Cracking the mobile money nut

Has Nigeria found the right formula to crack it?

Mobile money is Africa?s most well-publicized fintech innovation. Though often hailed as the gateway to financial inclusion, many have begun to lose faith in its promise.

The solution has been deployed in over 90 countries across the world, attracted over 690 registered accounts, and processes over US $1 billion in transactions on an average day. However, only a quarter of registered accounts remain active (30 days).

While M-Pesa?s well-known success story is alluring, 80-90% of launches are considered failures. In most countries, mobile money is often viewed as a wire transfer services, rather than as a digital currency for payments and other financial services.

However, mobile money, ?the gateway to financial inclusion?, is only that. To realize its full potential for financial inclusion, the platform must also enable a full range of financial services?savings accounts, financial credit, pension contributions, insurance services, etc.

In Nigeria, where less than 6% of adults use mobile money, consumer protection has taken precedence over enabling innovation. The Central Bank (CBN) recognizes the importance of the mobile payments; however, it has so far banned telecoms or their subsidiaries to apply for mobile money operator license.

For the first time since 2012, the CBN is reviewing and refreshing its National Financial Inclusion Strategy (NFIS) to remove foundational constraints, better leverage technology, and create an enabling environment for innovation.

Admittedly, Nigeria is far from meeting its financial inclusion target of 80% by 2020, and in some measures, the country has regressed in recent years. However, the draft NFIS exemplifies a new mindset around leveraging innovative digital financial services (DFS).

Here are a few reasons why we?re optimistic for the future of mobile money and fintech in Nigeria:

1. Improving the Value Proposition

In March, the CBN launched an aggressive plan to establish a network of 500,000 shared agents to deliver a portfolio of digital financial services, through close collaboration with mobile money operators and super agents. The agent network will reach further into Nigeria?s most remote villages; provide low-cost digital access to several products; and help accelerate the country?s financial literacy campaigns.

Then, in April, the Central Bank signed an MOU with the Nigerian Communications Commission (NCC) to collaborate closely on developing a more robust payment system. Though the NCC has been a member of the Financial Inclusion Steering Committee since 2015, their joint-partnership might prove a critical step towards better collaboration with the telecom industry as a whole.

Though these efforts are still in very early stages, a wider network of agents offering more diverse products on a robust payment platform is a promising start.

2. Taking the lead on digitizing payments

For many consumers, there?s often a psychological barrier to switching from cash to digital accounts. Thus, the government is seeking to ease this transition by requiring digital accounts from all beneficiaries, employees, and customers.

Each year, Nigeria transfers over US $227 million to social program beneficiaries alone, including millions of unserved/underserved consumers who are paid in cash. To reach its ambitious target of 100% digitization of transfers and payments, the government will coordinate a cohesive effort with all relevant public and private sector agents.

3. Growing appetite for disruption

One of the biggest differences between the 2012 and 2018 Financial Inclusion Strategies is the Central Bank?s openness to testing out new fintech solutions and lowering barriers to entry. The CBN has developed a regulatory sandbox for fintech start-ups to test their solutions, and once again, collaborated closely with another agency, namely, the Nigeria Inter-Bank Settlement Systems (NIBSS).

What?s still missing?

Nigeria is often cited as a case study on ?mobile money failures?, and as the continent?s largest economy, getting digital financial services right could mean a lot for the region. For those who have often lobbied against the ban on telecom-run mobile money platforms, the draft NFIS will likely fall short of their expectations.

However, change often happens gradually, and then suddenly. Where the previous NFIS was prescriptive, the revised strategy offers design principles and guidelines. For each initiative, the implementation plans seem light on details, focusing less on strict enforcement, and more on close engagement with stakeholders.

In the coming months, stay tuned for more updates and insights, as more details come into focus. And be sure to mark your calendars for the Africa Fintech Summit in Lagos, November 8th-9th to learn more from the bank leaders, regulators, and mobile money operators bringing this strategy to life.


Mutoni Karasanyi is a marketing and communications expert, and a member of the Africa Fintech Summit Advisory Board. He has managed campaigns for The World Bank Group, Corporate Executive Board, MTN, and others; and is currently based in Washington, DC.

Follow Mutoni on Twitter at @Karasanyi.


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