• Wednesday, February 28, 2024
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Proof of identity hindering Nigeria’s N1.1trn mobile money business


The lack of generally accepted proofs of formal identification required to assist service providers navigate KYC (Know Your Customer) concerns has been identified as a major drawback to the success of mobile money operations in Nigeria, according to a new report released by Lafferty Group and obtained by BusinessDay on Tuesday.

The report says that when this situation is combined with the need for secure authorisation mechanisms to enable financial services providers manage risk, the result is a very low uptake of mobile money services, confined largely to those who already have bank accounts.

This also implies that the vast unbanked majority in Nigeria remains so, and the current mobile money offerings do very little to address this.


Reinforcing the report’s findings, Akin Oyebode, head, SME (Small Medium Enterprise) Banking, Stanbic IBTC Bank, said, “The major reason Safaricom (MPSA) was able to navigate KYC concerns in Kenya is because Kenya has a national identification system”. According to Oyebode, the only way to scale adoption of the service is to reduce KYC requirements to open accounts or transact via mobile money.

 The report further highlighted the need for a paradigm shift from a focus on ‘banking’ to the inclusivity of ‘financial’, which would enable non-banks to operate in the mobile money space.

 The Central Bank of Nigeria’s (CBN) perception that mobile money is a ‘banking service’ rather than a ‘financial service’ constitutes a drawback to service uptake, the report adds.

Two years after mobile money service was launched in Nigeria, it is yet to catch on with the generality of the populace. The report also pointed out that the general population’s low awareness of mobile money and its benefits, poses another challenge towards unleashing the N1.1 trillion market potential of the service. “Despite the fact that 70 percent of Nigerians have access to mobile devices and SIM cards, only 35 percent have any knowledge of mobile money services”, states the Lafferty report.

A recent poll by the Nigerian research company, NOI, further reinforces Lafferty’s findings. According to NOI, only 6 out of 10 Nigerians are aware of the service (59 percent), and of that number only 13 percent are actually using it.

Even more disheartening is that 93 percent of the mobile money adopters are using the service in conjunction with an existing bank account. The remaining 7 percent had a bank account, but operated it separately. What this means is that the target audience—the unbanked—is missing out completely in the grand scheme of things.

The Lafferty Group is of the view that these challenges however are not insurmountable. “Ongoing dialogue with the Nigerian central bank would contribute towards changing the central bank’s perception of mobile money’s positioning.

“Such dialogue should be supported by global case studies that showcase  for example, retailers and telecoms providers that have successfully transformed into mobile money service providers with the help and support of their own central banks”, according to the report.

“Telcos have demonstrated capability to address the constraints associated with the slow uptake of mobile money service. Therefore, the regulatory framework should be reviewed to allow telco involvement, to conclusively eliminate these constraints,” said Osondu Nwokoro, director, regulatory affairs, Airtel Nigeria, in a recent industry forum.

“The Nigerian government is already busy with a national identity project”, according to the report. This, combined with an innovative and pragmatic approach to KYC principles that are nevertheless stringent enough to combat electronic fraud, would make it more possible for the unbanked to take up the service.

 The report suggests that mobile money service providers could redirect and rechannel marketing budgets towards general mobile money education and enlightenment.

By: Ben Uzor Jr