Mobile money and growth challenge in Nigeria

The fast growth of Mobile Money (MM) services in emerging countries such as Kenya, Tanzania and South Africa has buttressed the need to deepen the platforn in Nigeria’s financial services sector, especially to capture the unbanked. Despite two years of deployment in the country, the scheme seems to be crawling, as painted by a recent poll. But experts however, appear optimistic of its growth. ADEYEMI ADEPETUN writes
AS predicted, poor access channels, inadequate distribution or agency networks, lack of proper awareness and poor mass education have become major challenges troubling Nigeria’s mobile money initiative presently.
The sub-sector, which according to financial analysts, is worth N150 billion, but if adequately maintained and proper policies in place, is projected to have growth capacity of N300 billion in another three years.
Indeed, in August 2011, the Central Bank of Nigeria (CBN) licensed 16 banks and other financial institutions to deploy the services across the country.
Touted as Bank-led initiative, the mobile money service is seen as a viable tool to provide basic financial services through the mobile technology platform, which is aimed at creating a veritable tool of payment, especially for the unbanked Nigerians in the rural areas, and also help drive financial inclusion in the country.
The growth in mobile money use is expected to benefit many sectors of the Nigerian economy, thus contributing to national economic growth. Today, in the country, a large proportion of households lack access to financial services as in many other emerging countries.
Research showed that only about 25 per cent of the Nigerian population (170 million people) has bank accounts or access to financial services.
The Director, Banking and Payments System Department, CBN, Mr. Dipo Fatokun, in Lagos, confirmed this huge gap recently.
In his presentation, entitled: “Mobile Money in Nigeria: Prospects, Opportunities and Challenges,” at the meeting of the Ikeja District Society of the Institute of Chartered Accountants of Nigeria, Fatokun said surveys conducted on financial services in Nigeria revealed that banking penetration was relatively low because of a number of factors, some of which include proximity to financial service outlets, product complexity and cost of service.
He noted that no nation could progress or truly develop if majority of its population are under-banked or has no access to financial services.
To this end, Fatokun said the CBN was vigorously working to ensure the success of the mobile money initiative as a financial inclusion strategy to reduce the nation’s unbanked population by 20 per cent.
He said: “The percentage figure of Nigeria’s unbanked population currently stands at 46.3 per cent and the CBN will work to ensure the success of the strategy.”
According to Fatokun, a survey carried out in 2008 by an international agency, Enhancing Financial Innovation and Access (EFInA), on access to financial services in the Nigeria revealed that banking penetration was relatively low with only 21 per cent of adult population in the country having access to banking services, while 74 per cent had never been banked.
The remaining five per cent, previously banked, in other words, had left the banking system, Fatokun added.
Interestingly, the NOI polls showed that mobile money scheme has not been embraced by the unbanked Nigerians.
The polls result showed that six in 10 (59 per cent) Nigerians are not aware of mobile money services and only 13 per cent of the 41 per cent that are knowledgeable of it, have adopted it, depicting a very low acceptability rate.
In the NOI polls, which tried to determine the ratio of mobile money users with bank accounts to those without, responses revealed that all of the respondents (100 per cent) that use mobile money services operate a bank account.
“This suggests that the level of awareness and adoption of mobile money services amongst Nigerians without accounts is currently very low and almost non-existent,” the report stated.
In the area of proportion of users that operate their mobile money account in connection with their bank accounts, the report showed that 93 per cent of Nigerians operate their mobile money account in connection with their bank account and seven per cent operate their mobile money account separately. This further affirmed previous findings where the majority indicated banks as their provider.
