Nigeria drags on Telco-led mobile money as India intensifies efforts

The Reserve Bank of India is taking mobile banking a step further with the newly introduced payment banks, while Nigeria continues to drag on reviewing its bank-led mobile money services.
Payment banks are small banks which customers access through their mobile phones rather than traditional bank branches.
New payment bank, the India Post Payments Bank (IPPB), kicked off its operations this year after being licensed by the RBI in January 2017, and is the second payments bank to start operations after Airtel Payments Bank.
The new bank has gotten off by rolling out pilot services in Raipur and Ranchi, the capitals of Chhattisgarh and Jharkhand respectively and in the next couple of months, plans to open 650 new branches.
It has great potential to effectively improve financial inclusion in India, according to sources familiar with the matter.
India is home to 21 percent of the world’s unbanked adults, and like Nigeria, faces a significant challenge in increasing access to financial services.
However, Nigeria’s bank led model for mobile money services is failing to replicate the kind of success the telecommunications driven model has achieved in other countries.
Godwin Emefiele said last year that the Central Bank would break the monopoly of banks in offering mobile money services sometime in 2017, but nothing has happened yet, despite the pressing need to increase financial inclusion in the country.
Only 800 thousand Nigerians were using mobile money services in 2014, according to a survey by EFInA, representing 0.4 percent of its total population of 182 million according to World Bank data.
This compares with Kenya’s 26.5 million mobile money users, 58.8 percent of a total population of 45 million.
Despite having higher levels of banked adults than Kenya, Rwanda and Tanzania, Nigeria’s percentage of formally included adults is lesser than the aforementioned three countries due to a sluggish growth in the use of mobile money.
“Nigeria’s bank led mobile money model is not as effective as the telecommunications model which Kenya, Rwanda and Tanzania have all adopted and data supports that,” an expert, who craved anonymity told BusinessDay.

“The CBN licenced banks to operate Mobile Money rather than the telecommunication companies. But the banks don’t have the distribution links which telecommunication companies have,” the expert added.
Mobile Money services are either ‘bank-led’ or ‘telecom-led’, meaning the service either requires a telecommunication operator to provide the infrastructure or a bank to provide the financial framework.
“Kenya has been successful due to Mobile Money being ‘telecom-led,” said Tijani Babaade, a financial inclusion consultant, by phone.
The telecommunication company Safaricom entered the Mobile Money market in Kenya back in 2007 with a platform called M-PESA.
Safaricom invested in the infrastructure, trained their agents all over the country to become Mobile Money agents and simultaneously promoted awareness.
Safaricom have been successful due to the high penetration of mobile phones throughout Kenya as well as a large unbanked population.
Some analysts say regulatory loopholes in Kenya aided Safaricom in spreading its domineering tentacles.
“Mobile Money infrastructure must be made attractive to the telecommunication companies, so that there are incentives to develop the technology and infrastructure here in Nigeria,” a group of experts polled in a BusinessDay survey asserted.
Payments by mobile are predicted to increase rapidly around the world over the next few years, with telecoms groups, retailers and banks all trying to secure a piece of the pie.
Recent research by consultancy McKinsey suggested that by 2025, 360 million people in sub-Saharan Africa will have access to the internet via smartphones making it easier for users to send and receive money across countries.