culled from: Businessday
How it works
With barely two days to the commencement of the Central Bank of Nigeria's (CBN) 'Cashless Nigeria' pilot project which is expected to bring several millions of unbanked Nigerians into the formal banking system, BusinessDay investigations indicate that most Nigerians still don't know how the mobile banking system works.
While seminars, workshops, enlightenment campaigns and statements have been rolled out by the CBN and other stakeholders, the message has clearly not seeped down to the average would-be user.
A cross section of phone users who spoke with BusinessDay claimed that they do not know how it would work, but are aware of its coming into existence on January 1.
The primary purpose of CBN's cashless project is to reduce the cost and dangers of cash transactions in the economy.
There are currently about 90 million active mobile phones in the country, which are thought to be in the hands of between 45 million and 60 million Nigerians, on account of multiple subscriptions. Meanwhile, there are about 25 million active bank accounts in the country, which has a population of 167 million. Industry watchers say that given these statistics, there is a margin of between 20 million and 35 million unbanked mobile phone subscribers. They further say that if only ten percent of unbanked mobile phone users subscribe to mobile banking, the scheme would rake in between two million and six million Nigerians into the formal banking system, and that if up to 15 percent subscribe, then the figure would be between 3.5 million and 10.5 million Nigerians embraced into the formal banking system.
Mobile financial services, also referred to as mobile money, mobile payment, mobile banking, mobile money transfer and mobile wallet, generally refer to payment services operated under financial regulation and performed from or via a mobile device, such as a mobile phone handset. Financial institutions and credit card companies have implemented solutions that provide mobile access to their services.
Giving a graphic description of how transaction is conducted on a mobile money platform, Patrick Eregie, general manager, mobile payment, E-transact, said: "First, the user has to open an account, either personally or through an agent. The user has to fund the account from an agents account or a bank. The user can now initiate a transaction from his phone using SMS/USSD or WAP services. The network receives the transactions and sends it to the mobile money operators for processing. It is important to note that SMS transactions are encrypted to guarantee security of transactions. The Mobile money operators, in this case E-transact, process the transaction and send it back to the network provider. It gets back to the users as notification of the status of the transaction."
Mobile payment is an alternative payment method. Instead of paying with cash, cheque or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods such as music, videos, ringtones, online game subscription or items, wallpaper and other digital goods. Others include transportation fares, parking meters, books, magazines, tickets and other hard goods.
Two mobile transaction formats are being deployed in Nigeria. These are Premium SMS based transactional payments and Mobile web payments (WAP).
In the SMS Transaction Model, the consumer sends a payment request via an SMS text message or an Unstructured Supplememtary Service Data system (USSD) to a short code and a premium charge is applied to their phone bill or their online wallet. The merchant involved is informed of the payment success and can then release the paid for goods. In the Mobile web payments (WAP), the consumer uses web pages displayed or additional applications downloaded and installed on the mobile phone to make a payment. It uses WAP (Wireless Application Protocol).
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