Furthermore, to gain insight into the transactions users carry out on mobile money services, 65 per cent of respondents said they use mobile money for funds transfer, followed by bill payment (54 per cent), money withdrawal (36 per cent) and “payment for purchased goods and services” (25 per cent).
“Analysis based on geopolitical zones revealed that the North-west zone (80 per cent) had more respondents that carry out “funds transfer” on their mobile money account, the South-West zone (93 per cent) accounted for the highest proportion of respondents that use their account for “Bills payment”.
“Also, the South-West zone (54 per cent) had the highest number of respondents that use their account for Money withdrawal while the South-East zone (57 per cent) accounted for the highest proportion of respondents that use their mobile money account for the “Payment for purchased goods and services”.
The NOI findings also revealed the majority agree (55 per cent: 25 per cent+30 per cent) that the service is easy to use, on the other hand 38 per cent (nine per cent+29 per cent) are of the opinion that the service is not easy to use.
In reference to the accessibility of service providers, the majority (55 per cent 21 per cent+34 per cent) agree that service providers are easily accessible.
Reacting to the NOI’s findings, the Principal Associate, Mobile Money Africa, Mr. Emmanuel Okoegwale said the outcomes of the NOI polls came with some disappointments, saying however, that he cannot fault them “since they explained the processes used to reach the outcomes though there are some contentious issues raised but that is for another day. Despite the gloomy pictures painted, there is still hope for the industry in Nigeria and I hope all the stakeholders will take time to review the outcomes of the survey and work towards a better score card in near future.”
Relating Nigeria’s case with that of Kenya, (Safaricom’s mPesa), which has become a source of reference in the Continent because of its successes within few years of existence, Okoegwale said, “these are two different climes. The mobile network operator that is also the largest organization in that country is also the provider of the mobile financial services in the country mentioned. They have everything under their control from subscribers, access channels and distribution points and a primary product (airtime), which was used to cross sell the mobilemoney value proposition. We have also seen smaller MNOs do well in that space like Econet in Zimbabwe. In the case of Nigeria, most of the factors to scale up the deployments were external to the providers and will take some time, resources and efforts to achieve.”
The mobile money expert agreed that the current agent capacity in the country is still very low, saying agency network recruitment, training, monitoring and incentifying, require significant resources for an industry that do not have existing distribution network to act as transactions points. It is a challenge that the stakeholders are trying to sort out. Gradually, agency network is growing but the incentive is not a strong motivation yet because it is a low value business that is still running at low volume.
The Programmes Director of One Network, an industry-focused organisation whose target is to deploy mobile money agents across the country, Mr. Sola Bickersteth, said for the Mobile money services to be successful, an estimated number of 250,000 as against the about 3,000 would be required.
Bickersteth explained that the mobile money service has not been fully expanded in the country; adding that this accounts for the slow adoption of the process.
Chief Technology Officer, eTranzact International, Richard Omoniyi, agreed that there was need to step up ‘education’ on the scheme.
“One thing that is important is education. GSM is working despite the hiccups. Once in a while, we still have communications issue, but I believe that it’s a matter of time, we will get there.
“CBN needs to push further, awareness is vital. People still find it hard to believe that in their cell phones, they could send money,” he said.
Butressing Omoniyi’s claim, Okoegwale said the challenges facing the initiative in Nigeria are peculiar to the industry anywhere in the world but that “government through the regulatory agency must continuously review policies, ensure certainty, appropriate risk and balance regulation with innovation.
“The international development organisations are also keen to assist in many ways. Government must demonstrate willingness to make mobilemoney a success by actual usage. If all current government conditional cash transfer programs are disbursed through mobilemoney then we will have better score card with the NOI polls.”

