London — In this Nigeria mobile money special, there are two views of the market. Emmanuel Okoegwale, Principal Associate, MobileMoneyAfrica identifies lack of clarity over current regulation and lack of focus on the agency network as key obstacles. In a country as large as Nigeria, the geographic spread of agents for internal remittances will be crucial. Russell Southwood took the temperature from the point of mobile money provider Paga when he talked to its CEO Tayo Oviosu.
It's been a year since mobile money providers in Nigeria were licensed and approved. The providers are a combination of financial institutions and independent providers. Despite the completion of the first stage of the process, the policy debate about who can take part and why continues. The policy framework of the Central Bank of Nigeria allows mobile money providers' partners to sign up customers and mobile network operators can be partners. The industry deserves a clearer interpretation to ensure some level of certainty that must surely be the purpose of having a regulated industry.
One of the factors contributing to a successful mobile money space is the regulatory climate. Recently UNCTAD called for uniformity in mobile money regulation in East Africa to boost financial inclusion.
Around Africa, mobile money services are moving from being an alternative channel to becoming the main channel for providing basic financial services and payments services for the banked and unbanked. Adoption is growing at exponential rate in East Africa and some parts of Southern Africa. Uganda, Tanzania, Rwanda and Zimbabwe are new frontiers. Recent studies showed 43% of Ugandans and 24% of Rwandans use mobile money services while Ecocash, a runaway success in Zimbabwe has ambitions to become the biggest bank in Zimbabwe.
Some weeks ago while in Accra, the local TV stations showed mobile money services commercials back to back throughout the duration of my stay but the reality on the street is far from the glossy advertising. Agent's outlets are difficult to locate and widely spaced out. Agents have an inadequate knowledge of the service and are not sure if the service can perform other functions aside from sales of airtime. There is a shortage of customer education materials and poor agency monitoring and oversight.
Nigeria seems to be following the same pattern so far. Providers seem to think that all services should be like M-Pesa without considering the particular needs of the local market, its culture and patterns of internal migration. They have yet to provide the density of agent outlets required to make the services a success.
In all the countries where mobile money had been a success, investment in agency network has been paramount followed by technology and marketing. These are the top three expenditures for providers. In Nigeria, with certain notable exceptions, it seems marketing is the largest expenditure, followed by technology and lastly, the agency network.
A mobile money provider, just like a remittance company, has its strength in the spread and availability of the agency network. That is why international remittance providers do not try to win customers by talking about the security of their platforms. They win customers on the basis of service point availability that translate into the provider's coverage footprint. Understanding the pattern of remittances between large cities like Lagos and other states will be crucial.
It is early days and there is not much primary data but it may be that local conditions will mean that something much more like a person-to-person channel will be successful and this may redefine the idea of how mobile money providers work.
The industry is still grappling with the glaring lack of knowledge where only a few of the licensed providers seems have good understanding of the task ahead. Is it a miserable future for mobile money in Nigeria? In the Indian model, micro finance payments seemed to be the driver. In Brazil, it was the extensive use of Government payments. In Kenya it was money transfers and later bill payments. What will be the Nigerian model? Only time will tell.
Paga targeting 15 million users in three years but acknowledges that there are big challenges ahead
Paga was launched in April 2009 but because of the lengthy licensing and approval process did not enter the Nigerian market until February 2011. Six banks were licensed and nine third party, independent providers. The most visible of these have been Paga itself, Stanbic, UBA, Transact and TETS.
When I asked Paga CEO Tayo Oviosu about users numbers in the first week of July, he turned to his laptop and pulled off the then current figure of 128,384 users up from 100,000 at the beginning of June 2012. It aims to have 600,000 customers by the end of the year and believes it needs 1 million to be really successful. According to Oviosu:"We're trying to be realistic about how the service will grow. We need a critical mass of agents. But we think we'll get to a million users next year." Beyond that he believes growth will spike upwards with it reaching 15 million in three years time. Total market? 30 million, he says.
It currently has 850 agents in 19 cities across Nigeria. By the end of the year, it will have 1,500 agents and wants to double that in the medium-term. 90-95% of all transactions are done through agents.
The average transaction is between N3,500-4,000 (US$22-25) and the primary services used are money transfer, bill payment and airtime purchase. It currently has 32 merchants accepting bill payment on its service including DStv, Guaranty Trust Insurance and Dealday.com. Currently there are a number of e-commerce apps and sites in Nigeria but thus far there have not been efficient payment systems.
Paga is using its latest marketing campaign to grow people's awareness of how to use the product and are also encouraging agents to do their own promotions in the cities they are located in.
One of the obstacles has been the fact that the telcos felt very bruised at being excluded from the provider model and it took them a while to come back into the conversation:"It's about churn reduction for them and therefore the development of these services remain in their financial interest. The current system allows everyone to participate and benefit."
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A bumper crop of video clips this week on Balancing Act’s You Tube channel:
Tayo Oviosu, CEO, Paga on the mobile money market in Nigeria
Nigerian ICT blogger Loy Okezie on Nigeria's online successes
Victor Dibia, CEO, Denvycom.com on his games portfolio and plans to monetize
Oluseye Soyode-Johnson, consultant to Maliyo Games on the business model
A special for Balancing Act readers:
Sean Krepp, Uganda Country Director, Apps Lab on raising farmers income using community knowledge workers with smartphones
Kobus Roux, CSIR Meraka Institute on getting rural schools connected using local micro-entrepreneurs and Wi-Fi mesh technology
Two experts discuss the challenges of mobile operators as brands:
Laine Barnard, Founder, 8Brand - Mobile outlets as "giant waiting rooms" for selling airtime
Sammy Thuo, Director, Saracen Media on differentiating African mobile brands
Read the original story, with tables and illustrations where appropriate.