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Nigeria: Lessons to learn from Kenyan mobile money success story

Nigeria: Lessons to learn from Kenyan mobile money success story

The world is gradually drifting into a cashless era as people from all parts of the world are beginning to embrace the use of their mobile devices to make payments.

The online or mobile payment system is unarguably a faster more safer and secured means of payment when compared to the conventional means of payment which involves the use of cash, cheque and in more recent times, credit cards.

Many technology and software companies including Google, Apple, Samsung have taken turns to develop various mobile payment platforms but whether you chose to call it digital wallet, electronic wallet, e-wallet, virtual wallet or mobile money, these mobile payment platforms all work the same way.

[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]To realise the full potentials of mobile payments in Nigeria, industry experts underscore need for regulatory principles which will enable opening the market to mobile network operators enabling the ecosystem leverage their huge marketing and distribution assets to extend reach and gain scale.[/quote]Digital wallets mostly work through apps with your smartphone. Just as Samsung developed “Samsung Pay” app for its users, Apple also developed “Apple Pay” app for its users. Google is not left out with “Google Pay” app, if we are to mention just a few. There are several other digitized wallet apps ranging from PayPal, Lemon Wallet, Square Wallet, among others.

Mobile banking in Africa has proved to be very appealing to consumers. One of the best models so far of and an African mobile money platform that has become the continent’s success story is Kenya’s M-PESA.

M-PESA, a Kenyan mobile money transfer and financial services platform underwent explosive growth following its launch in 2007. In 2013, M-PESA recorded the flow of 43% of Kenya’s GDP through its platform with over 237 million person-to-person transactions.

As of January 2016, M-PESA is used by 21.8 million Kenyans with over 1.5 million of the users using it for bill payment, thus making Kenya the country with the highest number of mobile payment users in Africa and in the world at large. M-PESA had a network of over 90,000 agent outlets as at the time.

A Cross section of tech savvy at the Lagos social media week
A Cross section of tech savvy attendees seen at the Lagos Social Media Week 2016

In Nigeria, which is Africa’s most populous country and largest economy, digital finance holds even greater commercial prospects but despite the advantages users of mobile payment platforms enjoy, the system recorded slower growth. Nigeria’s person-to-person (P2P) electronic payments penetration is much lower than Kenya’s and a dominant mobile payment platform is yet to emerge.

M-PESA success is giving ideas to the Central Bank of Nigeria (CBN) which has staged a huge and ambitious “Cashless Economy” for Nigeria based on mobile banking. Obviously, for a more populous nation as Nigeria, the potentials for financial transactions through the integration of financial services with mobile telephony are vast, and very attractive.

As part of efforts to achieve the National Financial inclusion Strategy goal, the Central Bank of Nigeria in 2011, licensed 21 companies to offer mobile payment services and also introduced agency banking which allows banks and mobile payment operators to render services through third parties in various locations.

But these measures are yet to bear the desired fruit in terms of massive attraction of the unbanked population into the financial sector.

The reason why the mobile payment system has been very successful in Kenya has several factors in its favour, including the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom, among other factors.

Mobile Phone user in Nigeria
A mobile phone user in Nigeria

Mobile telephony are much easier and more accessible than any type of telephony, which are unavailable in most areas of Africa plus the massive obstacles attached to energy. The mobile money system has swept Kenya, where people can send and receive money on their cell phones. It has equally improved commerce and brought basic necessities to poorer areas. For business, the technology has revolutionized cash flow.

A prime example of this is the adoption of M-PESA in Kenya which since its launch in 2007 has inspired many tech startups in Nairobi. The city has also become the tech innovation hub in Kenya and one of the hottest tech hubs in Africa, and the growth continues.

One big benefit of this mobile payment method is that those without a bank account can use the platform to transfer funds as quickly and easily as sending a text message. To use the service, customers first register with Safaricom at an M-PESA outlet and then load money onto their phone. The money is sent onto a third party by text message. The recipient takes the phone to their nearest vendor, where they can pick up the cash.

M-PESA also offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money because they do not need to waste hours queuing up at the bank.

Prior to the advent of M-PESA, people residing in remote areas in Kenya who have no bank accounts used to send money to people in other parts of the country through a vehicle driver. In many cases, the money do not end up reaching its destination but that was the only way out for the people so they are left with little or no choice. But thanks to M-PESA, they now have a choice.

Across Kenya, mobile money is breathing life into micro businesses. Companies whose business models are based on mobile payments have shown how targeting some of the world’s poorest customers can not only pay but also be a promising way to grow.  Small digital transactions are fueling new ventures, from insurance to loans, and pointing the way for other companies that want to reach the global poor.

As regards why the mobile payment system is still far behind in Nigeria, there appears to be a reconsideration of the payment system from the user interface basis, security perspective where people are not confident to pay online because of fear of being defrauded and connectivity concerns. This is also based on the unfolding realities that the potential of future payments could only be achieved from the average consumer’s perspective.

The Central Bank of Nigeria (CBN) has attributed the exclusion of telcos in the mobile banking system to its lack of control over telecoms companies and synergy between them and mobile payment operators.

The CBN Cash-Lite policy was introduced to modernise Nigeria’s payment system, reduce the cost of banking services, drive financial inclusion and improve effectiveness of monetary policy. CBN says it will also reduce the high security and safety risks, reduce high subsidy, foster transparency and curb corruption and ultimately meet the Federal Government’s Vision 2020.

However, the main factor responsible for lack of traction of mobile money operations is inadequate capital investment on the part of mobile money operators, according to experts.

Operators of mobile money are complaining of lack of basic infrastructure such as power, telecoms networks among others. There is also the difficulty in reaching the unbanked especially in remote areas as agents are not available.

Just like in Kenya, payment can actually be a front door which can lead to endless possibilities for innovative startups especially Nigeria.

To realise the full potentials of mobile payments in Nigeria, industry experts underscore need for regulatory principles which will enable opening the market to mobile network operators enabling the ecosystem leverage their huge marketing and distribution assets to extend reach and gain scale.

In this context, the CBN, Nigerian Communications Commission (NCC), and Nigerian Inter-bank Settlement System (NIBSS) would also need to deepen collaboration for the design and implementation of an interoperable environment in which regulatory and implementation risks are identified and mitigated, experts advise.


Elizabeth Edozie Technology Journalist @Technology Times 08077671659 elizabeth.edozie@technologytimes.ng

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