Entrenching cashless economy through secure, affordable mobile money solutions

culled from: http://microfinanceafrica.net
By Biodun Coker, Business Day Online
Mobile money solutions will play a major role in integrating Nigeria’s huge informal economy which is driven by small scale farmers, traders, craftsmen and other types of small and medium sized businesses, into the formal economy.
Also, it will serve as a convenient and secure electronic payment platform for the under-banked and unbanked in Nigeria’s emerging cashless economic landscape. This is because the major infrastructure for mobile money services, which is the mobile phone, is within the reach of under-banked and unbanked Nigerians. Mobile phones are far more pervasive and accessible than traditional bank branches, Automated Teller Machines (ATMs), Point of Sales (PoS) terminals and the internet, all essential channels for financial services distribution.
Reinforcing this, the Mobile Marketing Association (MMA) report of July 2011,  put the level of mobile phone penetration in Nigeria at 50 percent, with over 90 million subscriptions, for 167 million Nigerians. Coming a distant second, internet penetration in the country is 28.43 percent, according to International Telecommunications Union (ITU), with 45.9 million Nigerians accessing the internet in 2010. As at June 2011, the penetration of PoS terminals was a mere 13 Point of Service terminals per 100,000 adults, according to the Central Bank of Nigeria (CBN), which hopes to scale it up to 2,200 PoS units per 100, 000 adults by the end of 2015.
All these demonstrate the potential of mobile phones as a distribution channel for financial services in the country. Truly so, Enhancing Financial Innovation & Access (EFInA), an organisation committed to deepening financial inclusion in the country, indicated that 56.5 million adults (66.6 percent of the adult population) own mobile phones, disregarding use of multiple mobile phone lines by individuals, in its research. It further disclosed that 25.3 million adults who own mobile phones are unbanked and can become banked through affordable, secure and convenient mobile money solutions. Also, 63.5 percent of Nigeria’s adult males and 76.8 percent of adult females are unbanked, while 78.8 percent of the country’s rural populations are largely unbanked. In the main, there are 59.3 million adults who are unbanked due to irregular income, unemployment and distance to the bank branch, according to the EFInA report.
Across Africa, the adoption and usage of mobile phones for electronic payments, and to bring financial services to the under-banked and unbanked is gaining currency. The continent has had several successful mobile money deployments driven by financial institutions such as Standard Bank and Commercial Bank of Africa in South Africa, Ghana, Uganda and Kenya, with Nigeria, a very important market in terms of volume, in its embryonic stage. In countries where it is fully operational, mobile money is bringing financial services to people who do not have easy access to traditional banking channels, as well as people with very small deposits and loans which are unprofitable for banks using traditional delivery models. Mobile devices have also reduced transaction costs by 50 to 70 percent in these countries, making cashless funds transfers and utility bills payment more accessible to a vast population from the comfort of their homes and offices.
Endeva, a German developmental organization, in its 2010 report stated that mobile money has fostered financial inclusion in Kenya. The organization disclosed that prior to the introduction of M-Pesa in Kenya in 2006, as a joint venture between Safaricom and Vodafone, banking transactions were expensive and many people did not have bank accounts. However, by the spring of 2010, over 9.5 million Kenyans use their mobile phones to conduct basic financial transactions such as payments for groceries in supermarkets or to transfer money to their families. This is because M-Pesa is fast, easy, no account required and, most importantly, cheap. Presently the most successful mobile money deployment with over 700 million domestic and international cashless money transfer transactions, M-Pesa accounted for $130m in revenues to Safaricom in the 2010 financial year.
Nigeria with an estimated population of 167 million people, 25.4 million bank accounts and over 90 million mobile phone subscribers has launched mobile payment services with the potential to become Africa’s biggest mobile money market. The cashless society initiative of the Central Bank of Nigeria, as well as the compelling need of millions of unbanked Nigerians, are expected to drive the country’s mobile money volume to surpass Kenya’s celebrated 9.5 million M-pesa subscribers among its 39 million people, in coming years. Currently, in Nigeria, 23.8 million adults choose to save money at home, 12.9 million adults use informal societies, while 6.7 million adults use village associations, according to EFInA.
However, creating a functional mobile-money model can be complicated, especially in a country like Nigeria, calling for collaboration from two distinct domains, telephony and banking, as well as for partnerships with a variety of players such as agents, some unfamiliar, to manage cash collections and disbursements and promote adoption. As such, licensed mobile operators in the country, with the right technology, agent network, risk management process and customer service, will not only capture the opportunity in the market but also have unique know-how that would be valuable in other emerging and frontier markets, either through strategic alliances or direct investment.
Consequently, Stanbic IBTC Bank, a member of Standard Bank Group and Afripay entered into strategic partnership with Globacom Nigeria, a telecommunications services provider to launch Nigeria’s first mobile money service. The partnership avails Stanbic IBTC MobileMoney and Afripay the GloTxtCash platform to make basic financial services accessible to about 23 million Nigerians on the Globacom network, thereby breaking down the traditional distribution barriers hindering financial inclusion of millions of Nigerians. Of note is the pedigree of Standard Bank, the parent company of Stanbic IBTC Bank, in the successful deployment of mobile payment solutions in various markets on the continent such as Ghana, Uganda, Kenya and South Africa. Equally, before the advent of mobile money services in Nigeria, Stanbic IBTC Bank had shown commitment to branchless banking in banking the unbanked and under-banked, as exemplified by its E.susu product, a formal and technology-driven version of the traditional esusu savings model subscribed to by millions of artisans and traders. Leveraging this and Standard Bank’s expertise in mobile money services, Stanbic IBTC Bank’s mobile payment offering will afford individuals, as well as micro-businesses the benefit of accessing banking services such as funds transfer, bills payment, account balance information, and mini-statements from their mobile devices, thereby addressing the multifaceted transactional challenges being faced by those who reside and do business in semi-urban and rural areas.
Obinnia Abajue, Head of Personal and Business Banking at Stanbic IBTC bank said mobile money has tremendous benefits for the people and the economy. It will not only drive financial inclusion of the under-banked and unbanked, it will facilitate understanding of the country’s true Gross Domestic Product (GDP), improve national planning by government, as well as drive and entrench the cashless economy initiative of the Central Bank of Nigeria (CBN), targeted at reducing cost of cash handling and cost of funds in the country. Available statistics show that the CBN and the banks would have spent over N200bn on cash management by 2012. This cost can be ploughed into infrastructure development.

