Tuesday, 29 July 2014

CBN's Cashless economy: Why Mobile money would not work in Nigeria

Nigeria, Africa’s largest economy by GDP, will require a national accelerator programme to drive the adoption and usage of mobile money services by the vast majority of Nigerians, said Emmanuel Okoegwale, principal consultant at Mobile Money Africa. 

About three years after its launch by the Central Bank of Nigeria (CBN), mobile money, with a potential market size expected to reach N1.1 trillion by 2015, is yet to catch on with the masses. A recent poll by the Nigerian research firm, NOI, reported that only 6 out of 10 Nigerians are aware of the service (59 percent), and of that number only 13 percent are actually using it. In a country with 127 million mobile subscriptions, and ranked 8th in the world in terms of Internet usage, experts are concerned about the slow adoption of the service. 

Speaking at the 3rd annual BusinessDay Mobile Money roundtable held in Lagos, weekend, Okogwale further stated, “We really need to move away from policy to actual implementation. “We can develop an end-to-end value chain system to drive mobile money usage. We select six specific industries and build m-payment systems around their processes.” The failure of banks, mobile money operators and other players in the emerging ecosystem to create better value proposition for consumers has been identified as a fundamental drawback to the adoption of the service, said panelists at the conference.

 In his remarks at the conference tagged, ‘Forging inclusive growth in payment systems & financial inclusion initiatives in Nigeria’ held in Lagos, Thursday, Valentine Obi, chief executive officer, eTranzact, said one of the major stumbling blocks to the development of mobile money systems in Nigeria, Africa’s largest economy by GDP, is low consumer awareness about the benefits of using the service. “In Lagos, perhaps, people are aware of mobile money. But in other parts of the country, awareness is still low”, he added. Obi urged stakeholders in the industry to provide compelling incentives for consumers in order to speed up adoption levels.  “Why would a Nigerian consumer want to put his or her N1, 000 in a mobile payment system rather than a bank? What kind of value is the system adding to the consumers?” he asked. Okoegwale, principal consultant at Mobile Money Africa, is of the view that banks and other major players in the ecosystem are not placing priority on the development of mobile money, further adding that many of them have positioned mobile payments as an add-on rather than a transformational service. “They are not pushing mobile money as a critical service”, he further stated. According to him, there was need to forge strong partnerships amongst critical players in the ecosystem, in order to put the mobile payment industry in pole position for sustainable development.

 “The industry needs to collaborate and share resources more especially in the area of technology platforms, merchant and agent acquisition. These operators are all replicating the same thing everywhere”, he added.  Alluding to the need to develop robust agent network across the length and breadth of the country to drive mobile money service, Obi further said government must provide incentives for mobile money operators to take services to underserved areas. “If an operator is targeting a state for instance, there is need to provide incentives to that operator to go there. It will bring down the cost of entry and that can be passed on to the consumer. We are looking at incentive programmes to enable customers benefit more”, said the eTranzact boss. 
Transaction fee charged on mobile money users should be abolished, according to Obi, to encourage Nigerians to use the service. “We are saying there should be no cost attached to using mobile money. But how many operators have the wherewithal to compensate agents”, he noted. Lending his own view, Sim Shagaya, chief executive officer, Konga.com, a panelist at the BusinessDay conference, said mobile phones are indeed pivotal to driving financial inclusiveness in Nigeria. “Mobile money has continued to enhance financial inclusion with the number of unbanked public declining from 46.3 percent in 2010 to 37.9 percent in 2013.
 But until, the cost of smartphone acquisition falls and broadband services become efficient and affordable, mobile money, according to Shagaya, will remain a pipe dream. According to him, a highly functional mobile payment system could give further impetus to the electronic commerce industry. “There are occasion where, a dispatch rider from Konga.com, with about ten stops to make, is delayed because a customer’s has to look for the nearest ATM to withdraw money to pay for an item. It just disrupts the entire process. We strongly believe mobile money can play a big role in this regard”, he further added. With the cashless policy been initiated the apex bank moving into the second phase, there has been a 10 percent increase monthly in Point of Sale (PoS) transactions, according to Niyi Ajao, executive director, technology and Operations, Nigeria Inter-Bank Settlement System (NIBSS).  On the issue of mobile money, he said technology and infrastructure is no longer a challenge for the market. “We need to begin to develop value propositions that appeal to Nigerian customers”. He was keen to emphasise the need for interoperability amongst disparate mobile money system in the country. As at the end of June 2014, he stated that there were over 130,000 PoS terminals of which 42,000 are active.
Ben Uzor & Daniel Ojabo



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