Would MTN's over 60m Nigerian subscribers ever exchange their Banks for MoMo? -

As Africa’s telecommunication giant, MTN Group gets closer to achieving its mobile money ambitions in Nigeria and on the continent with the official launch of its super-agent network service, MoMo Agent, analysts are beside themselves with projections of the telco becoming the largest bank in Africa.

MTN Nigeria is probably number one on the list of applicants that have been awaiting the Payment Service Bank (PSB) license from the Central Bank of Nigeria (CBN).

On Monday, 29 July MTN announced that its Yello Digital Financial Services Limited (YDFS) unit had been granted a “full super-agent” license by the Central Bank of Nigeria, consequently the launch of the MoMo Agent service in August.

While announcing the launch of the service in Abuja amid pomp and pageantry, the director of YDFS, Usoro Usoro, explained that some of the services the telecommunication company will be able to provide through the MoMo Agent include: money transfer, purchase of data, airtime and payment of bills, a far cry from what it would be able to do with a PSB license.

“In a nutshell, the MoMo Agent is bringing banking to neighborhoods, taking away transportation cost, providing a safe, fast and efficient means of sending and receiving money,” Usoro said.

There is every reason to hope that by dominating the mobile money market in Africa leveraging it’s over 60 million subscribers in Nigeria, MTN would eventually supplant Nigerian banks. The company’s listing on the Nigerian Stock Exchange (NSE), although it is still early days, has it vying for the most valuable stock position with incumbents such as Dangote. It even displaced Dangote as the most valuable stock albeit for one day.

But the reality is, MTN is not the largest mobile money provider in Africa, Safaricom already has that covered. However, as many have said, it is only a matter of time before it takes the place Safaricom has occupied for a while. YDFS plans to roll out around 500,000 Agents spread across all states and the Federal Capital Territory who will provide safe money transfer services to under-banked and unbanked people across Nigeria.

A key question the banking industry has been asking is – if MTN has access to BVN, what banks paid $60m to build, are the banks going to be allowed to have access to MTN’s deep trove of data as well? If yes, what’s the modality? Would they give their own PSB extra leg up against CBN’s section 8 of the PSB licensing framework which prohibits preferential treatment?

Nonetheless, recruiting 500,000 to drive its mobile money does not immediately transform MTN into the bank of choice for the more than 60 million people who use its service. If it indeed it wants to morph into a bank, MTN will discover that being a bank is more of a culture than it is about rolling out services. It is also about trust issues, people are not just going to just exchange their traditional Banks where they believe their money is very secure for MoMo, Nigerian fintech startups are currently facing this reality.

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MTN itself has also experienced these pushbacks in various forms in markets where MoMo already exists. Apart from South Africa where the company is struggling to grow the adoption of its mobile wallet, in Ghana where it appears to have the upper hand, enlisting merchants have proven a hard nut to crack. Paul Damalie, CEO of Appruve, a pan-African financial data API, shared insights from a visit to multiple merchant points of different sizes in Ghana.

“One thing was clear, MTN and other MoMo players may get into space, but may not be able to drive adoption and provide support easily,” he explained. “Merchants want simplicity. The idea of having another merchant account different from their personal accounts creates a disincentive. Although a bad business practice, most merchants will push adoption easier if they had funds deposited immediately into their personal accounts.”

It is equally important to add that MTN’s 500,000 agents notwithstanding, the company would have to confront poor road network, the internet connection that have seen millions of Nigerians living in rural areas alienated from the digital age, growing insecurity which scares agents away from risk-prone areas and unstable policy environment.

Again, how does MTN play with SANEF? SANEF is the commercial banks’ attempt to do mobile money. While they have recruited the much celebrated Ronke Kuye as the CEO, the reality remains that there is much gap and the partner commercial banks are not really interested in financial inclusion.

Also, key questions remain on how consumer credit would be driven. PSB licenses do not allow for lending. However, if the exclusivity to airtime lending done by MTN is anything to go by, it is likely the telecoms giant could run into trouble with the Central Bank of Nigeria.

Analysts who expect MTN to replicate Safaricom’s results in Kenya may also be underestimating the capacity of Nigerian banks to respond to the threat the telco poses to their revenues. In Kenya, Safaricom capitalized on its first-mover advantage and the Kenyan banking sector’s poor participation in digitization. In Nigeria, most of the banks are as aggressive as fintech startups in pushing digital banking. Already they have managed to gain the upper hand with the CBN mandating that telcos in mobile money do not participate in the lending and insurance side of the market.

A relatively well-developed financial services market in South Africa is largely the reason MTN has yet to make progress in that country. This has made the demand for mobile money platforms less robust than in places like Kenya. MTN, however, hopes to target rural and peri-urban poor who are largely reliant on cash payment. Again it might find itself having to share the spoils with entrenched platforms like Paga, Etranzact and the banks that already have agents physically present in some of those locations under the umbrella of SANEF.

Irrespective of its more than 60 million subscribers, the road to becoming Africa’s largest bank looks perilous for MTN.