“This is why Stanbic IBTC bank is leveraging the growing pervasiveness of the mobile telephone and the knowledge users have of the mobile phone to deliver non-traditional, low cost financial services to unbanked artisans, traders, market women and farmers among others, as well as under-banked people. Instead of visiting bank branches, customers will be able to conduct transactions using Stanbic IBTC MobileMoney solutions on their mobile phones, or through the bank’s retail agents within their locality. We do not merely look at mobile money from the point of view of using mobile phones to conduct financial transactions, hence our solid agency model. We have been successful in implementing branchless banking, using the agency model to drive the acceptance of E.susu, a formal and technology-driven version of the traditional esusu savings model. In the same manner, Stanbic IBTC MobileMoney will benefit from peripheral support such as a contact centre and our strong and pervasive agent network,” Abajue stated.

CBN to issue more mobile money licences

By Isaiah Onwuanumba

 

www.momentng.com
THE Central Bank of Nigeria (CBN) has announced it will issue more mobile money licences in an effort to streamline the process and deliver more options to Nigerians.

THE Central Bank of Nigeria (CBN) has announced it will issue more mobile money licences in an effort to streamline the process and deliver more options to Nigerians.

 

The Deputy Director of Domestic Payment Division of CBN, Emmanuel Obaigbona, said that the move is to assist banks in their ability to move the programme forward, which officially began on 1 January.

 

Obaigbona added in a statement that the aim is to broaden the overall participation in mobile money system, in general, and the cash-less policy in particular.

 

He added that ‘the apex bank has already licensed 11 mobile operators who successfully passed the pilot studies conducted for them last year.

 

‘The 11 licensed operators are not the end of the list. The CBN intends to license more operators to meet the set standards for operating mobile money services in the country,’ Obaigbona said.

 

He continued to say that the apex bank’s decision to issue the mobile money licence ‘was to reduce the unbanked population to the barest minimum and subsequently develop the economy.’

