Mobile money transfer key to financial inclusion’

By Ibrahim Apekhade Yusuf 29/04/2012 00:00:00

Tayo Oviosu is founder and Chief Executive, Pagatech, Nigeria’s first mobile money company established in 2009, whose flagship service, Paga, is the nation’s foremost mobile money transfer service. With venture capital funding from some internationally renowned investors, one of whom is Tim Draper, who also bankrolled social media like Hotmail, Skype, Badoo, etc, the highly cerebral but young Oviosu has been able to proof his worth and mettle as a world class entrepreneur. In this interview with Ibrahim Apekhade Yusuf, he shares the vision and mission of his company, reputed to control over 80 per cent of the nation’s mobile money transfer services

What is Paga, and what prompted you to startup this service?

Paga is money transfer service that leverages the ubiquity of the mobile phone to bring great value to customers. Customers can use Paga to send money to anyone in Nigeria either from their mobile phone or Internet-enabled device, or via any Paga agent across the country. Recipients get the money instantly, and they don’t even need to have registered on Paga. Customers can also use Paga to pay for a variety of goods and services at various online or offline merchants.  For example, you can sit at home and pay to top-up your electricity meter or pay your cable TV subscription using Paga.

Paga began out of my frustration with having to carry cash around with me all the time in Nigeria. Nigeria is a cash-driven society; only about 20% of the population has access to what you might call formal financial services. Even for the banked set, there are infrastructure issues to contend with – roughly 60% of ATMs in the entire country are located in Lagos State; debit cards are not accepted by most merchants. As such you have to carry cash with you. Additionally there is no safe and secure way to send money within Nigeria outside of the banking sector. Carrying cash around with you everywhere, even sending cash to your family by paying a fee to the local bus driver clearly has its limitations not forgetting security issues. As I explored these sets of issues I honed in on the fact that 60% of Nigerians are within mobile phone coverage and about 40% of Nigerians currently have a mobile phone with an even greater number having access to one when you count shared phones. This raised a question for me – “Can the phone become the primary means, not the only, of electronic transactions?” Fundamentally I believe the ubiquity of the mobile phone can be leveraged to deliver financial services to all.

We’ve been around now for two years and only just got our full operating license from the Central Bank of Nigeria this month. We launched to a closed user group of approximately 70 participants in September 2010 and then, after our Approval-in-Principle from the Central Bank of Nigeria, to the general public in February 2011. This allowed us to pilot our service and test the reception with the general public. The reception has been great! Customers and agents alike see the value of the service to their daily lives and the numbers tell the story. With pretty much just word-of-mouth marketing alone, we have almost 32,000 users on our platform and have processed over US $1.6 million in volumes. This represents over 40,000 transactions since February.

Mobile money has thrived elsewhere in Africa like Kenyan, South Africa, Ghana, etc, but Nigeria is an entirely different market. Is there really an opportunity for this kind of service in Nigeria, and why do you think it is going to succeed?

I totally agree with you – it is a very local business. The dynamics in Nigeria are somewhat different than Kenya, and it’s clear that the market opportunity is multiples of Kenya’s.

Today in Nigeria, as in Kenya pre M-Pesa, there are no efficient, secure, and universally accessible ways of transferring money across the country. Paga changes this. However, in Nigeria we do not have a dominant Telco with the kind of market share Safaricom had in Kenya. We also have a very fragmented banking sector. These are reasons we have chosen to offer a service that works on all mobile networks and in partnership with banks. The convenience that Paga offers combined with the push by the Central Bank of Nigeria for a “cashless Nigeria,” will help drive the opportunity for our service.

It’s interesting. My view is that Nigeria may be the toughest African market to get right for a number of reasons. It also presents the biggest opportunity. With 160 million people, GDP of approximately $207 billion, 68% literacy rate, less than 20% of the population owning a bank account, but with 40% owning a mobile phone. Assuming that we execute our plan and capture our target share of the Nigerian market, we are certain that entry to other markets with our partners will be made easier. 

Nigeria’s financial landscape has been riddled with fraud, money laundering and other clandestine activities, and this could dissuade people from using mobile money services. What measures are in place to checkmate any potential incidences of financial irregularities?

At Paga, security is our top priority. We have created rings of security to prevent the chance of any fraudulent activity, each channel we offer having its own security framework – some visible to the customer, many others not visible. For example, you must confirm every transaction you do on Paga by entering your PIN number. We train our customers to not share their PIN with anyone, even with Paga representatives.

If you use Paga’s mobile phone application or online application there are additional security measures we have developed to protect your account such as device monitoring – we monitor the hardware you are using to log into Paga. If we see you attempting to login from an unknown device we ask you your security questions.

We have gone to great lengths to ensure that the customer’s account is safe and we will continue to stay ahead in terms of building in the latest technological advances to protect the customer’s account. 

As one of the foremost mobile money transfer companies in the country, what is the share of Pagatech in the market?

The Head, Shared Services, CBN, Mr. Chidi Umeano, recently disclosed that as at January 2012, mobile money services in Nigeria recorded 35,971 transactions worth N227.92m. We can confidently say that more than 80% of those transactions were recorded by Paga. Right now, there is no doubt in our mind that Paga is the market leader when it comes to money transfer services in Nigeria. We are working effortlessly to ensure that our service remains reliable and we serve the need of our customers.

Pagatech has hinted of plans to achieve countrywide coverage come 2015. How positioned is Pagatech to achieve this?

Our goal is to have 15 million active users and 30,000 agents by 2015. We are right on track to achieving this and we have a team strategically placed in various cities in Nigeria working diligently to achieve this goal.

To date, we have over 77,000 customers and close to1,000 agents. While we are cognizant that we have a long way to go, our growth even in the last month has been astronomical.  Just under two months ago we recorded our 50,000 customer. We have gained 20,000 customers in such a short period. We envision that the rapid rate of adoption of our service will see us to our goal!

What does the future hold for Paga?

The future of Paga is very bright and we are very excited. One of my favourite adages is the following: if you want to go fast go alone, if you want to go far go together. It is for this reason that we’re taking a multi-stakeholder approach.  We strongly believe that for mobile payments to achieve the goal of financial inclusion, network effects are essential. Bringing together multiple stakeholders and creating numerous avenues for the payments service to be used provides the fastest and most efficient method of propagating a nationwide network for our customers.

Our goal is to have 30,000 agents across Nigeria in five years and 15 million customers. If we achieve that we will bring financial services within reach of over 40 million Nigerians. The potential impact to society is what drives us. Paga’s bottom up approach will empower the most underserved segments of our economy.  In ten years our services would have spread to those households that are poorer and less connected to the financial system.

With this goal in mind, we are building a network of partners – banks, micro-finance institutions, mobile operators, and other businesses – to ensure the robustness of our offering to customers.

As a business, how viable are local mobile money transfer services?

Money transfer services such as Paga are extremely viable. Paga brings a simple, safe, and efficient way for any Nigerian to send money to anyone else. Before Paga, there was no safe and effective way to send money within Nigeria.

We can see evidence of the viability of mobile payments in other regions of the world. For example, probably the most well-known and most successful - M-PESA, a mobile payments company in Kenya, was able to reach 13 million customers by its fourth year of operations (33% of the total Kenyan population and about 70% of the mobile subscribers).

Similarly, we fully expect the Nigerian money transfer market to grow exponentially in the next few years. We believe that this will be driven by various factors which include the increasing mobile phone penetration, poor quality of existing alternatives, and the general growth of the Nigerian economy.