At the beginning of the week I kicked off a conversation about mobile money in Nigeria, starting with a post in which I theorised that the existence of mobile money in Nigeria predates the launch of Kenya’s M-Pesa. As expected, my reasoning in that regard went uncontested.
However, like I said in my response to one of the comments in that conversation, the post was only intended to be a backdrop against a larger question which is – if Nigeria has had mobile money for this long, albeit within an informal framework, why is it taking this long to deliver it in a standard format by corporate stakeholders?
The Nigerian context is sufficiently different from Kenya’s that a wholesale comparison to the M-Pesa model would probably not be a great idea. But there are lessons that can be learnt and parallels that can be drawn what has worked there. Also, from what I’ve been able to glean from various sources — the web, talks people in the mobile money/financial services industry, casual discussions with concerned techizens, as well as the thoughts some of our readers graciously added to the last conversation, I’ve come up with a number of reasons, any or all of which might be responsible for the current state of affairs in Nigeria’s mobile money sector. Let’s get into it then.
The regulators are regulating mobile money to death
From all indications, the CBN is keeping a tight stranglehold on the mobile money initiative with labyrinthine licencing requirements that waste time and compel would-be mobile money operators to jump through several hoops for a chance at the action. Some regulation is fine, but sometimes you can’t help thinking that some of these people take their their jobs too seriously.
Choosing a bank led model over a telco led model flies in the face of logic
Citing protectionist concerns which I am yet to comprehend, the Central Bank has chosen to put the banks at the vanguard of mobile money deployment and relegated mobile network operators to second string roles. Incredibly counter-intuitive when you consider four things.
First, you can’t have mobile money without mobile — and that’s what telcos, not banks, do.
Second, while only 38 percent of Nigerians own formal bank accounts, experts report over 90 million mobile subscriptions in the country. Telcos have found a way into the places that banks can only dream of reaching in Nigeria’s informal sector.
Third, the telcos already have a robust distribution system in place — the airtime vendor distribution hierarchy — that is essentially a full fledged agent network just waiting to be activated.
Fourth, the telcos are sitting on a mountain of subscriber data gathered from the SIM registration exercise. Data that would make it significantly easier to target and sign up mobile money users. Data that I’m not likely to share with a bank if I were a telco who got stiffed by the CBN.
Kenyan regulators also had similar concerns about Safaricom, yet they granted a special licence for M-Pesa. Now, they are probably congratulating themselves for their foresight.
The licensed providers are dragging their feet
For all their their dawdling, the CBN has granted licenses to some operators since last year. You’d have thought that since then, the pace would pick up and things would begin to happen, right?
That doesn’t appear to be the case. Currently, the only visible player in the space (from where I’m standing) is Paga. A few weeks ago I was at the Intermarc sponsored Card Expo Africa event, and I spoke with a few of the banks who have mobile money licenses. Access bank is yet to launch. First Bank is still conducting an in-house “staff pilot”. The vaunted partnership between GTBank, MTN and Fortis Microfinance is likely languishing in development limbo. Zenith Bank and UBA have active products (eazymoney and U-Mo), but have done so little publicity that I’m almost inclined to believe that they are in stealth mode.
In all, the general levels of public awareness that such a product even exists falls far short of where I expected it to be at this point in time.
Significant infrastructural and information barriers exist
After having a talk with Jisas Lemasagarai, a Kenyan, I realised that M-Pesa owes its success in part to the availability of a nationally aggregated database of information that holds records of every citizen. By leveraging National Identity cards in their business processes, M-Pesa was able to fulfil the KYC (know your customer) requirements on each subscriber.
Nigeria, on the other hand, doesn’t have an identity system that works (I don’t want to get into how much of a scam the old National ID cards are), making the registration process very troublesome. In some cases, it’s almost as involved as opening an actual bank account.
That reminds me about that heap of subscriber data the telcos are sitting on.
The mobile money offerings are fragmented
Everybody and their brother is lobbying for a licence. If the CBN hadn’t prevented the telcos from joining the party, the number of operators in the space would likely be just shy of twenty. Logic dictates that there will be as as many mobile money products as there are mobile money operators, and I doubt that they will be interoperable or subscribe to cross-platform standards. There’s a whole tangled web of deals being struck between various banks and telcos, it’s so jumbled that I cringe to think about how confusing it’ll all be when they all launch their different products with different usage protocols, shortcodes and what-not to memorise. Scary.
Mobile money requires a degree of monopoly to work. Safaricom’s near monopoly of the Kenyan telecommunication sector is probably the biggest contributor to M-Pesa’s impressive rate of adoption. Nigeria is big enough that we could manage a duopoly. A triopoly even, provided sufficient levels of co-operation that will facilitate inter-operability are brokered. Eleven mobile money operators however, and you no longer have an industry, just a brawl.
Agent networks? Too few and far between
Each mobile money provider I’ve spoken to so far have said they’ve got people out there handling deposits and withdrawals, but up till now I’m yet to bump into any. That’s not to say that they aren’t out there…there just aren’t enough of them to make any sort of real impact.
Mobile money works only when people are able to deposit or access monies from no more than a short stroll away from where they live — like from the local merchant downstairs, or the airtime vendor across the road. Any farther, and it just isn’t worth the trouble.
Again I’m reminded about the natural advantage the telcos have over banks in this space. You might not find a bank or ATM machine on your street, but you’ll almost always find an airtime vendor. And if you’d like proof, just ask 17 million M-Pesa subscribers who would rather wait till tomorrow when the local M-Pesa agent will have cash than make the long trip to the nearest bank.
What’s your take?
Bear in mind that this is by no means a definitive opinion, just another contribution to an ongoing discussion. As always, we would like you to oblige us with any insights that might have on the subject by way of contention, additions subtractions, or even abstractions. The comments are all yours.