 

Still, the move has many analysts worried that it could create too many restrictions in the country, especially after the central bank barred telecom operators from promoting any specific mobile money product.

 

According to a Lagos-based telecom analyst, Asamoa Hiran: ‘I am a bit concerned that this will open the market up too wide and destroy companies and peoples’ ability to understand what they are participating in right now.’

 

He told the media that there is ‘too much confusion right now to really understand what is going on, so we are all waiting to see what the future will hold.’

The launch of mobile money banking hopes to move Nigeria, which has the largest population not using banks, into the financial system.

Nigeria: Mobile Money - Banks Must Prepare for Possible Explosion

By Emma Okonji

culled from: THIS DAY Newspaper

Infosys of India, the world developer of Finacle core banking software has challenged Nigerian banks to be prepared to accommodate the expected surge in customer growth from mobile money transactions.
Vice President and Global Head of Client Services for Finacle Software, Mr. Sanat Rao, who spoke with THISDAY at a software seminar organised for banks in Lagos recently, said mobile penetration countries in Africa, especially Nigeria, was going to develop rapidly in terms of customer growth, because of the already established mobile devices.
"The situation of well-established mobile devices is already changing banking services as more people are using their mobile devices in financial transactions," Rao said.
The banks, he said should be prepared to experience more usage of mobile devices in financial transactions, especially as Nigeria is warming up for mobile money implementation.
"On our part, we are ready for such envisaged surge in terms of customer growth in the banking sector and we have already developed software that will address the challenge that will come with it."
According to him, Finacle Software from Infosys had solutions that would enable banks gainfully serve the under-banked and unbanked with relevant products and services.

"Finacle solution supports customer on-boarding using smart-cards and smart applications, supports delivery through channels ranging from laptops to specialised hand-held devices, and supports fingerprinting-based biometric authentication. The solution has extensive offline transaction processing capabilities, supported by a robust synchronisation engine," Rao said.
He explained that mobile banking was going to come much more bigger than the Internet banking, insisting that as mobile technology was changing rapidly, the banks must also change in terms of infrastructure deployment and in the use of core Finacle banking software from Infosys that was designed to bring ease to banking operations in the midst of mobile money transaction.

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"Nigerian banks should expect high customer growth in mobile money transactions in 2012 and 2013. It is already happening in Nigeria, South Africa and most part of the world," he said.
The Central Bank of Nigeria (CBN) had earlier called on Nigerians to embrace electronic payment systems in all forms of financial transactions, insisting it would boost economic development, reduce financial risks and enhance financial inclusion.
CBN recently gave commercial approval to 11 mobile money operators, mandating them to carryout full mobile money operations in cities and remote parts of the country.
Mobile money supports Person to Person (P2P) transfers with immediate availability of funds for the beneficiary. Mobile payments are meant for low value transactions where speed of completion is key and it encourages cash -lite economy.

Subsidy strike: ATM failure highlights flaws in cashless policy

By Tony Chukwunyem

  www.momentng.com

AS industry stakeholders increasingly lament the huge cost to the economy of the nation-wide strike called by labour unions to protest the removal of petrol subsidy, proponents of the Central Bank of Nigeria (CBN) cashless economy policy were probably more concerned about the industrial action mainly due to its timing. 

 

Reason:  coming barely a week into the commencement of the pilot scheme of the policy in Lagos, code named, ‘Cashless Lagos’, the strike has further exposed some of the weaknesses expressed in some quarters about the programme.

 

At the weekend, which was the start of the two day ‘break’ that organisers of the protest declared to allow for more negotiations with the Federal Government and also ‘to give Nigerians the opportunity to replenish their supplies in preparation for a continuation of the strike’, 

 

The Moment’s correspondents saw huge crowds at some banks’ Automated Teller Machines (ATMs) in various parts of Lagos. 

 

According to some of the banks’ customers who spoke with this newspaper,  they were unable to withdraw money from the ATMs during the strike, so being totally broke, they were desperate to get cash in case the leaders of the protest direct workers to continue to stay indoors  for most parts of this week. 

 

For instance, at the Skye Bank branch on Ajao Estate Road, Isolo, the security men on duty had a difficult time trying to control the crowd that had come to make withdrawals from the bank’s ATMs.