Did the Developed World Steal Mobile Payments? by BARRY COETZEE

Once upon a time, a mobile payment was performed by transferring value from one mobile phone to another. In Africa, we had MPesa and that is what we understood as a mobile payment. There were confusing semantic issues, but these revolved mostly around the difference between “mobile payments” and “mobile banking”.

 The difference here is quite easy to resolve. With “mobile banking”, there is normally an account at a financial institution involved  banking, whereas with “mobile payments” the need for financial account was mostly not required. You still need some relationship with a mobile operator (who hold the account in the background) - mobile.

 Generally, we in Africa had a clear idea of how a “mobile payment” worked.  If you scan the international financial media today, you will see that, actually, there is another way to transfer value from one mobile phone to the other  NFC (Near Field Communication). Yes, this is true. You do not send anything from one mobile phone to another with NFC, you have to touch another NFC device, which could or could not be a mobile phone. The mobile phone needed to do NFC is usually a smart phone that has special stuff in it to enable NFC.

 We all know that our “mobile payments” that use SMS and USSD work on any phone.  In fact, it was designed to work on every phone and definitely the cheaper phones. However, there are significant difference in what we know as “mobile payments” and payments made with NFC. An NFC device can interact (pay) another device that is NFC enable, but not a mobile phone. A consumer with a NFC mobile phone can make a payment to a NFC enabled PoS terminal which is not a mobile phone.

 Therefore, my position is that for a transaction to be labelled as a mobile transaction there should always be two mobile phones involved. If there is only one mobile phone involved then the transaction should have another name! Since by far the majority of African “mobile payments” meet my definition, and because we are the champions at it, I say that we get to make the rules around the definition. As for NFC transactions, I think the developed world should spend some more money and come up with a more appropriate definition for its use.

BARRY COETZEE

Keeping mobile banking secure in an unsecure world

MOBILE phones today are multipurpose, so it is no surprise that the number of mobile banking users has doubled over the past three years. Most banks have worked to make it easy by optimising their websites for mobile devices, allowing you to check your account and make payments and transfers on the go. But while a number of mobile users find this incredibly convenient, they are still in the minority, representing about 12% of online adults.

As for the rest, studies have shown the primary concern is a perceived lack of mobile security. This perception is slowing the rate of mobile banking adoption, according to Javelin Strategy & Research.

Consumers’ concerns about mobile banking and mobile security are understandable.

Not only do users face mobile browser threats, but there has also been a rise in dangerous applications. Some users have received text messages from scammers pretending to be their bank and asking for personal information.

Losing your mobile phone or tablet is another concern. If your online banking sites are set to automatically log you in, a thief could potentially access your account and make unauthorised transfers and payments.

Although these threats are real, banks are doing their part to make mobile transactions safer by offering multifactor login procedures and using encryption that ensures sensitive information cannot be read.

There are a number of steps you can take to protect yourself, however, while still enjoying the convenience of mobile banking:

• Download your bank’s mobile application to be sure you are visiting the real bank every time, and not a copycat site.

• If you use Wi-Fi, connect to your bank’s site or app securely by making sure your wireless network is secure. Never send sensitive information over an unsecured wireless network, such as in a hotel or café.

• Password-protect your device and set it to auto-lock after a period of time.

• Don’t store vital data on an unsecured device.

• Do not share or disclose your bank card number or password to anyone other than your bank.

• Don’t share any information about your account via SMS.

• If you receive a text message from your financial institution, delete it after reading it.

• Check your financial statements for anomalies.

• Report any banking apps that may be malicious.

• If you lose your phone, or change your number, contact your bank so they can update your mobile information.

• Before downloading any banking apps, read users’ reviews to make sure it is safe.

• Don’t try to hack or modify your device, since this could leave you open to malware.

• If you have to check your bank accounts in a public place, change your password immediately afterwards.

• Consider using a service that allows you to remotely lock your device and delete all personal information in the case of theft or loss, as well as locate the device via GPS. It should also provide mobile antivirus and safe-search protection.

If something does go wrong, know how to alert your bank. Look for specific instructions on its website.

MTN Mobile Money: helping build a cashless economy in Ghana

When the country’s biggest telecommunications service provider, MTN, decided to roll out its mobile money service in 2009, it knew it was about promoting a cashless and a very efficient economy.

Since its humble beginnings in 2009, MTN Mobile Money services has transformed the way in which people handle their finances, allowing people to transfer money, make purchases and pay bills with just a few taps on the keys of their mobile phones.

