As of the second week of December, at least two out of the three licenced Payment Service Banks (PSBs) have launched their digital financial services putting them in a mobile market that has serially performed below expectations and is led by deposit money banks.
While mobile money services led by telecommunication operators have become the preferred channel for sending, receiving, and making payments in many African countries, in Nigeria individuals and businesses have to go through banks – directly or indirectly – to access full digital banking services.
Nigerian bank leaders have never minced words on how they felt about telcos getting involved in financial services.
In a 2019 article, Uzoma Dozie, former CEO of the defunct Diamond Bank and founder of Sparkle, a fintech platform, said Nigeria is not a laggard when it comes to mobile money because it simply isn’t playing in the sphere and the country doesn’t really need to.
Prior to being acquired by Access Bank, Diamond Bank under Dozie was deeply invested in driving mobile banking services in Nigeria. In fact, in 2015, Dozie was awarded the Best Digital Banker of the Year by the American Banker, Bank Technology News, in recognition of the bank’s value addition to mobile banking and for leading revolution in providing efficient and cost-effective services in the financial industry using the mobile phone.
Dozie’s bank-led mobile banking approach has been a dominant theme since when the Central Bank of Nigeria (CBN) began to be serious about financial inclusion in 2013.
At a Social Media Week session in 2019 Segun Agbaje, CEO of GTBank suggested that telcos will do the economy a better service if they stayed focused on improving quality of service rather than be distracted by offering banking services.
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“We need the telcos to bring the price of data down. Getting a PSB licence isn’t a disruption because that is already being done. What is a disruption is for a telco to be bold enough to reduce the cost of data,” Agbaje said.
At a breakfast meeting hosted by Unified Payment in 2018, a former executive director of Nigeria Interbank Settlement Systems (NIBSS) told the audience that telcos really have no business doing banking because they already have their hands full with telecommunication services. He also fancies a mobile money space led by financial services firms and not telcos.
What is mobile money?
Mobile money refers to the use of a mobile phone to conduct financial services using electronic accounts (e-wallets). The IMF’s Financial Access Survey, defines mobile money as a pay-as-you-go digital medium of exchange and store of value using mobile money accounts, facilitated by a network of mobile money agents. It is a financial service offered to its clients by a mobile network operator or another entity that partners with mobile network operators, independent of the traditional banking network.
Salami Abolore, founder of Riby Finance explained that “an Agent” is a channel and agent networks are distribution businesses.
“Agents can therefore service mobile money accounts, bank accounts, utility and bill payment services as much as they can service yoghurt and gala purchase services,” Abolore said.
The CBN recognises the introduction of mobile money services as a practical strategy for financial inclusion, hence the adoption of mobile channels is imperative to driving inclusion of the unbanked. On paper the apex bank recognises two approaches, a bank-led and non-bank led working side-by-side to achieve financial inclusion.
In practice, the apex bank has not made a secret of its preference for a bank-led approach. Years after recognising that non-banking actors would be critical to driving financial inclusion, it delayed the issuing of a PSB that will enable telcos to participate in the market. It wasn’t until 2020 it finally issued licence to two telco-owned PSBs, 9Mobile and Globacom, and Unified Payment’s Hope PSB.
So far only 9Mobile and Unified Payment have launched their services.
Meanwhile, MTN and Airtel which have acquired years of experience and success stories providing mobile money services in other African countries are yet to receive their licences despite being among the first to apply.
In some respect, this leaves the now functional 9Mobile in a precarious situation where it is the lone sheep in a field of wolves.
The Safaricom infrastructure test
9Mobile may have been handed a first mover advantage but it may not suffice for a market that is still very much an infant in terms of infrastructure development. The Nigerian Communications Commission (NCC) estimates that nearly 200 communities in Nigeria have no access to mobile connectivity.
While many people now remember MPesa’s Safaricom for the success it has become in mobile money services in Africa, what is hardly mentioned is the large network infrastructure it rode on to succeed.
In its 2019 Sustainability Report, Safaricom noted that it delivers its services through 4,949 network sites that provide 96 percent of the population with 2G coverage, 93 percent with 3G and 57 percent with 4G.
The company has built 6,700 kilometres of Fibre Optic footprint, more than twice the 3,236 kilometres it had in 2016. This currently connects over 107,762 homes and over 5,992 businesses.
9Mobile on the other hand has no public data on its total investments in infrastructure, but it wasn’t until 2020 that it received funding to expand its presence in 16 cities in Nigeria.
The telco has less than 13 million mobile subscribers as of October which leaves it with less than 7 percent of the market. 9Mobile with loan money will hardly present a challenge to banks with truckloads of cash eager to unleash on mobile banking products. Its presence in one 16 cities also makes it an unlikely champion of financial inclusion. Banks like Access Bank, First Bank, GTBank, among others already have presence in more Nigerian cities.
The banking agents test
A short term option for 9Mobile will be to join the banks’agent-led approach.
Although agents are a major component of the mobile money operations, financial inclusion would only seem to be completed when unbanked individuals on their own begin to use mobile money services for transactions. But the proliferation of agents driven by attractive returns is distracting from the goal of bringing more people to personally access financial services.
“Yes, there is more attention on Agents than on Mobile Money right now only because it’s easier to set up an agent business than it is to set up and run a mobile money business,” Abolore said.
Adedeji Olowe, CEO of Trium Network said this is why mobile money is failing in Nigeria because not too many people are actually using the services.
But it is possible for Nigeria to evolve its own brand of mobile money, says Bolaji Akinboro, co-founder of Cellulant.
“Mobile money will evolve differently in Nigeria, it will evolve along the lines of Venmo in the US. I don’t see Nigerians who are very aspirational use a mobile money wallet as their primary store of value, most probably wallets will be gateways into bank accounts,” Bolaji Akinboro co-founder of Cellulant said.
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