Entrenching cashless economy through secure, affordable mobile money solutions

Mobile money solutions will play a major role in integrating Nigeria’s huge informal economy which is driven by small scale farmers, traders, craftsmen and other types of small and medium sized businesses, into the formal economy. Also, it will serve as a convenient and secure electronic payment platform for the under-banked and unbanked in Nigeria’s emerging cashless economic landscape. This is because the major infrastructure for mobile money services, which is the mobile phone, is within the reach of under-banked and unbanked Nigerians. Mobile phones are far more pervasive and accessible than traditional bank branches, Automated Teller Machines (ATMs), Point of Sales (PoS) terminals and the internet, all essential channels for financial services distribution.

Reinforcing this, the Mobile Marketing Association (MMA) report of July 2011, put the level of mobile phone penetration in Nigeria at 50 percent, with over 90 million people, out of 167 million Nigerians, owning mobile phones. Coming a distant second, internet penetration in the country is 28.43 percent, according to International Telecommunications Union (ITU), with 45.9 million Nigerians accessing the internet in 2010. As at June 2011, the penetration of PoS terminals was a mere 13 Point of Service terminals per 100,000 adults, according to the Central Bank of Nigeria (CBN), which hopes to scale it up to 2,200 PoS units per 100, 000 adults by the end of 2015.

All these demonstrate the potential of mobile phones as a distribution channel for financial services in the country. Truly so, Enhancing Financial Innovation & Access (EFInA), an organisation committed to deepening financial inclusion in the country, indicated that 56.5 million adults (66.6 percent of the adult population) own mobile phones, disregarding use of multiple mobile phone lines by individuals, in its research. It further disclosed that 25.3 million adults who own mobile phones are unbanked and can become banked through affordable, secure and convenient mobile money solutions. Also, 63.5 percent of Nigeria’s adult males and 76.8 percent of adult females are unbanked, while 78.8 percent of the country’s rural populations are largely unbanked. In the main, there are 59.3 million adults who are unbanked due to irregular income, unemployment and distance to the bank branch, according to the EFInA report.

CBN

Across Africa, the adoption and usage of mobile phones for electronic payments, and to bring financial services to the under-banked and unbanked is gaining currency. The continent has had several successful mobile money deployments driven by financial institutions such as Standard Bank and Commercial Bank of Africa in South Africa, Ghana, Uganda and Kenya, with Nigeria, a very important market in terms of volume, in its embryonic stage. In countries where it is fully operational, mobile money is bringing financial services to people who do not have easy access to traditional banking channels, as well as people with very small deposits and loans which are unprofitable for banks using traditional delivery models. Mobile devices have also reduced transaction costs by 50 to 70 percent in these countries, making cashless funds transfers and utility bills payment more accessible to a vast population from the comfort of their homes and offices.

Endeva, a German developmental organization, in its 2010 report stated that mobile money has fostered financial inclusion in Kenya. The organization disclosed that prior to the introduction of M-Pesa in Kenya in 2006, as a joint venture between Safaricom and Vodafone, banking transactions were expensive and many people did not have bank accounts. However, by the spring of 2010, over 9.5 million Kenyans use their mobile phones to conduct basic financial transactions such as payments for groceries in supermarkets or to transfer money to their families. This is because M-Pesa is fast, easy, no account required and, most importantly, cheap. Presently the most successful mobile money deployment with over 700 million domestic and international cashless money transfer transactions, M-Pesa accounted for $130m in revenues to Safaricom in the 2010 financial year.

Nigeria with an estimated population of 167 million people, 25.4 million bank accounts and over 90 million mobile phone subscribers has launched mobile payment services with the potential to become Africa’s biggest mobile money market. The cashless society initiative of the Central Bank of Nigeria, as well as the compelling need of millions of unbanked Nigerians, are expected to drive the country’s mobile money volume to surpass Kenya’s celebrated 9.5 million M-pesa subscribers among its 39 million people, in coming years. Currently, in Nigeria, 23.8 million adults choose to save money at home, 12.9 million adults use informal societies, while 6.7 million adults use village associations, according to EFInA.

