With payments by mobile predicted to increase rapidly around the world over the next few years, telcos in Nigeria who currently provide the platform for mobile banking to commercial banks, are looking more towards operating as super agents for mobile money, as in the case of Mpesa in Kenya.
This is especially so, as the telcos’ revenues from voice services continue to dwindle in the face of keen competition and they seek new outlets for margin enhancement.
According to information received from the Central Bank of Nigeria (CBN) telecommunications service providers in the country may soon be allowed to act as super agents in the financial industry.
Dipo Fatokun, Director, Banking and Payment Systems, CBN, explained to BusinessDay yesterday, that banks and other financial institutions will soon engage the telcos as super agents.
Fatokun said that currently, “three telecommunications service providers in the country have applied for super agent licenses which have not yet been issued because the CBN is still working with the Nigerian Communications Commission (NCC) in that regard.”
The MTN group says its recently appointed Chief Executive Officer, Rob Shutter, who was a former bank CEO, will use his substantial commercial experience to assist the formulation of a revised strategy for MTN, particularly in the area of convergence between mobile telephony and financial services.”
The group says it has appointed a yet-to-be-named new head the mergers, acquisitions and strategy with a “wealth of banking experience.”
Responding to who regulates them under this scheme, Fatokun said the CBN which issues the super agents license will regulate the telcos on mobile money.
A recent report by the Ericsson ConsumerLab revealed that 47 percent of the Nigerian population are unbanked.
Patrik Hedlund, Senior Advisor, Ericsson ConsumerLab, said; “consumers have to make long journeys to reach the location where they can pay their bills. Saving money and taking loans also becomes problematic in unbanked Africa, with many hiding cash in their homes and relying on informal lenders who charge high interest rates. So, mobile money is really beneficial to them and even better if they can use it conveniently through the telcos.
Razia Khan, managing director, Chief Economist, Africa Global Research, Standard Chartered Bank, London said the move by the CBN to license telcos for agency banking is very positive.
“The hope is that it will create greater access to financial services using a lower-cost platform, as mobile banking is cheaper than putting up a brick and mortar branch.
“This could potentially bring the benefits of financial inclusion to a much larger segment of the Nigerian population. Consider the differences between the percentages of the population that are formally banked versus those who use mobile phones. The impact could be transformative,” Khan said.
“By not licensing telcos in the past, Nigeria has fallen behind other Sub Saharan African economies that have seen less financial exclusion and greater access to credit as a result.
“Of course the issue of a dual regulator is a challenge that will need to be worked through. But it should not be the reason that more innovative forms of banking do not get to take off in Nigeria,” she added.
Gbolahon Awonuga, Executive Secretary, Association of Licensed Telecommunications Operators of Nigeria (ALTON) told BusinessDay that the mobile money market is wide enough for all players.
“We have to remember that there is no mobile money banking without telecommunications networks. Banks are using the facilities of the telcos and if there is any problem, customers would talk about network service before going to the bank. If your money gets stuck, the first thing to blame is the network service provider, since it is the platform being used.”
Awonuga however made clear that the two regulators need to come up with realistic regulations for the scheme to work efficiently. “The CBN and NCC should come up with a sort of regulation that will benefit both parties, so that it will be a win- win situation,” he said.
In his emailed response to BusinessDay, Taiwo Oyedele, partner/head of Tax & Regulatory Services, West Africa Tax Leader, PricewaterhouseCoopers, said “I think it is a good development for the economy and financial inclusion in particular. This is the way the rest of the world is going, where we are seeing cheaper, more effective and broader financial services coverage being provided by Telcos and Fintech companies.
“This can also help bring a good number of informal sector players into the formal sector for economic development and tax revenue generation”.
Oyedele added that given that Telcos are already highly regulated, the most effective way to regulate their financial services functions will be through a collaboration between the CBN and NCC.
Although the idea of licensing the telcos to act as super agents for mobile money banking has been generally welcome, a few industry players have expressed doubt in the possibility of mobile banking being effectively handled by non financial institutions.
Muyiwa Ogunboye, telecoms industry analyst and Managing Director of e.Stream Networks, told BusinessDay in a telephone interview, that although the telcos will be advantaged to tap into the large percentage of the unbaked population, Nigerian telecommunication service providers may not be ready for the sudden transformation and Nigerian citizens might not be ready to depend on them for financial services.
“If these licenses are given to the telcos, it means they would have two regulators and the charges that the telcos would have to pay would be too much. Secondly, I believe that fraud will increase, there is already a level of trust people have with banks and I don’t think Nigerians will easily trust their money to telecoms operators.
“I don’t think Nigeria is ready to dabble into this. It will not be easy for MTN or any other operator to replicate the M-Pesa success story because a regulatory loophole in Kenya meant that the telecom service provider, Safaricom did not need a formal banking partner or license to launch services. With the CBN and NCC regulating, more regulations and security should be put into mobile money for telcos to achieve success in this sector,” he said.
Some telecommunications networks are currently partnering with particular banks to provide bill payment and fund transfer services to customers. Airtel for example, partnered Access Bank to develop a mobile banking platform in Nigeria and also have partnership with National Bank of Kenya, where all Airtel subscribers who sign up have the opportunity to open a savings account from their phones, payment of bills, real-time mobile banking services, such as funds transfer to accounts in Access Bank and other Nigerian banks’ accounts.
Globacom also launched it mobile banking services in collaboration with over 20 banks , while MTN provides mobile banking services through a joint service provided by Guarantee Trust Bank (GTB) and the y’ello Diamond account provided by Diamond bank.
The CBN has fully licensed a total of 21 Mobile Money Operators (MMO) who are currently carrying out commercial operations, while eight others are at various stages of pilot run, but none of the telcos have been given licenses for the opportunity to serve Nigeria’s largely unbanked population.
The rapid growth of mobile has become the driving force of almost everything in the technological evolution of the world and the telecommunications industry is spreading its tentacles across various other industries including the financial services sector which has been described by industry analysts as the next growth area for telcos.
Hope Moses Ashike & Jumoke Akiyode