 

Speaking with The Moment, Emeka Eze, complained that he had tried to make withdrawals from several banks’ ATMs but that he was not successful because the machines were not dispensing cash.  

 

 He said, ‘I don’t live around this vicinity, but having tried all the ATMs in my area without success, I was on my way to the airport because I learnt that the ATMs there had cash when I saw the crowd here and was told that the ATM was working.  So, I decided to stop to try my luck’.

 

He revealed that even though he thought he had enough money to last him for the duration of the strike, he had spent all he had by last Thursday and since ATMs had run out of cash, he had to resort to borrowing from his wife.  

 

According to him, ‘I did not realise that the strike would last beyond Wednesday, but when it did I thought I could get money from the ATMs at Okota where I live. However, all the ATMs that I tried appeared to have run out of cash.  

 

Of course, I could not drive to other parts of Lagos because the strike was still on. I would have thought that since the banks knew about the strike, they would have made adequate arrangements to ensure that the machines were regularly loaded with cash, especially now that the cashless banking policy has commenced’.

 

Indeed, The Moment’s investigations revealed that particularly from last Thursday, the fourth day of the strike, ATMs at Igando, Iyana-Ipaja and Egbeda all in Alimosho Local Government Area of the state had stopped dispensing cash. 

 

The situation was not different in places such as Gbagada, Palm Grove, Ilupeju and Anthony where the machines were either not dispensing cash or seemed to have network problems.  

 

In areas where a few ATMs were working such as the GT Bank branch on Isolo-Mushin road and First Bank of Nigeria Plc, Akowonjo, there were such long queues that many people could not wait and preferred to return to their homes empty handed.

  

 

In a chat with The Moment, the head of Information Technology (IT) in a leading new generation bank, who requested not to be named, argued that while the financial institution had made adequate plans to ensure that ATMs had cash throughout the duration of the strike, the tense security situation made it impossible for the plans to be carried out.

 

He said, ‘Before the strike commenced, we made sure that all our ATMs were loaded with cash. Staff were also directed to ensure that they reload the machines on Wednesday when they should have run out of cash. 

 

However, on Tuesday there was a false report that banks had told their staff to report for duty in defiance of the Nigerian Labour Congress’ (NLC) directive. We did not want the protesters to target our staff so they were told to stay at home’.

 

Commenting on the issue, a financial analyst, Dafe Edevbi, noted that the failure of the ATMs during the strike has not helped to promote the CBN’s cashless economy project.

 

 Under the project which was unveiled in April last year, individuals withdrawing/lodging amounts exceeding N150, 000 will be penalised N100 for any additional N1, 000 while companies withdrawing/depositing more than N1million will be required to pay a penal fee of N200 for any additional N1, 000. 

 

The CBN and the Bankers’ Committee which are promoting the policy believe that these penal rates will serve as an incentive for Nigerians to migrate to alternative channels of payment such as Point of Sales (PoS), Internet and electronic funds transfer, thus, minimising the dominance of cash in the economy and eliminating the risks and costs that it entails.

 

However, since the introduction of the policy which is expected to take off in other major cities of the federation such as Port Harcourt, Abuja, Aba and Kano in June this year, it has generated intense debate among industry stakeholders with many analysts contending that even though the objectives of the policy are laudable, the CBN and banks are too much in a hurry to implement it.  

 

This is despite an aggressive enlightenment campaign embarked upon by its promoters and the order of 40,000 PoS terminals for the industry.

 

As Edevbi put it, ‘Most bank customers are still reluctant to make use of ATMs because of the fear that they could lose money to fraudsters. Now, the unpleasant experience of those bank customers who tried to use the ATMs during the strike will rubbish all the efforts that the CBN and banks have been making to boost the use of the machines’. 

 

Also speaking, a top banker who pleaded anonymity, argued that the CBN and the banks have so much raised customers’ expectations of ATMs that the failure of the machines last week was a setback to the cashless economy campaign.

 

According to him, ‘many commentators have told the CBN that it is too much in a hurry to implement this policy and that it is not taking the level of sophistication of the average Nigerian bank customer as well as the country’s infrastructural challenges into consideration. For instance, even the 40,000 PoS terminals that they are still expecting are too small for the size of the industry. 