Available data show that the Service has recorded about 13.5 million transactions totalling over GH?300million, which represents over 265% growth in the value transacted. Currently, there are more than two million MTN Mobile Money subscribers.

MTN Mobile Money users can pay their DSTV, ECG bills and school fees, purchase Starbow airline tickets as well as pay for goods purchased at Melcom Plus, Max Mart, and other online shops such as Ghanabuys and Sellphone Ghana.

These services have been designed to create greater flexibility, accessibility and convenience for customers.

Further research also indicates that the continent in general is gearing up to embrace a cashless system very soon.

A joint research by Mckinsey and the Financial Access Initiative in 2009 reported that more than half of the world’s adults are unbanked; (2.5billion people) but two-thirds of the unbanked, 1.8billion adults, have access to mobile phones.

This growth (access to mobile phones), combined with the ability to deliver financial services telephonically, now makes it possible to tap vast markets bankers previously considered unprofitable.

According to another research report by Aite Group, mobile payments will reach US$214billion in gross dollar volume in 2015 — up from US$16billion in 2010 — which represents a 68% compound annual growth.

At a recent round table discussion on a cashless economy for Ghana, MTN’s Sales & Distribution Executive Mr. Ebenezer Asante noted: “As a growing economy we must focus on a structured programme to achieve the benefits of a cashless economy.

It will ensure a significant reduction in the cost of printing, replacement and transportation of cash along the value chain.”

He said: “Mobile Money services have transformed the way in which people handle their finances, allowing people to transfer money, make purchases and pay bills with a few key strokes on their mobile phones.”

Mr. Asante believes that a cashless economy brings about more benefits than an economy that thrives on cash.

A cashless economy will reduce the cost of printing currency notes, replacing them and transporting cash along the value chain from the Central Bank to banks to businesses and consumers.

“As an example, according to Nigerian Central Bank Governor, Sanusi Lamido Sanusi, the direct cost of cash management to the Nigerian banking industry is estimated to be N192 billion (approximately US$1.9billion)by 2012,” he said.

Another benefit includes the reduction in risks associated with transporting currency notes, both for banks and individuals (robbery, loss from fire or flood, etc.);

Also, increased service options for consumers, including efficiencies created when goods and services may be purchased and bills paid 24-hours a day, year round, without having to be physically present. Thus time, space and distance are no barriers for economic transactions in a cashless economy.

Furthermore, the net effect of the benefits is business and economic growth through e-commerce promotion, enhanced individual, business and national productivity; and with positive impacts on job-creation and its attendant multi-sectoral multiplier effects.

But the Consultative Group to Assist the Poor (CGAP) — an independent policy and research centre dedicated to advancing financial access for the world’s poor — says not a single country in the world, including the advanced economies, have been able to eliminate cash from their respective economies.

In the USA where 50% of transactions are cards, 29% are still cash; Australian cash-use was still at 64% of transactions in 2010; and UK cash-use is projected to drop to 45% in 2018.

“Let’s not have too high expectations of rapid change,” Technology Programme, CGAP, Mr. Peter Zetterli, said. He suggested a ‘Cash-lite’ system rather than a cashless system.

“‘Cash-lite’ is a more realistic goal than cashless. This is fine: the point is to offer alternatives that add value. Freedom from cash, not absence of cash! Offering alternatives that add value to people’s lives, the benefits of even partial transition can be substantial.”

He says a cashless society is a long way in the future. “Even in the most developed economies, not a single country has eliminated cash so far. So it’s true that cash use is falling in all advanced economies — but gradually. Cash will stay with us for the foreseeable future. Thus cashless is unrealistic for now; we should focus on cash-lite.”

Challenges and Way Forward

Even in the face of several benefits, building a cashless economy has also several challenges that try to derail its progress.

Policy — there is a need for clear policies to be followed to achieve the full benefits of a cashless economy, including a national policy that encourages more electronic-based transactions while discouraging physical cash-usage and circulation.

