Is Nigeria set to replicate the success of Kenya’s digital payments upheaval on an even grander scale? MTN, the top African telecom operator, certainly hopes so as it prepares to apply for a mobile banking licence under a new regime launched by Nigeria. By opening up access to Nigeria’s banking system to non-financial companies such as telecom operators, the central bank hopes to make basic financial services accessible to the tens of millions of people in the country who have no bank account. MTN, the South African telecom operator that is Nigeria’s biggest carrier with more than 50m subscribers in the country, is the group best positioned to capitalise on the opportunity, just as Kenya’s Safaricom did by launching Mpesa in 2007. Nigeria, though, seems determined to avoid a repeat of Mpesa’s monopoly by forcing telecom groups to work closely with banks. Rob Shuter, MTN’s chief executive, told a telecoms conference on Tuesday that the company plans to apply for a licence under the west African country’s new regime and aims to launch its Mobile Money service there in the second quarter of next year. Mazen Mroue, chief operating officer of MTN Nigeria, argued there was “big potential” to convert the carrier’s 50m Nigerian customers into mobile money users. “We’ve already laid the foundation so it becomes easier to extend these services,” he told the Financial Times at his office in Lagos. “This is an opportunity for all stakeholders to work together, and use existing telco infrastructure to assist all of the unbanked . . . we’re open for collaboration with any player that really wants to leverage our infrastructure.” Nigeria has plenty of catching up to do. Kenya’s Mpesa has signed up 23.4m users — some 80 per cent of the adult population — becoming the de facto technique for transferring money for many people in the east African country. Nigeria’s economy is five times the size of Kenya’s, underlining the scale of the opportunity.
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More than 60m of Nigeria’s roughly 200m people do not have bank accounts. MTN is in prime position to sign many of them up to a mobile payments service, not least because of vast agent network. There is barely a village or market across Nigeria’s 924,000 sq km, no matter how remote, without someone at a yellow MTN table selling phone credit. Banks find it uneconomical to serve low-income customers who generate little revenue, said Karima Ola, who leads African deals at Leapfrog Investments, a private equity fund focused on companies serving consumers earning $2-$10 a day. Such customers also have difficulty accessing banking facilities. “For some of these customers, you [join together] and give six to seven of your debit cards to a guy on a bicycle who rides three miles to the ATM — think of the risks involved there,” she said. “The solution is agency banking, where you have a local agent who can take money and [disburse money]. Who has the biggest number of agents in the country? It’s the telcos.” Banks cannot afford to put branches in every corner of the country — for logistical, economic and security reasons. But MTN has agents scattered throughout, for instance, in Borno State, which has borne the brunt of the Boko Haram insurgency. There are challenges to MTN’s position. Edward George, head of research at Ecobank, said: “MTN’s market share has been falling steadily for the last five years . . .[and] we’ve seen both Airtel and Glo gaining market share and growing strongly.” Airtel has developed a mobile banking service in its home market of India, while 9 Mobile, the company that rose from the ashes of the bankrupt Etisalat Nigeria, could use it as an opportunity to gain market share, said Mr George.
Other groups that could benefit from the spread of mobile money include the Rocket Internet-backed ecommerce group Jumia and digital financial services providers such as Paylater, which provides microloans. “Our market is limited right now to the banked and there are more unbanked than there are banked in Nigeria,” Paylater’s chief executive Chijioke Dozie. “If more of the unbanked started going into these payment systems, or digitising their [savings] through mobile money wallets then we can definitely service them.” By waiting a decade longer than countries such as Kenya to embrace mobile banking, Nigeria has avoided some pitfalls, such as struggling to keep track of the money flowing through the telecom groups providing the new services, said Mr Dozie. “The [Nigerian] central bank has probably been cautious in terms of not trying to rush into the mobile money space given they want to ensure that they can monitor what goes on,” he said. “The telcos are not regulated by them, so they’ve tried to marry [financial institutions] and telcos [in order to] regulate them adequately because this will have a huge effect on the financial system.”
Neil Munshi, FT
