mobile Money, UBA/Afripay, GTBank Mobile Money, Pagatech, eTranzact, Monetise, Eartholeum, Paycom, FET, Ecobank and Kudi.

The operating licence allows the companies to provide products such as electronic payments through mobile phones.

According to Berg Insight, a leading financial technology research agency, a mobile money account does not encompass services limited to information services and simple transactions such as airtime top-ups and transfers between own accounts. It does not include services that use mobile operator billing as a payment source.

With mobile money, customers can convert cash to and from electronic value (e-money), and they can use mobile money to perform transfers or make payments. Traditional “bricks and mortar” banking infrastructure struggles to make the business model work to serve low-income customers, particularly in rural areas.

Mr Patrick Eregie, general manager, Mobile Payment of eTranzact, said “Mobile Money service has been specifically designed to give access to financial services for Nigerians in low banking coverage areas through the use of mobile phones, and to create job opportunities for many Nigerians.

“This service offers various options such as cash withdrawal, cash deposit, airtime recharge cards purchase, funds transfer (to bank accounts, cards and mobile phones) and bills payment (for cable TVs, electricity, school fees, health insurance scheme, etc).

In countries where it has been successful, it has largely been driven by mobile operators who already have large airtime distribution networks which can be used to provide customers with a network of mobile money agents where they can perform cash-in and cash-out transactions. Large mobile operators in developing countries typically have 100 to 500 times more airtime reseller outlets than all of the banks’ branches put together.

In addition, several mobile operators have strong brands which are recognised even in rural areas. Mobile operators can use their existing brand strength to establish trust with customers, which is important for driving adoption of financial services. Nigerian banks and other mobile money licencees, however, lack the network spread and brand attribute of mobile telecom operators, which have been their undoing in propelling mobile money.

A Tip Of The Iceberg

A ray of hope is, however, dawning, with the likes of Globacom, MTN and Airtel pushing the frontiers of Nigeria’s mobile money scheme even though the regulation establishing it has placed them at the back end.

MTN Nigeria is smiling to the bank following massive growth in Internet data and mobile money which contributed 16 percent to the N413.259 billion profit recorded from January to June 2014. In July 2014, MTN Nigeria launched the MTN Diamond Yellow account, offering mobile financial services in partnership with Diamond Bank.

The president/CEO, MTN Group, Sifiso Dabengwa, said the Nigerian operation will focus on meeting the significant market demand for financial services and mobile content with an expected positive impact on data revenue.

Super-Agent Network

Last month, Globacom, Nigeria’s second national operator, launched Glo Exchange, a mobile money super-agent network that will allow for grassroots pervasiveness of the scheme. The initiative will accelerate mobile money revolution, availing the industry the much needed distribution network.

The CBN gave approval to Globacom to create 500,000 mobile money agent outlets in the country through the Glo Xchange, Globacom in partnership with Firstmonie, a subsidiary of First Bank, Ecobank, Stanbic IBTC and Zenith Bank.

Mr Dipo Fatokun, director, Payment Systems, Central Bank of Nigeria, said the launch of the mobile money agent network by Glo supports CBN’s financial inclusion programme aimed at creating a cashless economy where every unbanked Nigerian can access to financial services irrespective of the location, literacy or financial capability.

“CBN believes that mobile money and agent framework is the frontier of cashless boom. Mobile money is the next thing expected to transform the CBN’s cash-less policy. The apex bank believe that such initiative like this will aid both telecommunications and banking industries to further serve Nigerians better,” he said.

Head of Glo, Prepaid Services, Kamal Shonibare, said the government through the CBN canvassed cash-less revolution through relationship between banks and the telecommunications operators. He said mobile operators are to create platforms that will drive and make the process a success. According to him, a majority of the about 170 million Nigerians have no access to financial services.

Quoting a report by EfiNa, the Shinobare said only 20 million Nigerians are banked, while about 80 million are unbanked – those at the bottom of the social pyramid.

Nigeria and Others

In Africa, mobile money payments have been launched across a dozen networks in Africa with Safaricom, MTN, Airtel, Vodacom and others making a success of the scheme. Kenya was the first country in Africa to successfully pilot mobile money and turn it into a huge revenue business model through Safaricom mobile network. One of the most successful ones is Vodafone’s M-PESA money transfer service which now has seven million customers in Kenya and is also offered in Tanzania and Afghanistan.

According to the GSM Association (GSMA) June 2014 Mobile for Development (M4D) report on Nigeria, major growth of mobile money services has thus far been largely outside West Africa in general, such as Kenya, Tanzania and Democratic Republic of Congo where operators have used extensive distribution networks and brand to grow scale and catalyse development of other sectors through payments, transfers and insurance.

It noted that the inability of Nigeria’s regulatory authorities to allow telecom operators implement mobile money is slowing the rate of acceptance of the scheme.