Mr. Asante cited Nigeria as an example when its Central Bank instituted a cashless economy policy to:

? Drive development and modernisation of Nigeria’s payment system in line with the country’s vision 2020 goal of being amongst the to-20 economies by the year 2020. According to them, an efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.
? Reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
? Improve the effectiveness of monetary policy in managing inflation and driving economic growth.
? Curb some of the negative consequences associated with the high usage of physical cash in the economy.

Infrastructure — Expanding the infrastructure and systems to the point where people are ready for a cashless economy and electronic transactions are truly ubiquitous and sustainable; so that everyone — retailer, service provider, consumer or business — can have the option of transacting electronically regardless of location, or even time.

This means that the technology coverage must be adequate, as well as other supporting structures such as energy availability for consistent connectivity and reduced downtime.

“In the long-term, we should be driving toward universal access and convergence to all forms of cashless mode of payments — All ATMs/ E-Zwitch/Mobile Money must cross-transact,” Mr. Asante added.

Security — In cultures where a cashless economy is well-advanced, system operators have learned that some of the pitfalls include inadequate security.

The need to have secure systems that allow citizens to transact without worry of identity-theft or other cyber fraud is critical, and so we must ensure our electronic transaction/payment systems and processes are truly secured.

Cultural resistance and Education — Since MTN rolled-out MTN Mobile Money, the telecom giant has experienced some resistance from prospective users, simply due to the fact that Ghanaians are used to a cash culture.

Mr. Asante said: “However, it has been our experience that once people start using Mobile Money they wonder why they did not start to do so sooner.

This tells us we must have a singular focus on educating people about the full benefits of a cashless economy — the benefits afforded them as well as the benefits afforded the country as a whole.”

This is something that must be done by all stakeholders, because as a country we all benefit.
He urged government to consider using its own purchasing power to radically promote cashless payments as a first step.

“MTN commits to continue its investments in this regard; to make Mobile Payments popular, acceptable and trusted nationwide. This is our commitment and we shall lead the way,” he said.

No Mobile Money Transfer (MMT) License Holders Yet-CBN

Author(s): 

funmi ilesanmi

The Mobile Money Transfer (MMT) industry will sit with cautious optimism this week awaiting further directions about the licensing of operators for the revolutionary mobile money services, after discovery that the Central Bank of Nigeria (CBN) is yet to license any player in the virgin industry, Nigeria CommunicationsWeek can now reveal.

In essence, no Nigerian provider has mobile payment licence as previously claimed but there are pockets of electronic banking licenses like what any other financial institutions have which covers their financial products and services.

Mobile payment license enables a service provider to provide mobile banking, payment and associated services using agent networks and using the mobile phone as a means of authentication.

The CBN also confirmed the findings as it said that it is still fine-tuning guidelines for the take off of the scheme in the country. The apex bank had in June 2009 released the mobile payment guidelines and general misconception is that one or two operators have the license and are yet to activate their services.

Abayomi Atoloye, director Banking Operations, CBN however told Nigeria CommunicationsWeek on telephone that there is no operator licensed yet for mobile money services.

He said that the apex bank will soon start issuing the licenses to operators which are expected to leverage on the ubiquity of the mobile phone and the interoperability of the technology to provide easy to use and secure mechanism for millions of people nationwide.

As he spoke, Emmanuel Okoegwale, foremost mobile money industry expert urged the CBN to clear ambiguities surrounding the nomenclature adding that “it is confusing stakeholders. There should be clear definitions for mobile money, mobile payment and mobile Banking. Without clear understanding, stakeholders may be confused and use the term interchangeably”

According to him, the regulator should also clarify the license classes and transparently address the concerns of stakeholders.

“If a particular operator got its licence before the release of the regulatory guidelines, the regulator should be able to defend the positions and why it is so. All over the world, regulators work in peculiar situations,” he added. Okoegwale said such information about license status should also be available on the CBN’s website.

