Mobile Money (MoMo) PSB, the fintech business of MTN Nigeria, has said it is focused on outsmarting the biggest competitor in Nigeria’s payment ecosystem – cash.
MTN Group’s fintech business was recently valued at $5.2 billion following a minority stake the telecommunication company sold to Mastercard.
According to Usoro Usoro, chief executive officer of MoMo PSB, cash accounts for 90 percent of transactions in Nigeria and the informal economy, primarily unbanked individuals and businesses are largely untapped. The International Monetary Fund estimates that the country’s informal economy is valued at $220 billion.
Moniepoint and Opay currently dominate the mobile money market in Nigeria, defying experts’ expectations of a telco-led mobile money market.
Telcos lead mobile money in many markets across the African continent. Safaricom’s M-Pesa controls the market in Kenya and other parts of East Africa. MTN’s MoMo wins in most markets in West Africa and many other regions on the continent. Airtel Money follows MTN closely in some markets.
But the telcos have yet to win the race for the top in Nigeria’s mobile money market. The market, which relies mostly on agency banking networks, has three clear leaders: Moniepoint with over 600,000 agents and 1.4 million businesses or merchants, OPay with 550,000 agents and 300,000 merchants, and Palmpay with over 500,000 agents and 300,000 merchants. MTN’s MoMo is in fourth position with over 200,000 agents.
Agents are mainly involved in cash-in-cash-out transactions. Tosin Eniolorunda, CEO of Moniepoont, defines agents as people who sell cash.
Usoro, like many experts, believes the future of payment in Nigeria will not depend on agents because it will be driven by cashless transactions. Hence, consumers would be able to make payments without taking cash from agents for transactions.
MoMo is therefore focusing on building for the unbanked population, which Usoro says represents the best opportunity to solve payment problems in Nigeria. The company doesn’t appear in a hurry to announce its success.
“It’s not a race, it is a marathon. We are building the infrastructure to bank the over 50 million Nigerians that are not banked,” Usoro said.
Building patiently is an approach that MTN is very familiar with. While MoMo is currently the dominant payment channel in Ghana, it has taken many years to build dominance in that market since it was launched in 2009. Karl Toriola, CEO of MTN Nigeria, also notes how long it has taken to build MoMo in other markets outside Nigeria, and the visibility that has generated for the brand.
MoMo is a key growth driver for MTN Ghana and is considered highly scalable. MoMo revenue in that country increased by 48.8 percent year-on-year and contributed 21.6 percent of total revenues. The Ghanaian MoMo industry is projected to grow by 29.6 percent per annum until 2028. It is the same approach MoMo is hoping to replicate in Nigeria.
“For MoMo in Nigeria, they already have over 80 million customers to play with. They are the people to beat and not otherwise. They will experiment until they find the cheapest way to create a massive margin. Don’t expect them to do conventional things,” said Osaretin Victor Asemota, growth partner at AnD Ventures and Africa partner for Alta Global Ventures. “MTN is not a startup with projected revenues and bubble valuations. They live and die by ARPU. They may invest long term but it eventually has to make sense to the bottom line. It also has to be sustainable. They don’t do flash and dash things.”
The fintech business is exploring different avenues to reach the unbanked in Nigeria. One of the ways is to solve remittances across the continent. Last week, the company announced it was collaborating with Saana Capital LLC to eliminate the need for foreign currency or domiciliary accounts. Millions of individuals and households in Nigeria depend on money sent to them by loved ones abroad.
Over-dependence on foreign aid due to the high poverty rate is expected to drive up foreign exchange remittance flows into Nigeria to about $26 billion by 2025, according to Agusto &Co, a pan-African credit rating agency. The agency said it anticipates that the need to finance the basic requirements of dependents will remain the most important element driving remittances in the near to medium term.
This is the opportunity MoMo want to tap into but the remittances have to be coming from within the continent. According to MoMo PSB, customers will be able to send and receive payment from various African countries directly using their MoMo accounts, eliminating the need for foreign currency or domiciliary accounts.
Usoro said there are also plans to activate MoMo payments for consumers in e-commerce. For lending, the company said it is speaking with the financial regulator in Nigeria to expand the bouquet of services the company offers. The Payment Service Bank licence it secured does not allow lending services. But the company says this is important for its customers and also for converting the unbanked population, many of which struggle with access to loans.