[kictanet] Nigeria – shaping up to become the next big M-money market

[alice]

  From Balancing Act



  Nigeria – shaping up to become the next big M-money market

This week saw Orange announce the roll-out of its M-money service into 
Mali (Orange Money) and Zain saying that it will soon launch a service 
(Zap) to compete with Safaricom’s m-Pesa. But the really huge market for 
M-money will be Nigeria if operators can get it right. Although Nigerian 
banks are among the more energetic on the continent, there is still 
plenty of potential writes Emmanuel Okoegwale.

The ability to pay for goods and services without having to carry cash 
or cards has universal appeal. In Africa it is being driven by the need 
to reduce the risk of theft.  The mobile is ideal because it is cheap 
and ubiquitous and can authenticate the payer and payee and record the 
transaction.

The mobile payment industry will change the way consumers interact with 
financial services and make payments. Mobile financial services will 
include consumer accounts information, updates, alerts, bill payments, 
person to person transactions and remittances.

In Nigeria where electricity and transportation are unreliable, the 
mobile phone is a driving force for change – and not just for voice 
calls. Mobile phones can address one of the biggest cost barriers in the 
value chain.

The success of M-pesa in Kenya (over 2 million users) has demonstrated 
the strong compelling need for a platform that can empower Africans to 
make transaction cashless and without need to visit a Bank. Nigeria’s 
seeming slow uptake of mobile payment presents a huge opportunity that 
can revolutionize the payment world, create new set of mobile 
entrepreneurs and new Business models in a market of 54 million mobile 
subscribers and an addressable market of 140 million people.

The mobile phone is a powerful channel for developing business. The 
Banks have so far been unable to win youth segment accounts because they 
are approaching them via traditional channel and not what  they always 
have with them, the mobile phone. The youth segment will most likely 
adopt mobile payment faster than the older segment because they are 
early adopters of technology and the good news is that they constitute a 
large segment in the mobile subscription pyramid in Nigeria and still 
largely unbanked or under-banked. Simple arithmetic from total 
subscriber base in Nigeria, shows that 54 million mobile subscription 
base is twice the Bank account holders of about 24 million, this clearly 
shows a huge 30 million people out there with mobile phones but without 
a Bank account.

Nigeria financial industry players seeks elusive mobile technologies and 
standards but slow progress is being made towards achieving 
interoperable and transparent standards for mobile payments. The process 
is complicated by the large number of stakeholders involved, in addition 
to the challenge of integrating various business models and technology 
layers into one platform. Even the term ‘mobile payments’ has different 
definitions. Some Banks currently offering mobile banking are 
erroneously  classifying their service as mobile payment even when the 
subscribers cannot do more than check account balance or transfer money 
between self account in same Bank.

Mobile operators are known not to be very adept in providing core 
payment and financial services, hence there is need for cross industry 
collaborations like what we have seen in the Glo / First bank cash card 
and  the MTN / UBA x-change cards. These collaborations are paying off 
in the mobile banking arena in the partnership between South Africa’s 
MTN and Standard Bank.

In South Africa, MTN, launched a SIM-based m-banking service with 
Standard Bank in a 50:50 joint venture, MTN MobileMoney. The Y’ello 
Bank, as it is often referred to after MTN’s pan-regional Y’ello 
branding campaign, operates as a separate division of Standard Bank, and 
as such is regulated under Standard Bank’s banking licence which brings 
compliance and interoperability to the rest of the payment infrastructure.

Many Nigerian Banks are evaluating different mobile payment systems from 
offshore providers but they are yet to learn from Africa’s own painful 
experiences in wap Banking. Offshore transfer of WAP banking technology 
was a disaster because an Internet-based technology was applied to the 
mobile phone, resulting in an experience that was slow, unreliable and 
costly for consumers in a continent with expensive mobile internet cost, 
poor coverage, hand set limitations and  inadequate customer education. 
Simpler technologies would have achieved more. However, to be fair, this 
was before most of the mobile operators started implementing data 
network upgrades.

SMS text messages will continue to be the dominant channel for mobile 
payments, although take-up of WAP, USSD and near field communications 
(NFC) contactless services will also grow. NFC technology seems to be 
attracting attention of players in Nigeria because of its ease of use 
and the European Hype but they are not factoring the end user into the 
plan at this early stage. The main draw back for NFC is that users will 
require acquiring NFC enabled handsets and that will be a major obstacle 
in a economy where income per head is low and average Hand set 
replacement rate is four years. Near sound Data transfer technology of 
the likes of Tag attitude of France are clear gap bridging measures not 
requiring any form of new hand set acquisition from the end user and it 
is immediately compatible with all Phone models.

Already, informal exchanges of Mobile Airtime locally in Nigeria 
accounts for over 5 percent of airtime purchases and banks might start 
losing market share if people found it more convenient to move money 
around and repay their debts, send little amounts to friends and 
relatives via this informal channel for small value payments.

Mobile payment is not a problem of technology. It is the management of 
the ecosystems of players like Banks which lack the technology, telcos 
industry non collaborative positions and inadequate understanding of 
financial matters and lastly, regulations which does not take into 
consideration, the speed of technology innovation that will hinder the 
growth of the sector that is already striving underground though not 
illegally but informally.

Correction on Issue 438: Michael Joseph, CEO, Safaricom writes:Your 
article on The Top-10 Fastest Growing Mobile Operators in Africa and 
Middle East you comment “We note with some amusement that the table on 
p54 of Safaricom’s March 08 IPO prospectus shows Telkom Kenya as having 
2% of the mobile market as at Dec 07 – quite an achievement, given that 
its Orange mobile service did not launch until September 08!” Please 
note that Telkom Kenya did claim to have about 200,000 CDMA customers on 
their so-called “fixed” CDMA system. However this was a completely 
mobile system at the time despite the lack of a mobile license!