Hostile bank lobby, telcos’ apathy stall mobile money growth

Hostile banking lobby, along with an unfavourable regulatory environment, which has restricted telecommunications companies from leading mobile money deployment, is threatening the country’s quest to attain higher levels of financial inclusiveness.

In 2011, the Central Bank of Nigeria (CBN) committed to pursue a strategy of financial inclusion to reduce the percentage of adult Nigerians excluded from financial services from 46.3 percent at the time to 20 percent by 2020. The apex bank however identified mobile money as a critical platform for attaining financial inclusion, though the service is yet to catch on with the generality of the populace four years after the initiative was launched by the CBN. The banking industry is engaging in hostile lobbying to keep mobile operators at bay as mobile money is viewed by banks as a potential revenue stream rather than add-on service.

The use of mobile money in Nigeria and other countries in sub-Saharan Africa (SSA) could produce an estimated $1.5 billion in fees for banks and other mobile money providers by 2019, according to research by The Boston Consulting Group (BCG). “Due to the sheer size of the mobile money space, if telcos get into the space, they will take a huge chunk of banking business,” said Victor Alaofin, managing director, Ryte Internet Technologies, in an interview.

The GSM Association (GSMA), in a report, has already proven that telcos are the most capable institutions to launch and scale mobile money services and to lead the partnership with banks. “Banking lobbies are strong in most African countries and they don’t want M-Pesa (mobile money) because they believe that they will lose out,” said Bob Collymore, CEO, Safaricom.

“The regulatory environment in Kenya was such that the government wanted to deepen financial inclusion, so M-Pesa was supported by the government because we had found a product that could help achieve this goal. “Elsewhere this is often not the case, and the regulatory environment and banking lobbies have been hostile”, said Collymore in an interview with Euromoney.

A survey conducted in 2013 by NOI, a research company, showed that 59 percent of the population are still unaware of mobile money services and only 13 percent of those that are aware of the mobile money have adopted it. Moreover, it found that 93 percent of those with mobile-money accounts operate them in connection with their bank accounts, implying that the unbanked population in Nigeria – the target audience for mobile banking – were not using the services. “In the interest of the space, if there is not greed on bot sides, I dont see why both parties cannot come together,” said Alaofin in an interview.

According to him, the current situation is not sustainable, as “most independent mobile money operators are already bleeding. This sort of traction is not what they sold to their investors.”

Giving insight into the rational behind CBN’s decision to give banks the lead role, Funmi Onajide, general manager, corporate affairs at MTN, said: “It was perceived that the telcos may have undue advantage in ruling out any form of competition against its own product through either blocking out the other players in the industry or overpricing its network access, so as to give its own product undue commercial advantage.”

Market observers are of the view that the adoption of mobile money is underwhelming despite a large, rural population. Nigeria’s bank-led annual mobile money transactions are said to be at a very low level in the rural areas, recording about 93.5 percent, or over N6 trillion lower than Kenya’s telecom-led mobile money operations.

According to the CBN, the total value of mobile money operations in Nigeria between 2012 and 2014 was about N430 billion. This two-year total for Nigeria is about 93.5 percent (over N6 trillion) lower than Kenya’s one year mobile money transactions.

Findings of the United States Agency for International Development (USAID) on scalable ICT applications for agriculture, show that M-Pesa, a mobile money product run by Safaricom, a leading telecom company in Kenya, processes transactions worth $4.98 billion (N996bn) annually, which is about 17 percent of total registered mobile money accounts in Kenya. This indicates that total mobile money transactions annually come to about $29.29 billion (N5.85trn) in Kenya. Market observers say it is clear that banks cannot compete with telcos when it comes to transacting payments for the majority of Africans.

 

Ben Uzor