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Mobile Money: Banks, Telcos Fight Dirty in Nigeria


By Janet Chinwendu Udogu

The birth of mobile telephony in Nigeria has changed the way we communicate and has also produced an overwhelmingly steep learning curve in rapid growth and adoption. It is only pertinent that the financial inclusion of the unbanked be driven by mobile channel.

However, looking at how far we have come in comparison to global best practices in mobile money systems, it is obvious that the Nigerian mobile money services are still underutilized. As it is expected, the Central Bank of Nigeria, CBN, wields the big stick here. In exercise of the powers conferred on her by section 47(2) of the CBN Act, 2007, to promote and facilitate the development of efficient and effective system for the settlement of transactions, including the development of electronic payment systems; and pursuant to its mandate of creating an enabling financial environment and also promoting a sound financial system in Nigeria, the CBN issued Guidelines on Mobile Money Services in Nigeria.

The guidelines identify two models for the implementation of mobile money services. These include the Bank-led Model and the Non-Bank led Model. The Bank-led Model recognises a bank or consortium of banks delivering banking services either alone or in partnership with other banks, leveraging on the mobile payment systems. It however, stipulated that the Lead Initiator shall be a bank or a consortium of banks.

The Non-Bank led Model on the other hand, recognises duly licensed corporate organizations (other than a deposit money bank or a telecommunication company) by the CBN to deliver mobile money services to customers. It however, specifically stipulates that the Lead Initiator shall be a duly licensed corporate organization other than a Deposit Money Bank, DMB, or a telecommunication company.
The Position of Stakeholders
Francis Nwoboshi, Head of Mobile and Acquiring Channels, Stanbic IBTC, asserted that mobile money is very critical to Nigeria. He made this assertion while presenting a paper at the fourth Annual ‘Brand and Marketing Conference’ of Brand Journalists’ Association of Nigeria, BJAN, held in Lagos, recently.

Nwoboshi stated: “A whopping 59 million Nigerians are unbanked.  There are only 5,036 bank branches in Nigeria with 56 million active bank accounts, and only 30 Bank Verification Number, BVN, records. This suggests that only 30 million Nigerians have bank accounts.
“But there are over 148 million active mobile lines and 90 million unique subscribers, meaning that there is a potential to capture close to 60 million Nigerians currently outside the financial services net in the Mobile Money platform. There are 76 million mobile internet users,” he said.

These statistics suggest that Mobile Money has the capacity to capture more Nigerians than the regular banking system. Besides the added benefit of convenience and ease of use, mobile money can penetrate remote areas where banking services are not available, via the telcos services.

The idea of mobile money is to reach the unbanked. According to the World Bank, not more than 2% of Nigeria’s adult population have mobile money accounts and 85% of Nigerians are unbanked. If the banks cannot reach the 85% unbanked, how are they going to successfully push mobile money to them?

The telcos have argued that they own the gateway and infrastructure on which the system rides. They also point to their ubiquitous spread across the country as evidence that they would drive the process better and faster than the banks.

In making this claim, they cite the example of Kenya, the global case study for Mobile Money development. In Kenya, Safaricom, the country’s leading Mobile Network Operator was the key driver of Mobile Money in the country and for this reason, the telcos think the example should be replicated.

But Emmanuel Agha, CEO, Innovectives, one of the two Agent Banking Licensees in Nigeria, said that the Kenyan Model was more of a child of necessity and the model arose during a crises period when the people could not access regular banking services, and aid agencies could not reach those they were targeting.

Telecommunications companies however, have not ceased to express displeasure for only being allowed to provide network infrastructure for mobile money through which bank services can be offered, but restricted to favouring any Mobile Money Operator, MMO, over another, in terms of traffic and price. They are however, determined to become the Lead Initiators of mobile money in Nigeria on the basis that the current model has not been impactful on the economy.

Segun Ogunsanya, Chief Executive Officer, Airtel Nigeria, believes that mobile money services in Nigeria will continue to experience low patronage except the CBN adopts the Telcos-led Model.

Ogunsanya made his belief known while speaking at a reception organized by the Association of Telecommunications Companies of Nigeria, ATCON, in honour of Prof. Umaru Danbatta, Executive Vice Chairman, Nigerian Communications Commission, NCC, in Lagos recently.

The Airtel boss said that “mobile money is not taking off well because the right pillars have not been allowed to champion it in Nigeria.” He went ahead to say that mobile money would record more success, create more jobs and boosts the economy if telecommunications operators are allowed to champion the initiative in the country as it is in other climes, where mobile money has been very successful.

“There is need for a change in the model,” Ogunsanya stated. He therefore, called on Danbatta to ensure that the Telcos-led Model is adopted by the Central Bank of Nigeria for the good of Nigerians and the government.
The Position of CBN
Most operators in the telecom sector are more disposed to having a Telco-led Mobile Money regime, a position the Central Bank of Nigeria disagrees with.  Following the virtual monopoly created by Safaricom’s MPESA in Kenya, the CBN decided to only allow Bank-led and non MNO-led third party operators to operate mobile money services in Nigeria.  The CBN felt that a dominant MNO-led mobile money issuer could quickly create a monopoly and pose a systemic risk for the country.

Shina Badary, Chairman, TechTimes, emphasized that a dominant MNO-led mobile money issuer would create a monopoly and pose a systematic risk for the country. He said: “Allowing telcos to become virtual banks could be a challenge to national security.”

Sola Fanawopo, CEO, e-Maginations, reiterated that the Safaricom example has been grossly misinterpreted. “Safaricom is a project which the Kenyan Government owns majority stake, with Vodacom owning just 40 percent of its shares. The Government of Kenya never would have allowed a foreign company as it is the case with the Nigerian telecom sector to lead such an arrangement,” Fanawapo stated.

