The coming of mobile payment systems in Nigeria caused the drop in losses in financial services sector from N6.2 billion in 2014 to about N2.3 billion in 2015, according to an industry study.
According to the 2016 Brookings Financial and Digital Inclusion Project Report, the successful deployment of mobile payment systems enforced by the Central Bank of Nigeria (CBN) in 2015 has led to the drop in the losses frequently experienced in financial sector due to fraudulent bank transactions.
In reference to the director of the Banking and Payments System Department of the CBN, the report noted that mobile payment system and the drop in financial loss as a result of fraudulent bank transactions are among the major developments recorded in the Nigerian financial services sector in 2015.
[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]The report noted that the Regulatory Framework for Mobile Payments Services in Nigeria, which was published in 2009, specified that mobile network operators (MNOs) are not permitted to become licensed mobile money operators. Instead, MNOs must work with sponsoring banks, which hold customer funds that are covered under the Nigeria Deposit Insurance Corporation.[/quote]The Brookings Institution is a nonprofit organisation devoted to independent research and policy solutions. Its mission is to conduct high-quality, independent research and based on that research, to provide innovative, practical recommendations for policymakers and the public.
A review of the report reveals how Nigeria’s demonstration of clear national-level commitment to advancing financial inclusion through the CBN spurred the surge in deployment of mobile payment systems in the country.
According to the report, Nigeria’s introduction of Agent Banking in 2013 is one of the driving factors behind the growth of mobile money transactions. Agent Banking Guidelines were released in February 2013, and a circular was issued in August 2013 to provide guidance on the approval process for financial institutions aiming to deploy agent banking services in Nigeria.
By February 2016, three banks had adopted agent banking: Guarantee Trust Bank, First City Monument Bank, and Sterling Bank. Agents offer selected banking and payment services, including bank transfers, bill payments, and airtime top-up, under the auspices of the Agent Banking framework. The three banks had a total of 737 agents, according to the Brookings FDIP report.
The report noted that the Regulatory Framework for Mobile Payments Services in Nigeria, which was published in 2009, specified that mobile network operators (MNOs) are not permitted to become licensed mobile money operators. Instead, MNOs must work with sponsoring banks, which hold customer funds that are covered under the Nigeria Deposit Insurance Corporation.
Limiting the role of MNOs in the mobile money sector has been identified as a potentially constraining factor within the digital financial services market in Nigeria. However, in April 2015 the CBN issued a licensing framework for “super-agents” that banks and other regulated financial service providers can leverage to extend access to financial services among undeserved groups.
Companies that are approved as super-agents are permitted to monitor and supervise the activities of agents, among other measures. This framework enabled MNOs to operate as super-agents for banks.
The Brooking report says that following the licensing, several super-agent arrangements have emerged. In September 2015, the “GloXchange” network, a partnership between Globacom and Firstmonie (a subsidiary of First Bank Nigeria), Ecobank, Stanbic IBTC, and Zenith Bank was launched commercially. MTN has formed similar arrangements, including with Diamond Bank’s Y’ello account.
The super-agent framework is expected to help advance financial inclusion by broadening the financial services distribution network.
The report further highlighted that in March 2016, the CBN granted approval-in-principle to Innovectives to operate as a super-agent and granted approval-in-principle to Interswitch Financial Inclusion Services to expand its agent network as a super-agent.
All the efforts by CBN over the last few years in establishing the mobile money transactions in Nigeria as highlighted in this report might have been paying off, as a recent report by the Nigeria Bureau of Statistic (NBS) revealed that Nigeria recorded ATM transactions totaling N2.6 trillion in the first half of 2016.
At the end of June 2016, ATM transactions in Nigeria also recorded a 26.9% increase against ₦1.9 trillion during the corresponding period of 2015, according to the NBS report.
The Brookings FDIP report revealed that the CBN plans to undertake a study to understand the barriers and opportunities surrounding agent banking for consumers and financial institutions; identify policies that could amplify agent banking, particularly in rural areas; and develop a viable agent banking model in a further effort to advance the scaling of agent banking.
It also says that as at April 2016, the Nigerian Postal Services expected to soon introduce certain banking services to rural areas of Nigeria, which should help enable access to formal financial transactions and e-commerce among marginalized populations.
In the meantime though, the Brookings FDIP report believes that the entry of several super-agents into the market should strengthen the digital financial ecosystem.