Emmanuel Okoegwale
Principal Associate – MobileMoneyAfrica.
Judge designate at the GSMA Global awards in the Best Mobile Money Innovation category, Febuary 2012 in Barcelona.
With the recent launch of commercial mobile money services in Nigeria by the licensed mobile financial services providers, the country is finally joining other developing nations where mobile financial services is changing the way citizens access basic financial services, banking, payment and other allied services via the mobile channel.
Mobilemoney services is gaining ground and positioning as mainstream channel alongside the formal Bank branches, internet and cards.Mpesa, Africa's leading mobile financial services provider, now processes more transactions in Kenya than Western Union does, globally.
Orange Money recently announced three million active customers on the platform across Africa, Fundamo and Visa are jointly deploying card services that are targeted at developing nations. Some months ago, Airtel and MasterCard deployed similar products in markets across Africa.
Despite all the mentions of licensing, deployments, collaborations and announcements, many mobile financial services are still struggling to get off the ground across Africa from Libya to Zimbabwe. The providers are still struggling to understand the needs of the customer and provision services that will address the strong compelling needs of the end users.
MPESA was designed to disburse loans and repayments in Kenya but the reality of the market changed the product directions to suit the needs of the Eastern African country with strong internal migration and limited formal Bank branches which provided the opportunity for mobile money transfer to strive alongside the strong brand equity of the parent company, safaricom.
Is this feat achievable elsewhere in Africa? The answer is yes if the service meets the strong compelling need of the end user. Same product, process and people achieved little success in same region where MPESA excelled.
To gain traction and deliver value in the mobile financial services ecosystem in Nigeria, stakeholders must put resources together, share information and work in a sustainable manner in areas like agency network roll out and MNO network access.
Designing the right products.
Despite the convenience factor that is always associated with mobile financial services, it depends on the scale of ease of use that it delivers against other existing channels. For a savvy urban dweller, internet banking services may address all His payments, bills and banking needs while card services and Bank branches may also readily available in the urban centres and beyond.
Money transfer that might actually act as a catalyst is a push service and not a pull service, beneficiaries usually influence delivery mode. For mobile money transfer to be well positioned to kick start adoption in Nigeria, the expected rural beneficiaries should be able to understand, use and promote the services to families in the urban areas where the remittances flow from and not the way round.
There is need to develop anchor products that will support layers of other secondary services or the end user might be confused if the services are highly segmented like what obtains in a formal commercial bank.Mobile money services should be standard products and easy to understand and use.
Access channels.
Presently, the very successful mobile financial services in Africa are those launched on the Sim toolkit (STK) and USSD applications.Mass market penetrations can only be achieved via mass access channels which STK and USSD represent. These are applications that are immediately available on all mobile devices when deployed by mobile money providers in active collaborations of mobile network operators and third party aggregating firms that are directly linked to the MNOs.
While Java and Wap will not require the round-robin meetings with Mobile network operators, they do have their clear advantages as a means to get a leg into the market quickly but cannot meet the needs of the market where low handset devices exceed smart phones, literacy level is significant, Gprs footprint is limited to urban and semi urban areas.
A recent study in Nigeria by Institute for Money, Technology and Financial Inclusion (IMTFI) in Califonia and MobileMoneyAfrica showed that most mobile money users in Nigeria want to use the services via sms, ussd and stk but unfortunately sms is not an acceptable means of conducting mobile financial services by the financial regulator in Nigeria.Java and wap were the least chosen access channels.
The Central Bank of Nigeria will only achieve their purpose of financial inclusion if the mass access channels are available for all mobile money firms at agreed commercial rates from the MNOs. Selective access will not deliver overall ecosystem benefit. There is need to get the telecommunications regulator to enforce certain aspects of the mobile payment framework which are clearly beyond the purview of the financial regulator with clear sanction systems where applicable.
Distribution network.
A mobile money provider is essentially an e-distribution firm and not a technology company atleast in Africa. Though it is desirable to have more transaction run via person to person without the need of the agent intermediary but mobile money in Africa is still largely built around business owners, stores and merchants that are willing to perform cash in, cash out and accept mobile money as a form of currency.
Building the agency network require resources that will exceed technology budget in the ratio of 10 to 1 in the first year of operation. It is more challenging in a market like Nigeria where licensed providers must develop the agency network from the scratch. Mobile network operators are not licensed to provide mobile money services and the agents are not selling any of the primary product of the mobile money firms and will require to trust them first, understand the value proposition and sustainability before committing to the business relationship.
While agent commissions may be fixed but their cost varies depending on the prevailing situation per community. The further the distance of agent from the formal bank branch, the higher the cost of rebalancing and support for the agent which might increase service delivery cost for the agent.
Agency network can emerge either by birth where the mobile money provider develops the network from the scratch or if they get lucky and an existing distribution chain grants access to the outlets for mobile payment agency purposes. Though there are definite processes, strategies and procedures to develop and sustain an agency network that will be distributing low value, high volume services which mobile money is but what is not contestable is that the provider that is able to support agents and adequately incentivize them will win the race.
Government push services
The government is desirous of improving access to formal financial services, promoting cashless society which we may soon experience in south western part of Nigeria in early 2012 with the cashless Lagos initiative.
Government-2-person transactions may be the key to unleash the potentials of mobile financial services in a country where government is still active in the provision of public utilities and citizens support services from government agencies cutting across the Federal, State and local government.
Government can use mobile financial services to improve efficiency, transparency and reduce corruption since they will be able to directly distribute agricultural subsidies (Fertilizers, farming inputs etc), health insurance for low income, distribute conditional cash transfer programs like girl-child educational empowerment projects, HIV support initiatives, Poverty alleviation funds, amnesty funds in the Niger Delta without going through politicians that may need to carry physical cash and use same for political patronage or misuse.
Mobile money will also improve internal generated revenue of governments in collecting low value taxes, levies and duties that are not currently and efficiently managed due to the cash based nature of such collections in far flung communities where there are limited government presence and Bank branches.
How many of government ministries and agencies are aware of the potentials and availability of mobile money in Nigeria? How many of them will adopt, design and implement a mobile money strategy in the next 12 months in Nigeria?
Only time will tell.
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