Nigeria CommunicationsWeek gathered that Nigeria is at the threshold of Mobile Money Transfer and Payment, a new revolution that is potentially more profound than the arrival of mobile phones in the country but this time sweeping and exponential.

Hailed as the next big thing, mobile payment industry will change the way consumers interact with financial services and make payments and the major plank will be the mobile phone.

With only 22 million bank accounts and less than10, 000 bank branches for 140 million citizens, mobile payments will reach over 80 million mobile phone holders and millions of others that do not have access to formal financial services in urban and rural areas.

East Africa Going Cashless: Lessons for Nigeria

Author(s): 

Emmanuel Okoegwale

Last month at the Open Africa Innovation summit  in Nairobi which was hosted by Nokia and World Bank group, subject matter experts, innovators, technology providers ,policy  / regulators and other stakeholders gathered at the Safari Park Hotel  to evaluate the challenges of mobile innovation in Africa ,celebrate the  success stories and work towards replicating the same across Africa.

Despite the good country delegate representations across many African nations, Europe and Asia, all the participants agreed that indeed mobile innovation has taken root in East Africa and most especially Kenya.

 It is beyond doubt that mobile based programs and innovations are opening opportunities for cross selling opportunity for Kenya as a Nation.

Kenya is attracting tech investments, hubs, researchers and also MPESA tourist to the country on a consistent basis.

MPESA is indeed a phenomenal and worth taking a look at.

It is available everywhere and anywhere. There is even a joke that the policemen now receive their brides via mobile money in Nairobi.  
    
I visited a midsized shopping complex about eight months ago in Kenya and it had only 2 agents that were transacting MPESA but on the recent visit, the service is now available in 38 stores in same shopping complex with only 2 stores left! That is contagion effect of mobile financial services in Nairobi.

While mobile money is Kenya’s wild child, use and adoption of card is also on the rise.

 The Central Bank of Kenya data showed that the value of transactions made through plastic cards rose by 12 per cent last year, driven by rising consumer preference for cashless transactions with automated teller machine (ATM) cards accounted for transactions worth Sh577.9 billion last year, up from Sh517.3 billion between January and December 2010 while 2.5 million new cards were issued to Kenyans in 2011 to take the total in circulation to 10.1 million.
Incentive to go cashless
For customer to go with less cash, he must understand the value proposition, experience the convenience and be well educated about the services so that His attempt to go with less cash will not result to lost cash.

Merchants’ transactions may hold the key to unleashing the potentials of e-money in any economy but the merchants must see value in terms of turnaround time to get the physical cash to restock or ability to spend same e-money to stock inventory.
Transaction cycle time
The spread, use of service and ecosystem development will determine how successful e-money adoption will be in any country.

If a quick serve  restaurant  collects e-money at Point of sale but will require to wait for 2 -3 days for the amount to get to his account and withdraw cash to restock, then e-money adoption will be limited to merchants that are able to afford the 2- 3days transaction date cycle time.

These are underlying issues that were dealt with in the early days of less cash in East Africa.
Reporting customer adoption
East African mobile money providers consistently provided the primary data of customer base, frequency of use, adoption rate and other information to enable further study of the ecosystem.

While some Nigerian financial institutions and licensed mobile money providers are making strides in signing customers and improve transaction volumes in the early days of  slow moving and  low value mobile money services, almost all the providers are shy to declare  customer base and frequency of use aside Pagatech that celebrated  crossing  the 100,000 customers  some days ago.

According to The GSM Association (GSMA) 80 percent of global transactions originated from East African countries, Several factors can explain the success of mobile payment systems in  East Africa, including a legal frame supporting innovation and a powerful distribution network.
This trend can be noticed in Kenya, Tanzania, Uganda and Rwanda. Moving into ‘Less Cash’ economy can only be a function of innovation and not legislation.

Promoting less cash in Nigeria and imposing penalties at certain transaction threshold will not deter people that do not understand other options that are available which are more secured than carrying cash.

Section: 

Mobile Money

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