The Cash-Lite Policy of the Central Bank of Nigeria in Lagos, soon to the extended to other major cities, opens up a new revenue stream for telecoms companies
A new wave of competition may have been ignited among telecoms companies over a share of Nigeria’s emerging mobile payment market. This latest wave of subtle but fierce competition was inadvertently set off last year by the Central Bank of Nigeria, CBN, when it issued operating licences to 11 mobile money operators, MMO, for the operation of mobile money, one of the financial services the apex bank is relying on to achieve a cashless economy.
The MMO includes Fortis Money, UBA/Afripay, GTBank Mobile Money, Pagatech, eTranzact, Monetiz, Eartholeum, Paycom, Funds Electronic Transfer, FET, Ecobank and M-Kudi. Although the CBN opted for banks and other financial and non-financial institutions instead of telecoms companies for the operation of the scheme, it allowed telecoms companies to partner the licensed firms to drive the scheme.
The thinking of the CBN, the magazine learnt, was that such partnership would enable telecoms companies provide the necessary platform and infrastructure upon which mobile money transactions would thrive. With a huge customer base currently closing in on the 100 million mark compared to about 30 million bank accounts in the country, the belief is that telecoms companies are in a vantage position to drive the scheme. Riding on the back of the exponential growth of the telecoms sector, the CBN is therefore using mobile technology to extend financial services to unbanked Nigerians especially those in the rural areas who are outside the formal banking system.
At present, only 30 million Nigerians have bank accounts, according to experts in the financial sector. This means that about 120 million Nigerians, representing 80 per cent of the estimated 150 million population, are without bank accounts. The CBN, therefore, envisaged that telecoms firms would partner licensed MMO to provide the infrastructure support needed for seamless cashless banking services that would bring majority of unbanked Nigerians into the national and global financial net. That partnership, as it turns out, has now become a cash cow of sort for telecoms operators wishing to increase their revenues. Since the pilot scheme of mobile money kicked off on January 1, 2012, in Lagos, the commercial nerve centre of the country, various telecoms operators have, through such partnerships, been bridging the infrastructure gap in the implementation of the cashless policy. For the telecoms firms, Nigeria’s emerging mobile payments system is a potential revenue stream too tempting to be ignored.
Eugene Juwah, executive vice chairman, Nigerian Communications Commission, NCC, recently attested to the huge potential for increased revenues, which the mobile payments market offers to telecoms operators when, citing recent surveys, he said that the combined market for all types of mobile payments is expected to reach more than $600 billion, about N93.6 trillion, globally by 2013. Juniper Research, a consultancy outfit, brought the enormous opportunities nearer home, projecting that across Africa alone, mobile banking would become a $22 billion, about N3.4 trillion, industry by 2015. The consultancy outfit based its projection on the continent’s soaring cell phone use and growing financial services demand. Correspondingly, the firm said that mobile network operators would earn $7.8 billion, N1.2 trillion, in direct and indirect revenues from serving a projected 364 million low income, unbanked people in about 147 countries who are projected to use financial services by 2012.
These projections have now kept telecoms companies in Nigeria on their toes, with most of them opening their doors wide to licensed MMOs, especially banks, to implement the mobile money initiative. Mobile money or mobile banking is the use of mobile phones to remotely access bank accounts primarily for account inquiry, mobile transfer, retail payments, micro insurance, savings remittances, mobile top-up, utility bill payments and government collections, among others. It is a savings and transfer system that turns GSM phones into a savings account platform, allowing the owner save money in it and from which withdrawals or transfers are made. Under the payment system, customers are able to carry out basic financial transactions on a daily basis.
The system has since caught on like wildfire with many Nigerians using their mobile phones to send and receive money, buy recharge cards, pay subscription fees for DStv, and pay electricity bills. The use of point of sale, PoS, terminals to pay for goods and services is also common among many Nigerians, particularly the elites, in major cities such as Lagos where the pilot programme for the new payment system started. Some telecoms firms have been signing memoranda of understanding, MoU, with MMOs, an indication of their readiness to play a dominant role in the implementation of the cashless policy when it kicks off nationwide by June 1.
For instance, MTN is partnering GTBank to deliver what it termed a more convenient means of money transaction. For Brett Goshen, chief executive officer, CEO, MTN Nigeria, “Mobile money represents another opportunity to bring additional added-value services to our over 40 million subscribers.” He said that it would not only improve the quality of people’s lives, but also encourage banking as opposed to storing one’s earnings in cash. Nigeria, he said, would also benefit, as the impact of mobile money would flow into other segments of the society and have a multiplier effect on the economy.
The trio of Etisalat, Globacom and Airtel also joined the fray, signing MoU with First Bank of Nigeria, FBN, to provide seamless mobile money services to millions of Nigerians. The four companies promised to combine their strengths to provide secure, convenient and user-friendly mobile banking services to the unbanked through the use of mobile phones. Etisalat is counting on its exponential growth and innovative services to position it as the operator to beat in the emerging mobile payment scheme. “Etisalat is already recognised as most innovative and fastest growing GSM operator in the Nigerian market,” says Steven Evans, CEO of the fifth GSM operator.
Airtel Nigeria also hopes that the arrangement would help it bring mobile financial services to all corners of the country. According to Rajan Swaroop, chief executive officer & managing director of Airtel Nigeria, “We are excited to partner with one of the biggest financial institutions in the country. This partnership would, without a doubt, assist us in realising our vision of empowering more Nigerians with innovative and affordable mobile financial services. At Airtel Nigeria, we are committed to creating value propositions that delight, enrich and benefit our customers regardless of their income level and location.” He added that the development further demonstrated Airtel’s commitment to Nigeria and supported the concept of borderless mobile telecoms services across the country.