“We think there is a strong case for permitting operators to operate mobile money services in Nigeria. More widely, a facilitating regulatory environment can help unlock successful services in other M4D sectors closely aligned with economic growth and social improvement (Sri Lanka is a good example), for which Nigeria is a prime candidate,” it said.

According to GSMA estimates, in June 2013 there were still less than one million customers using mobile payments services in Nigeria, less than one per cent of the population.

“Nigeria is lagging behind in the development of these services, when compared to what has already been achieved in other markets such as Ivory Coast, Kenya, Madagascar, Tanzania and Uganda,” he said.

For example, Tanzania has an adult population of 25.8m (one-third of Nigeria’s adult population) and already has 11 million mobile payment services accounts that are active on a 90-day basis. In September 2013, the four mobile money services provided by operators facilitated transactions for TZS 2.8 trillion ($ 1.6 billion). The value transacted through those schemes in Tanzania is 26 times greater than Nigeria (N10.14 billion/month, equal to $61.4m, in the same month),”the report said.

Increasing Education, Perception and Interest

Aside technology and agent network challenges which had hindered the smooth take-off of mobile money in the country, general perception and education of the payment platform remain areas needing improvement.

According to various surveys, many Nigerians are yet to be aware of the payment platform and even those who are aware of the platform do not use it for various reasons. A survey conducted by NOI Polls showed that almost six in 10 Nigerians (about 59 per cent) are not aware of mobile money services and only 13 per cent of those that are aware of mobile money have adopted it.

Also, a survey by Philips Consulting Ltd showed that of the 63 per cent of respondents who know about mobile money, only 29 per cent are registered with any of the mobile money operators (MMOs) in Nigeria.

The report also revealed that the leading MMO among registered respondents was Guaranty Trust Bank (GTBank) mobile money which accounted for 41 per cent.

The survey report also showed that young adults within the age range of 26-35, who dominate Nigeria’s population, had the highest registration with mobile money.

Survey reports also showed that the number of people registered with MMOs seems to be increasing every year since its inception. According to responses from the Philips Consulting survey, 40 per cent of respondents registered in 2012 compared to the six per cent in 2010.

Banks Taking Advantage

Taking advantage of the bank-led model, many banks in the country have introduced various mobile payment platforms as they strive to keep their technology and change-savvy customers. GTBank came up with its GTMobile, United Bank of Africa (UBA) collaborated with Afripay to come up with Umobile, and Stanbic IBTC’s mobile money still trends on its *909# platform. Zenith Bank which was among the first to be granted licence also operates eaZymoney, while First Bank operates its mobile money through its subsidiary, FirstMonie.

Currently, most Nigerians who use mobile money only make transfers and airtime purchases with it. A survey on the use of mobile money in Nigeria by Philips Consulting showed that the most common usage for the service is for funds transfer.

Future of Mobile Money

Experts believe that if mobile operators are allowed to be in the front seat of mobile money, Nigeria has the mass market to be the leader in mobile money which will lead to an avalanche of technology innovations, job and wealth creation as well as an increase in the contribution of ICT to the GDP. The mobile phone is changing how customers conduct their financial activities, leading to an extended reach and increased operational efficiency among financial service providers in emerging markets.

In the longer term, mobile money services are facilitating the increasing share of digital transactions in emerging markets where cash transactions still dominate. A growing share of international remittances is being electronically disbursed into mobile money accounts. Mobile phones are also being increasingly used to send remittances.

According the GSM Association, mobile money services are increasing the availability and access to financial services for lower-income segments of the population which, previously, had not been possible to serve profitably. The mobile phone will be the first digital banking channel for a majority of the unbanked populations in many emerging economies, like Africa, Latin America and Asia. The number of live mobile money deployments has grown at an explosive rate over the past two years. In-depth study of the industry indicates that there are currently around 300 mobile money deployments in emerging markets.

The number of mobile money subscribers in emerging markets is forecasted to grow from 133 million users in 2010 at a compound annual growth rate (CAGR) of 40 percent to reach 709 million users in 2015.

The total value of mobile money transactions will simultaneously grow at a CAGR of 54 percent from $25 billion in 2010 to $215 billion in 2015. Asia-Pacific is expected to become the most important regional market, accounting for more than half of the total user base.

Many new companies have entered the mobile money industry as technology vendors in the past year, including the likes of Ericsson, SAP, Gemalto and Nokia. The competitive landscape is intense with around 70 vendors competing in the industry, of which many need to reach a critical mass of deployments over the next two years in order to stay in business in the longer term.

Mr Mark Durrant, Nokia spokesman said the huge interest in mobile payment systems has a simple explanation: with more than four billion mobile phone users and only 1.6 billion bank accounts worldwide, mobile money services represent a big opportunity. The credit-card companies are also getting on board

Benefits For Financial Inclusion

There are many reasons to be excited about using mobile phones for cash transfers, such as government payments or NGOs cash-for-work programmes.

Source : Leadership

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