However, creating a functional mobile-money model can be complicated, especially in a country like Nigeria, calling for collaboration from two distinct domains, telephony and banking, as well as for partnerships with a variety of players such as agents, some unfamiliar, to manage cash collections and disbursements and promote adoption. As such, licensed mobile operators in the country, with the right technology, agent network, risk management process and customer service, will not only capture the opportunity in the market but also have unique know-how that would be valuable in other emerging and frontier markets, either through strategic alliances or direct investment.

Sola David-Borha, CEO, Stanbic IBTC

Consequently, Stanbic IBTC Bank, a member of Standard Bank Group and Afripay entered into strategic partnership with Globacom Nigeria, a telecommunications services provider to launch Nigeria’s first mobile money service. The partnership avails Stanbic IBTC MobileMoney and Afripay the GloTxtCash platform to make basic financial services accessible to about 23 million Nigerians on the Globacom network, thereby breaking down the traditional distribution barriers hindering financial inclusion of millions of Nigerians. Of note is the pedigree of Standard Bank, the parent company of Stanbic IBTC Bank, in the successful deployment of mobile payment solutions in various markets on the continent such as Ghana, Uganda, Kenya and South Africa. Equally, before the advent of mobile money services in Nigeria, Stanbic IBTC Bank had shown commitment to branchless banking in banking the unbanked and under-banked, as exemplified by its E.susu product, a formal and technology-driven version of the traditional esusu savings model subscribed to by millions of artisans and traders. Leveraging this and Standard Bank’s expertise in mobile money services, Stanbic IBTC Bank’s mobile payment offering will 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, thereby addressing the multifaceted transactional challenges being faced by those who reside and do business in semi-urban and rural areas.

Obinnia Abajue, Head of Personal and Business Banking at Stanbic IBTC bank said mobile money has tremendous benefits for the people and the economy. It will not only drive financial inclusion of the under-banked and unbanked, it will facilitate understanding of the country’s true Gross Domestic Product (GDP), improve national planning by government, as well as drive and entrench the cashless economy initiative of the Central Bank of Nigeria (CBN), targeted at reducing cost of cash handling and cost of funds in the country. Available statistics show that the CBN and the banks would have spent over N200bn on cash management by 2012. This cost can be ploughed into infrastructure development.

Obinnia Abajue

“This is why Stanbic IBTC bank is leveraging the growing pervasiveness of the mobile telephone and the knowledge users have of the mobile phone to deliver non-traditional, low cost financial services to unbanked artisans, traders, market women and farmers among others, as well as under-banked people. Instead of visiting bank branches, customers will be able to conduct transactions using Stanbic IBTC MobileMoney solutions on their mobile phones, or through the bank's retail agents within their locality. We do not merely look at mobile money from the point of view of using mobile phones to conduct financial transactions, hence our solid agency model. We have been successful in implementing branchless banking, using the agency model to drive the acceptance of E.susu, a formal and technology-driven version of the traditional esusu savings model. In the same manner, Stanbic IBTC MobileMoney will benefit from peripheral support such as a contact centre and our strong and pervasive agent network,” Abajue stated.

He said extending financial services to semi-urban and rural areas, using low cost, convenient and secure delivery channels such as mobile phones, ATMs (at no cost to Stanbic IBTC customers)  and retail agents, is key to the bank’s retail strategy. “Looking at the statistics, you will appreciate the fact that there are over 90 million mobile phone users across the country, including rural dwellers where financial services barely exist. That is not to say that people in rural areas do not perform some form of financial transactions; we just want to bring down the cost of financial services, thereby empowering them to do more using Stanbic IBTC MobileMoney. These were our considerations in the product development phase of Stanbic IBTC MobileMoney solution, which will extend low-cost and secure financial services beyond the urban and semi-urban areas into the rural areas to engender economic empowerment which will in turn galvanize the country’s economic growth,” Abajue said.