Hope of revolution in Nigeria’s mobile money ecosystem

The recent approval-in-principle granted MTN Nigeria and Airtel Networks Limited by the Central Bank of Nigeria (CBN) to operate Payment Service Banking is expected to deepen the country’s mobile money sub-sector, whose penetration hovers between three and five per cent. ADEYEMI ADEPETUN, in this report, examines the possible revolution that may emerge.

In early 2020 when the COVID-19 pandemic hit the world, it quickly became clear that mobile technology, and mobile money in particular, would have an outsized role to play in keeping people connected, delivering vital financial support and providing safe, no-contact ways to pay for food, electricity and other life essentials.
   
Checks revealed that during the COVID-19 pandemic, many governments and NGOs turned to mobile money providers to distribute income support and emergency payments rapidly and efficiently. 
   
According to the Global System for Mobile telecommunications Association (GSMA), with more than $2 billion being transacted every day, mobile money became a part of a new daily routine for millions around the world, Nigeria inclusive.
   
But while other countries could boast of a thriving mobile money ecosystem, in Nigeria, the sub-Sector has been slow in gaining the required traction. It had been so for about a decade despite the huge mobile penetration in the country.  
   
Compared to neighbours in West Africa, mobile money is gaining traction in Burkina Faso, Cote d’ Ivoire, Senegal and Ghana. The proportion of people with mobile money accounts ranges from 33 to 45 per cent in Ghana. In Kenya, more than 80 per cent of the population has mobile money, whereas it is only just starting in Nigeria, with a paltry 15.3 million users.
    
Many factors are responsible for the slow uptake of mobile money in Nigeria, with the chief challenge being refusal of the Central Bank of Nigeria (CBN) to allow a telco-led model as seen in countries where the initiative is thriving beautifully well. An example of which has been Kenya with Safaricom.

Rise in global growth
In 2020, the number of registered mobile money accounts grew by 12.7 per cent globally, with over 136 million added in just one year. This growth, according to the GSMA, was twice as high as expected and exceeded previous year’s forecast by 6.4 percentage points, taking the total number of registered accounts globally to 1.21 billion. 
  
Total transaction values grew by 22 per cent in 2020 to reach $767 billion. This means that, for the first time, the industry is processing over $2 billion a day and has more than doubled in value since 2017.
  
Apart from a change in consumer behaviour, this uptake, GSMA noted, was also due to regulators implementing more flexible Know Your Customer (KYC) processes and relaxed on-boarding requirements.
   
Indeed, to drive traffic in the direction of mobile money in Nigeria, the CBN had, in September 2019, licensed three Payment Service Banks, (PSB) including Globacom’s Money Master, 9Mobile’s 9PSB and Hope PSB, a subsidiary of Unified Payment. But findings showed that nothing concrete had been achieved as far as mobile money is concerned. This is despite the combined mobile strength of over 64 million mobile connections between Globacom and 9mobile.

Bridging financial inclusion
Today, so many Nigerians are still excluded, not only financially, but also from basic telecoms services. For instance, the Nigerian Communications Commission (NCC) revealed recently that there were 114 access gaps in the country, with some 25 million Nigerians still lacking access to basic telephone services.
   
Although financial inclusion had grown in the past decade, Nigeria fell short of the National Financial Inclusion Strategy targets for 2020. The country had aimed to reach 70 per cent of Nigerians with formal financial services by 2020; the actual figure was 51 per cent.
   
The strategy also sets the target for overall financial inclusion, which counts Nigerians that use either formal financial services or informal financial services that are not nationally regulated, such as savings groups.
   
The overall financial inclusion target was 80 per cent by 2020, and Enhancing Financial Innovation and Access (EFInA) data showed that only 64 per cent of Nigerian adults were financially included by the end of 2020. This means that 36 per cent of adults (or 38 million) remain completely financially excluded.
   
EFInA noted that growth in digital financial services and agent banking highlights opportunities to drive faster progress towards financial inclusion, particularly for excluded groups such as women, rural dwellers and northern Nigerians.

The foray of MTN and Airtel in Nigeria
GSMA re-echoed the fact that anywhere mobile money thrives, it is always led by the telecommunications companies. It frowned at the earlier exclusion of MTN and Airtel from driving the initiative in the country going by the number of mobile connections at their disposal. 

   
For instance, MTN with 39 per cent penetration, has 74 million subscribers and Airtel’s 27 per cent reach, has given access to 51 million users. The combined 125 million users and 96.1 million data users between the two operators is seen as a boost for financial inclusion.
   
Last week, after years of delay, Approval in Principle (AIP) was handed to MTN Nigeria and Airtel Networks Limited, qualifying the two telcos to become licensed PSBs. Subject to meeting specific requirements over the next six months, the two major telecom operators would receive approval to operate PSBs.
   
PSBs are banks that take deposits from people and small businesses, provide payment and remittance services within Nigeria, issue debit and prepaid cards, run electronic wallets, and engage in other CBN-approved operations. To lawfully engage in these operations, a PSB licence from CBN is required, which these telcos have now obtained.

Huge expectations for new PSB licensees 
With both MTN and Airtel coming into the market with huge experiences, from countries including India, South Africa, Mauritius, among others, it is expected that the success witnessed in those climes would be replicated in Nigeria.
   
The Nigerian Coordinator, Alliance for Affordable Internet (A4AI), Olusola Teniola, said the CBN’ PSB approval-in-principle for both MTNN and Airtel Nigeria is long overdue and a relief for the millions of unbanked Nigerians that seek to engage in accessing affordable financial services by a telco-led DFS model.
  
Teniola said it is universally accepted that countries seeking to develop digital services for their citizens have a vibrant and wide coverage of digital infrastructure, which in the case of Nigeria is on the back of the telecoms industry. 
  
“Both players are already established pan-African operators and have a track record in other countries of rolling out mobile money services across multiple countries and this experience can be effectively utilised by their operations in Nigeria to assist the goals of the CBN to achieve increased financial inclusion by 2030,” he stated.

    
Chairman, Association of Licensed Telecoms Operators of Nigeria, (ALTON) Gbenga Adebayo, said the spread of the two telecoms firms would make it possible for financial services to reach all the nooks and crannies of the country.
   
“We believe this will give access, as you may be aware, the current infrastructure of the financial institutions is being run on the infrastructure of telecoms operators. In essence, operators are the only ones who have infrastructure presence across all local governments of the country.
    
“In essence, if you are looking at access by way of availability to the people, telecom services will certainly provide more availability for everyone.
  
“Again, we have a large number of unbanked Nigerians, and statistics from the CBN has shown that a lot of them, about 90 per cent of them, have one form of mobile services or the other. So, in essence, somebody may not have a bank account but he has a mobile phone and therefore this should be an easy point of entry for those kinds of people who are currently not financially included to be able to benefit from financial inclusion services and that is another side,” he stated.
   
Executive Secretary, Association of Telecoms Companies of Nigeria (ATCON), Jibola Olude, said the fact that MTN and Airtel have been approved to operate PSB license will accelerate and fast- track the initiative of financial inclusion.
   
Olude said the implementation of financial inclusion in Nigeria is best executed by mobile network operators because “everybody has access to a basic phone or smartphone. I strongly believe that they can bridge the gap in financial inclusion but I would want other telecommunications companies that are interested in obtaining the licenses to be granted.”