 

'Alaba International market alone will need as much as 2000 PoS terminals, ASPAMDA will require about 1,000 and another 10,000 will be distributed to other markets on the Lagos Mainland.   

 

'So, I don’t think 40,000 PoS will serve the needs of the nation’s 24 banks.’’   

 

It will be recalled that following the take-off of the Cashless Lagos pilot scheme at the beginning of this month, concerns expressed in some quarters about the policy made the CBN to waive service charges to the end of March. 

 

In addition, the apex bank set a new target for commercial banks to deploy 75,000 ATMs across the country by 2015.  And as a further boost to the cash-less economy policy, the banking watchdog has also spoken of plans to deploy 375,000 PoS terminals in different parts of the country in the next four years.

Inadequate ATMs, PoS Hinder Cashless Lagos Initiative

culled from: Leadership.ng

The cashless policy of the Central Bank of Nigeria (CBN) to encourage a shift from physical use of cash to electronic payments may have suffered some setbacks with the inadequacy of automate teller machines (ATMs) and Point of Sale (PoS) terminals in the country.

The apex bank has asked  banks to kick-off the Cashless Lagos initiative from January 1, 2012, a pilot test for the eventual introduction of the policy across the country.

However, inadequate provision of ATMs and PoS is hindering the successful implementation of the scheme.

Investigation by LEADERSHIP revealed that there are only 10,000 ATMs and 14,000 PoS that are functional in the country on the platform of Interswitch, West Africa’s leading transaction switching and e-payment network which connects all the banks, financial, cable broadcasting and telecommunications operators.

Electronic commerce points like the new Ikeja Shopping Mall controlled Shoprite still lack the use of PoS for commercial transactions. Apart from a few ATMs which hardly have cash, all the shops including Shoprite at the mall are yet to be connected to PoS platform of Interswitch.

Shoppers are made to part with cash for all transactions.

Also, the strike action called by the Nigerian Labour Congress (NLC), Trade Union Congress (TUC) and civil societies exposed the lack of preparedness of the banks for Cashless Lagos. Many banks in the suburbs of Lagos had their ATMs without cash, while the few that had cash witnessed long queues as bank customers waited to withdraw money.

Only few banks like GTBank and Stanbic IBTC have deployed PoS for customers to make withdrawals inside their banking halls instead of queuing up on long lines. At the weekend there were stampedes in front of banks in suburbs like IyanaIpaja, Akute, Akowonjo, Agbado and Ikotun as people rushed to make cash withdrawals in fear of another round of labour strike.

Deputy Governor, Operation, CBN, Mr. Tunde Lemo, had at a seminar organised by all the banks ahead of the January 1, 2012 implementation of Cashless Lagos said banks were expected to add 40,000 PoS to the e-payment network.

Lemo said CBN has a target of deploying 150,000 PoS machines by end December 2012 which would be scaled up to 375,000 PoS terminals by the end of 2015 when it hoped to have attained benchmark PoS penetration of 2, 247 PoS per 100,000 adult population as obtainable currently in Brazil.

CASHLESS LAGOS: Are we Ready? YES!

