Despite the slow pace of Mobile Money services adoption in Nigerian and most other African countries, the International Monetary Fund (IMF) is optimistic that there is substantial annual growth of additional 1.5 percent which wider access to banking services could unlock.
According to the Deputy Managing Director of the IMF, Mitsuhiro Furusawa, who spoke to AFP at a recent conference on promoting access to financial services in Dakar, Senegal , Africans are “leading in the world” in their uptake of mobile banking services. He noted that the potential for further financial development is “substantial” on the continent.
Despite this hope from IMF, Nigeria has been slow with adoption.
Some stakeholders have argued that the slow growth has been due to the model chosen by the Central Bank of Nigeria (CBN). Unlike some other African countries, Nigeria adopted the bank-led model to mobile money. This entails that telecommunication companies have been restricted to providing the infrastructure for Mobile Money, through which bank services can be offered.
According to a publication by the Institute Of Economic Affairs: “This (model) has proved less attractive to the telecommunication companies, and has given them less incentive to develop the technology and infrastructure here in Nigeria. Banks also have less incentive to develop Mobile Money, which may compete with existing products and target typically poor individuals instead of their normal target of wealthy individuals. This is as well as banks not having the distribution model which telecommunication companies have.”
However, the Central Bank of Nigeria (CBN) said its decision not to allow telecommunication companies lead mobile money model was to protect customers from losing money as it would not be able to regulate the telcos.
The apex bank had refused to permit the telcos-led model of mobile money which has been successful in Kenya as it said it would not be able to protect depositors’ fund under the model.
At a meeting with the telecom regulator, the NCC, the Deputy Governor, Operations, CBN, Alhaji Suleiman Barau had listed some of the challenges confronting the Mobile Money Scheme to include weak processes associated with SIM Swap that leaves customers vulnerable to fraudulent elements, high cost of Unstructured Supplementary Service Data USSD by Deposit Money Banks (DMBs), lack of secured USSD Gateway for financial services and allocation of unique USSD Codes to licensed Payment Services Providers.
While noting that the challenges had adverse impact on mobile financial services and negated the national financial inclusion strategy, he said the telecommunication companies played vital roles in the mobile money Service delivery value chain as the framework allowed them to provide the infrastructure and the agent network to drive agent banking and mobile financial service.
Alhaji Barau therefore called for greater collaboration between the financial and telecommunication regulators.
Mobile Money started as a payment service performed from a mobile phone, although now it is evolving into a platform to also include a limited range of other financial services. It enables users to access their money anywhere and at any time without the need for a traditional bank account, and can provide financial inclusion for the low-income masses. It will not replace retail banks, which provide a more diverse range of financial services, but in a number of countries it has become a popular platform for typically small transactions.
In practice, the service requires a telecommunication operator to provide the infrastructure, as well as a bank to provide the financial framework. A subscriber with a compatible SIM card creates an account in which to deposit funds on their phone, typically by purchasing a Mobile Money scratch card or taking up a bank-issued App.
There are broadly two approaches to Mobile Money: the service is either ‘bank-led’ or ‘telecom-led’. In practice, the service requires a telecommunication operator to provide the infrastructure, as well as a bank to provide the financial framework.
According to data from the Nigeria Interbank Settlement System Plc (NIBSS), the value of transactions through point of sales (PoS) channels across the country increased significantly by 65 per cent to N651.37 billion between January and November 2016, compared to the N395.05 billion recorded in the corresponding period of 2015.