Already, Airtel has stepped up its marketing campaign, encouraging customers to recharge their phones at automated teller machines, ATMs, and PoS terminals, quickteller.com, etransact.com, and Internet via Airtel website. To underscore its resolve to dominate the market, Airtel is said to have committed enormous resources in expanding its electronic recharge channels, providing customers with an opportunity to purchase airtime via an array of reliable channels such as the Internet, ATMs and PoS. This has significantly boosted the efficiency of its recharge process.
Globacom has also keyed into the cashless banking initiative by availing FBN of its extensive reach and strength to ensure quick, efficient and seamless transactions. As Adewale Sangowawa, executive director of the second national carrier, explained, “Our platform, ‘Glo Text Cash’, is the first of its kind in Nigeria. It is a service that would ensure that people need not carry a wallet and a mobile phone at the same time anymore, and our desire is to make the service available to all Nigerians.” He stated that the partnership with FBN would ensure that any subscriber on the Glo network would be catered for under the e-banking scheme.
The telecoms firm did not stop there. The company has been promising its customers both new and old, including those of United Bank for Africa, UBA, a better deal courtesy of a partnership with AfriPay, a subsidiary of UBA, for the deployment of mobile payment and mobile banking services. The bank and its subsidiary are hoping to ride on Glo’s robust network, resilient infrastructure and mobile payment platform known as ‘Glo Text Cash’ to reach millions of Nigerians and subscribers with their new mobile payment product called ‘U-M0’. Customers on the new mobile banking product will enjoy a number of benefits ranging from non-restrictions on cash limit, money transfer and banking services from any location and they will not be required to open an account with the bank.
Globacom went a notch higher, entering into a strategic partnership with Stanbic IBTC Bank, a member of Standard Bank Group. This would avail Stanbic IBTC Globacom’s ‘Glo Text Cash’ platform to make basic financial services accessible to Nigerians on the Globacom network, thereby breaking down the traditional distribution barriers hindering financial inclusion of Nigerians. Stanbic IBTC Bank’s ‘E.susu’ product, a formal and technology-driven version of the traditional ‘esusu’ savings model subscribed to by millions of artisans and traders, has been a success even before the partnership. Leveraging this and Standard Bank’s expertise in mobile money services, Stanbic IBTC Bank’s mobile payment offering would afford individuals as well as micro-businesses the benefit of accessing banking services such as funds transfer, bills payment, account balance information, and mini-statements from their mobile devices.
Under the current synergy between banks and telecoms companies, the product development units of banks are kept busy, churning out e-payment products and services that would help drive the cashless banking initiative while telecoms firms concentrate on fortifying their technology and backbones needed to achieve seamless and secure transactions. One of the fallout of the synergy is the signing of Service Level Agreements, SLAs, with some mobile phone companies. The purpose is to address the challenge infrastructure deficit could pose to the cashless policy. The CBN also directed that all PoS terminals must have provision for dual subscriber identification module, SIM, such that if signals for a mobile phone company are weak, the PoS could still function with the SIM of another telecoms firm. Besides, all PoS terminals are now to have 24-hour back-up batteries in case of poor power supply.
Apart from infrastructure, security is another clog in the wheel of progress. However, going by assurances and efforts by the CBN, Nigerians may soon heave a sigh of relief. For instance, the apex bank has set up a special team to monitor electronic frauds, while it remains proactive in fraud detection and control. Eyitope Daniel, CBN director in charge of the Lagos pilot scheme, disclosed recently that since last year when CBN crossed over to the new chip and PIN ATM cards, there has been over a 90 per cent reduction in ATM fraud. He explained that the CBN in conjunction with stakeholders is putting in place structures to enable it to be proactive in managing fraud, detecting fraud and putting all the litigation elements in place to manage the issues around fraud.
On its part, the NCC is looking into the issue of infrastructure. Lolia Emakpore, director of policy, NCC, competition and international affairs, hinted that apart from putting in place policies to ensure network reliability, the commission is working to ensure that equipment to be used for the process has interoperability. According to her, NCC is concerned with the networks’ integrity, interoperability and interconnectivity issues, robustness and redundancies. “In partnership with the CBN, we are assuring that we would work with the operators to ensure that the necessary requirements for a reliable network are provided by the mobile service providers. The mobile operators are also ready to support this by upgrading their networks to support cashless economy because they realise the need for real-time transactions,” she said.
Industry experts say that the collaboration between the NCC and CBN is geared towards replicating the success of mobile money in other countries of the world, particularly Africa. Ghana, Kenya, South Africa, Tanzania and Uganda have since been deploying mobile money system. For instance, Kenya’s ‘M-Pesa’ is said to be the most successful mobile money deployment globally. With over 700 million domestic and international money transfer transactions, ‘M-Pesa’ accounted for $130 million revenue in 2010 financial year alone. The product, which has transformed Kenya’s economic system, is the result of a joint venture between Vodafone and Safaricom. M-Pesa’s pervasiveness and wide acceptance have made Safaricom the biggest mobile money operator in East Africa.
It is this huge success that telecoms firms in Nigeria are now hoping to replicate by taking advantage of Nigeria’s large population and exponential growth of telecoms services to build a robust mobile money payment system. However, their success would depend largely on the combined efforts of all relevant stakeholders and regulatory authorities.