IS Lagos ready to go cashless? With the hiccups that have attended the take-off of the initiative since January 3, doubts about the readiness of the financial institutions for its take-off have mounted, so are worries about the preparedness of citizens to migrate into alternative payment platforms. The clearest indication is one of an apex bank caught flat-footed, yet determined to plod on willy-nilly. We start with the question of the PoS terminals – basic to transacting business on the electronic platform. By the apex bank’s schedules, a total of 40,000 ought to have been deployed before commencement. If the well-publicised lamentation by Tunde Lemo – Central Bank of Nigeria’s (CBN) deputy governor is anything to go by, the equipment are currently subject of a bureaucratic tussle. Whereas the Nigeria Customs Service insists that PoS terminals are cash registers for which it slams a 20 percent duty – the apex bank argues that the applicable rate is five percent. The result: the equipment lie, uncleared, at the ports. How can we reconcile the assurances by the CBN that the pilot scheme is on course with the knowledge that some of its critical equipment are at the ports? How truly ready is the infrastructure needed to drive the initiative at this time? The greater question of course is: how many of our sales outlets have adopted electronic platforms? Even without the strictures posed by the poor state of infrastructure, which is daunting enough, the idea of migrating a largely cash-driven society into some advanced, electronic payment platforms would seem particularly herculean. There are already reports of rejection of the PoS/ATM machines in settling payments even in the so-called elite outlets. The result is predictable in the highly informal sector, which, despite official denials, holds considerable ace. Only the CBN deludes itself to think that the prevalence of electronic payment terminals would, in the near-term, eliminate Nigerians’ propensity to hold cash. This is why we are aghast that the CBN seems – or pretends – to be oblivious of the nation’s huge network of the informal sector in its determination to implement the cashless initiative. The danger of this oversight– if that is what it is, as against plain myopia – is to potentially deepen the informal network, as against abolishing it, with consequences in further eroding confidence in the formal payment instruments. As for the financial services operators, the apex bank seems to have under-estimated or glossed over the challenges of interface under the new payment system. We cannot but ask: what has the apex bank done since April 2011 when the policy was announced, to educate its primary constituency – the financial institutions, not to talk of the consumers of financial products, on the merits of the cut-over to the new technology? Rather than being seen to aggressively promote the new payment platforms, the apex bank has spent a good deal of time marketing its regime of sanctions for those harbouring the preference for cash. We shudder to imagine what would happen by April when the CBN would start imposing sanctions on those exceeding cash withdrawal/deposit limits in the Lagos area – a development that is bound to be seen as discriminatory. The summary of course is that the CBN needs to proceed more methodically. For something as novel as the cashless initiative, stakeholders need to be given adequate time to buy into it. More would certainly be gained through adequate enlightenment and mass education. By plodding on as the CBN is wont to do, it stands in great risk of leaving a sizeable chunk of economic players behind. Much as we endorse the general principles behind the cashless initiative, our point of departure lies in the haste with which the CBN plans to bring it about.

Cashless policy commences amidst poor services

culled from THE PUNCH NEWSPAPER
by Ademola Alawiye

Poor preparation and inadequate enlightenment by banks and other e-payment institutions have characterised the commencement of the cashless policy in Lagos.

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The policy commenced as a pilot scheme in the state on January 1, but its impact was not felt until Tuesday, which was the first working day of the New Year.

Many Lagos residents, who thronged their banks on Tuesday after the long Christmas and New Year holidays, complained of poor services on the Automatic Teller Machines, while those who shopped at some retail outlets had a similar experience with the e-payment channels.

Those who spoke to our correspondent complained bitterly about their experience with the Point of Sale terminals and other e-payment channels.

While some of them said they encountered poor connectivity, while trying to use their ATM cards to make payment for goods and services, others said they could not make transactions online as a result of network problems.

The Central Bank of Nigeria had announced that from June 1, 2012, daily cumulative cash withdrawals and lodgements by individuals and corporate account holders should not exceed N150,000 and N1m respectively, otherwise penalties would be paid for any transaction above the limits.

A visit to different bank branches on Tuesday showed that normal activities were going on, as customers were making transactions above the limits.

A resident, who simply identified himself as Francis, said the challenges he encountered while trying to use one of the e-payment channels, showed that the nation was not mature for the policy.

Francis said, "I went for shopping with my family members and because I wanted to try the e-payment system, I tried using my ATM card on the PoS machine but was told that my bank's server could not be accessed.

"I had to resort to going to the bank to withdraw cash. The only good thing is that the payment of service fee on the withdrawal limit has been extended, if not, I would have been charged for withdrawing above the limit."

Mrs. Mobola Adekunle, a business woman, said, "I tried sending money online to a business partner but it keeps bouncing back. When the charges commence, a lot of people will be charged for exceeding the limit, not because they don't want to use the e-channels, but because the available channels are still under developed."

Officials at the different banks also told our correspondent that individual account holders were still making transactions beyond the withdrawal limit stipulated by the CBN.

They pointed out that such transactions would cease when the penalty charges kicked off.

One of the officials, who did not want her name mentioned because she was not permitted to speak on the matter said, "Nothing has really changed. People are still making transactions below and above N150,000 as usual.

"You don't expect anything to change until the charges start."