As of September 2023, PalmPay was 40 percent closer to achieving its goal of serving 100 million users and 10 million businesses with secure, user-friendly, and inclusive financial services. The number of users making money transfers, paying bills and saving on the platform is now 40 million.
Out of 40 million, 30 million are registered users on its smartphone apps, representing a significant growth from only a year ago when it announced 10 million users.
A notable part of the report is the revelation that 80 percent of people that have come to the PalmPay app were through a recommendation from friends and family and 30 percent of them were financially excluded before they joined PalmPay.
30 percent represent an impressive 12 million users who did not have an account prior to joining the PalmPay platform. It is an indication that unbanked Nigerians may want to be banked but are looking for extra incentives beyond normal banking services.
This provides an opening on how Nigeria can tackle its more than 30 million unbanked population problem. Nigeria has the largest number of financially excluded people in Africa with about 36 percent of the population unbanked as of 2020, according to a report by the Central Bank of Nigeria (CBN) and EFInA. There are projections that these numbers may hit over 40 million excluded people by the end of 2023.
Over the years, experts have called for a different approach to solving the inclusion challenge. While the consensus was that banks are not sufficiently positioned to drive financial inclusion, the telcos were pushed as the ultimate solution to bridging the gap. The argument is that since the telcos already have a presence in many rural communities, it is easier for them to provide financial services to the unbanked in these places. It was the idea that led the CBN to issue a Payment Service Bank (PSB) licence to telecom operators in 2021. The issuance of licence and launch of the PSBs have however not made a significant impact on the number of unbanked people in the country.
“My ‘hot take’ is that if the goal is financial inclusion, banks are not the answer; it must be telco-led. I still feel all the telco PSBs are either holding back or do not yet know how to proceed,” said a Nigerian X user by the name @pdauda.
According to Enhancing Financial Innovation and Access (EFInA), Nigeria’s financial inclusion rate grew by only 1 percent between 2018 and 2020. The growth hasn’t changed much with the entrance of telco-led PSBs into the market. The 2020 figure of 64 percent inclusion was below the CBN’s 80 percent financial inclusion target for the year 2020. Last year, the apex bank increased the target to 95 percent by 2024.
Experts like Osaretin Victor Asemota, a board member at EdoInnovates, have advocated for a broader strategy for addressing the inclusion problem.
“We have an aggregation of quality customers’ problem and not a financial inclusion problem. Those you think are excluded, need something different quality traders and business people in Africa don’t struggle because they are supported by communities of other high-quality people,” Asemota said.
PalmPay said it now processes up to 15 million transactions daily and $6 billion monthly transaction value, an indication that it may have unlocked something different that has made the difference. Chika Nwosu, managing director of PalmPay Nigeria said he expects the company will hit the target of 10 million merchants by 2025 with the pace of growth PalmPay has witnessed. He attributes the growth to its primary focus on financial inclusion.
“Driving financial inclusion is at the core of our business. We want to make our services accessible to as many people as possible and this is why we are reaching them not just with our smartphone app but also via our network of agents and merchants,” Nwosu said.
PalmPay drives its inclusion strategy mostly through its network of 500,000 agents and 600,000 merchants across the country.
“These entrepreneurs, the backbone of our country are not just our clients, they are partners on this journey towards prosperity. We now have 36 offices strategically placed across the country to ensure that every business, no matter how remote, has access to the financial tools they need,” Nwosu said.
PalmPay’s feat within four years shows that bridging the financial inclusion gap is within the realm of possibility. But it also demonstrates there is no one way to achieve the goal, operators would need to combine both online and offline strategies, and fintech companies have a significant role to play in helping achieve the 95 percent target of the CBN by 2024.