Musa Jimoh Itopa, Acting Director, Payments Systems Department, Central Bank of Nigeria, CBN, stressed that the apex regulator would never allow such a system given its wide-ranging challenges. Itopa was certain that the telcos would end up killing the banking system using their spread and larger customer base.

“We have asked Mobile Network Operators in Nigeria what they wanted and we have not been able to get satisfactory answers from them. It makes no sense for us to have a telco-led Mobile Money system in Nigeria because these operators are critical to the delivery of practically all financial services in Nigeria.

“In some of the cases, they even get paid well in advance. What we have asked them is to register as Super Agents and work with the banking system for overall success.

“For now, the telcos have neither agreed nor disagreed. But they are also holding on to the critical enablers available in the SIM Tool Kit, STK, which the other players in the Mobile Money business need to ease their services. Many think they are holding out in case the regulators have a change of strategy from a Bank-led model to a Telco-led model,” Itopa said.

However, in a recent development, Godwin Emefiele, Governor, CBN, revealed that the apex bank would eventually license telecommunication companies to provide mobile money services in Nigeria. Emefiele said that this is to drive the CBN’s vision of 80 percent financial inclusion as stipulated in its National Financial Inclusion Strategy.

The CBN Governor made this revelation while delivering a keynote address at the BusinessDay and Bill and Mellinda Gates Financial Inclusion Summit, held recently at the Eko Hotels and Suites, Lagos.

“Eventually, we will adopt a telco-led mobile money service. Our current model is bank-led because we were keen on averting any sort of financial loss but today we see the need for collaboration between the telcos and financial institutions to achieve our target of 80 percent financial inclusion within the next four years,” he said.

Although Emefiele did not give any time line, Telco-led mobile money services may be on its way to Africa’s most vibrant mobile market.
Also speaking at the Financial Inclusion Summit, Njuguna Ndungu, former Governor, Central Bank of Kenya was of the opinion that if Nigeria adopts a model that works, mobile money could boost inclusion and therefore help the government with revenue collection and administration.

Ndungu said that mobile money will provide a better environment for monetary policies to thrive, as more money will be captured within the formal financial system.

Elly Ohene-Adu, former Head of Banking, Bank of Ghana, laying credence to Mckinsey (global research and advisory firm)’s report that 80 percent of cash in the Nigerian economy is not deposited in a bank said that “if telcos were not so limited in offering financial services in Nigeria, all that cash would not be outside the financial sector.”

“In Ghana, we allowed telcos lead the mobile money market, although we asked them to create independent subsidiaries that would focus solely on providing financial services. And it worked. Currently, cash in and out transactions and money remittances make up almost the total of transactions executed using mobile banking,” Ohene-Adu said.
The Way Forward
Unarguably, the drive for financial inclusion can only be facilitated by increased penetration of mobile money services in Nigeria. But as with many cases about the country, the dichotomies between the Mobile Network Operators, MNOs, and the Financial Services players have slowed things down.

Locally, the Bank-led Model of mobile money operations are very limited and do not have what it takes to make Nigerians fully maximize mobile money services. On the other hand, telcos have the kind of reach that banks can only imagine. Mobile networks have coverage in areas where banks don’t have any presence whatsoever.

The Central Bank of Nigeria therefore, needs to make up its mind on what it wants, either to continue with the Bank-led Model or to give the Telcos-led Model which has been proven to be more efficient and effective in other climes, a try.

The CBN can equally adopt both the Bank-led and the Telco-led mobile money services simultaneously. But to avoid stating the obvious, considering the coverage and strength the telcos enjoy in Nigeria, the banks may not survive the competition. They will be eventually chased out of business or just become statistics. The Central Bank of Nigeria needs to act fast.
What Mobile Money Is And What It Is Not.
A large number of Nigerians mistake mobile money for mobile banking. According to Berg Insight, a leading financial technology research agency, a mobile money account does not encompass services limited to information services and simple transactions such as airtime top-ups and transfers between own accounts. It does not include services that use mobile operator billing as a payment source. With mobile money, customers can convert cash to and from electronic value (e-money), and they can use mobile money to perform transfers or make payments.

Patrick Eregie, General Manager, Mobile Payment of eTranzact, said “Mobile Money service has been specifically designed to give access to financial services for Nigerians in low banking coverage areas through the use of mobile phones, and to create job opportunities for many Nigerians.

“This service offers various options such as cash withdrawal, cash deposit, airtime recharge cards purchase, funds transfer (to bank accounts, cards and mobile phones) and bills payment (for cable TVs, electricity, school fees, health insurance scheme, etc).”

Musa JimohItopa , Acting Director, Payments Systems Department, Central Bank of Nigeria, said that while Mobile Banking refers to the use of other devices to remotely access an account in a bank, Mobile Money necessarily is not tied to bank accounts but is connected to electronic wallets on mobile devices like phones and tablets through which transactions can be completed.

Umar Garba Danbatta, Vice Chairman, Nigeria Communication Commission, NCC, defines mobile money as an electronic wallet service that lets users store, send and receive money, using their mobile phones.

“It basically stores funds in a secure electronic account linked to a mobile phone number. It’s safe. Easy electronic payments make Mobile Money a popular alternative to bank accounts and can be used on both smart phones and basic feature phones,” Danbatta said.

With an array of arguments for and against mobile money and varied examples of both positive and negative implications of the policy, the time is now for regulators and operators to reach concrete discussions and timeliness for what can work in Nigeria without creating monopoly that could stifle established sectors.

CULLED FROM http://billboardworldmag.com