By Franklin Chidi, PhD.
November 17, 2011 02:06PMT
The fast growth of Mobile Money (MM) services in emerging countries such as Kenya and the Philippines have provided evidence of the need to use such means to provide low-cost financial services in Nigeria, especially to the unbanked. In part due to the tendency of banks and mobile operators to focus on different customer segments, at the top and lower ends of the market, the conventional limitations of existing offerings have often not been breached in many countries where MM services have been available. This inconsistent growth of mobile money has been a cause of concern amongst proponents and promoters alike. In Kenya for instance, MM service M-Pesa, has been highly successful and is now used by more than 70% of the adults in the country; a feat achieved within four years. However, in neighboring Tanzania, M-Pesa, which was introduced a year later by the same parent company as that in Kenya, had achieved a more modest utilization rate of low double digits when tracked against M-Pesa - Kenya in the same timeline after launch. The fact that the two countries have similar populations, languages and cultural practices signify that success in MM services requires more strategic marketing.
The growth in mobile money use is expected to benefit many sectors of the Nigerian economy, thus contributing to national economic growth. In Nigeria, a large proportion of households lack access to financial services as in many other emerging countries. Research shows that only about 25 percent of the Nigerian population has bank accounts or access to financial services. In addition most financial institutions are concentrated around the major commercial centers and capital cities, further limiting access to those who do not live or work in those areas. Pursuant to the Tanzanian M-Pesa case, in Nigeria the resulting mobile money end-product solution is likely to be homegrown rather than something imported. This is the most likely outcome, especially when considered with the pliable Central Bank of Nigeria (CBN) framework for MM services and the unique security concerns in the country. The MM system being implemented in Nigeria is one of an open scheme, where transfer of money from sender to recipient is expected to be a seamless and familiar experience. This is because no telecom incumbent is being given a lead role in providing the service such as was done in successful and closed schemes like M-Pesa Kenya etc. Consumers will not need to know what mobile phone service you have and the fees are expected to be competitive. This Nigerian system presents many challenges, some of which are discussed herein.
While the potential benefits of mobile money in Nigeria can be compelling, several significant obstacles must first be overcome for mobile payments to achieve widespread adoption. The first and perhaps most basic obstacle is whether the various channels of payments will be up and running by the time the service comes on-line. It is easier for one telecommunications organization to marshal its forces to ensure that all links in its chain are ready by the time they launch, but when transfers are supposed to be transparent across mobile networks and middle scheme players, it becomes a greater challenge to achieve a smooth flow. In the early days of the service, it is conceivable that money sent using one mobile phone operator might not get to its intended recipient if they are on a different network from the sender. Quickly working out the kinks of interoperability will be important if success of this service is to be attained.
The second challenge is the issue of who owns the customer relationship; banks, middle scheme MM players or mobile phone operators. At this point in time, there is no clear answer. Although all parties would like to be the main conduit to customers, one ultimately must emerge to avoid confusing customers and hampering the success of the payment channel because of lack of ownership clarity. In this vein, it is hard to see the scheme or the phone operators winning especially since the banks have a clear advantage in being the known purveyor of financial services to consumers. The different branding exercises expected would only serve to confuse customers on the simplicity of the service as envisioned by the Central Bank of Nigeria. With the banks at an advantage, the customer relationship would be theirs to lose if they don't ensure a consistent message and a clear value proposition to their customers.
The third obstacle is the lack of a clear and compelling value proposition for customers and merchants. There has to be a strong and unambiguous benefit proposition to customers for them to embrace the new payment system. This proposition has to draw a direct connection with an improvement in the quality of their lives or those of their associates and loved ones from using the mobile payment system. For example, the marketing of M-Pesa in Kenya was singularly focused on the need to get money from young adults working in the cities to loved ones in the rural towns and villages. With many players in the Nigerian market, it is difficult to see such coordinated and targeted marketing. In addition, an opportunity is being missed by not more explicitly tying the Central Bank goal of reducing the costs of managing cash supply and tracking of money supply in the economy to MM service availability. It is believed that every mention of the challenges and costs of managing cash supply should be followed by a brief comment on the coming mobile money services, point-of-sale (POS) terminals and how the use of these solutions will help towards achieving that goal.
Finally, customers have to understand and perceive the regulatory and security requirements as a seamless part of the mobile payment and purchasing process, instead of an inconvenience. Ultimately, the key to success of a mobile money system is the consumer and merchant experience. The extent to which mobile payments enhance that experience will determine how quickly, and the extent to which, consumers and merchants adopt the payment solution.
Franklin Chidi, PhD is a telecommunications finance expert. He has been a senior management employee of AT&T Inc. in the USA for the last 12 years and prior to that was in commercial and investment banking organizations. Email at dr.fchidi@gmail.com
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