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N330bn mobile money revenue target under threat

By on March 10, 2015

A global management consulting firm, the Boston Consulting Group, has projected that Nigeria stands to generate $1.5bn (about N330bn) from mobile money services by 2019. But financial experts say the heartwarming projection may remain a dream unless urgent steps are taken to institute a model regulatory framework for mobile money services.

According to them, a collaborative effort between banks and telecommunications companies will drive mobile money services beyond the present stage. But they insist that such collaboration is not capable of pushing the services further than 20 per cent growth if there is no defined regulatory framework.

Since the launch of mobile money in the country in 2012, only 11.9 million adults (12.7 per cent of the adult population) are aware of the services, a report by the Enhancing Financial Innovation and Access has stated.

Out of the number, the EFInA report noted that only 0.8 million adults (approximately 0.8 per cent of the adult population) currently used mobile money services.

Financial experts, therefore, said that the inability of the CBN to team up with the NCC to draft a workable regulatory framework was impeding the current growth of 0.8 per cent in adult usage of mobile money services.

They said that such a framework, which should have the maximum input of the telecommunication companies, would enable Nigeria to adopt mobile financial services at a pace seen only in few other places and speed up the projected N330bn revenue growth.

The Managing Director and Chief Executive Officer, Precise Financial Systems, Mr. Yele Okeremi, said with the exception of M-pesa, a service whose breakaway success in Kenya stemmed largely from favourable regulatory circumstances, “no mobile financial service in sub-Saharan Africa has established an impregnable position yet.”

He said, “The Kenya example has shown that mobile money services, especially in a place like Nigeria with a huge population, should be telco-led. Should this be the case, we will certainly achieve a telco breakaway success that will ensure that mobile money revenue grows.

“But it is obvious that in Nigeria, we want to encourage a bank regulatory position as opposed to telco-led.”

Okeremi stated that the CBN had clearly shown “in its actions and commitments” that it was not favourably disposed to allow the telcos lead.

The PFS boss said, “There is a lot of money being controlled by the telcos. If we and the Central Bank of Nigeria encourage mobile money services to be led by the telcos, it means that the amount of money that will be controlled by the telcos will be 20 times more, which the CBN has no control of.

“While the banks may have the back-office systems and the understanding of risk and financial industry regulations, the mobile network operators have access to customers and the relationship with mobile phone store operators that could become a foundation for agent networks.”

He, however, said that to succeed, the banks and the mobile network operators would need to invest in infrastructure, business capabilities and governance. “These are what the regulatory framework should spell out were we to have one,” he noted.

Okeremi added, “A critical piece of infrastructure is a network of agents. These are the physical places where consumers can sign up for mobile financial services and make deposits and withdrawals.

“Consumer insights are among the important business capabilities. This speaks to a bank or the MNO’s ability to identify and develop the offerings that will matter most to consumers. It also has to do with knowing when to introduce different services.

“Good governance is critical because of the partnerships that will be needed to create an ecosystem for mobile service offerings.”

An industry expert and Principal Partner, Enechionyia and Co, an audit firm, Mr. Ndubuisi Enechionyia, said the regulatory framework should be given an urgent action “as regulation is not an end.”

Enechionyia was a former manager at First City Monument Bank, Fidelity Bank and several other Nigerian banks where he managed mobile banking services and related functions.

He added, “It keeps evolving as the business dynamics change. Because one of the objectives of mobile money is to improve access to financial services, improve power and telecoms infrastructure.”

He said that an aspect that would have been addressed if there were a strong regulatory framework was the challenge of inter-operability on the part of the telecommunications companies.

“A lot of improvement has happened in the telecoms industry in the past few years. The very fast growth has come with its own capacity issues. Interoperability is a recurrent issue that has to be addressed if we will derive the full benefits of mobile money,” Enechionyia said.

Aside the existence of a poor regulatory framework, he said that awareness, cultural apartheid towards financial service products, illiteracy, funding and technology issues were other factors that posed a threat to the anticipated N330bn mobile money revenue.

Enechionyia said a lot of public enlightenment was required to make people understand the benefits of mobile money.

He said, “Because the operators are profit-oriented, a cost/benefit analysis will determine the level of enlightenment they can undertake.

“Government’s support needs to continue in the area of enlightenment. The mobile money business will only grow and what is needed now is continuous engagement by all stakeholders and intensive public education.

“Kenya has made a lot of progress in mobile money. We need to collaborate with those who have gone beyond our current level to learn how challenges were addressed.”

The General Manager, Corporate Communications, MTN Nigeria, Ms. Funmi Onajide, shares Okeremi and Enechionyia’s views, saying a collaborative approach was a major driver of an optimal mobile money regime.

“MTN is of the view that a collaborative approach is desirable and that is the crux of my response,” she said.

Onajide, however, added that given the population, size and complexity of the Nigerian society, a framework that allows both banks and network operators to drive strategic partnerships will be best suited for the attainment of mobile money vision for Nigeria.

“Unfortunately, that is not the case at the moment,” she added.

Meanwhile, BCG has also said that by 2019, there will be about 400 million ‘unique’ mobile phone subscribers and almost 150 million traditionally banked sub-Saharan Africans, especially Nigerians.

“That will out leave some 250 million sub-Saharan Africans aged 15 or older who have incomes of $500 or more and mobile phones but no traditional bank accounts. This gives a sense of the potential market for mobile financial services,” it stated in its report.

 

[Punch]