Horses for Courses
Bloomberg recently took a swipe at Nigeria for lagging behind the rest of the continent when it comes to mobile money. I smiled at first, because I couldn’t quite believe what I was reading. And I wasn’t the only one who was a little irked, not only at the headline, but by the so-called “rationale” behind the assertion
In essence, the article assumes that Nigeria has lost its way in terms of financial inclusion and scalable digital services, because it didn’t follow mobile money. But did we need mobile money? Did we have the right environment for mobile money? So let’s very briefly unpick the subject at hand. I’ll set my argument out in wholly unambiguous terms; Nigeria is no laggard when it comes to mobile money. It simply isn’t playing in the sphere. It doesn’t really need to.
The write-up cites Kenya’s Safaricom and mPesa as the paragon to which Nigeria should aspire when it comes to mobile money. Let me remind you that Safaricom — a telco — had no competition whatsoever. Of course the environment is there to scale, rapidly, to a user base of 22million [over 50% of Kenya’s population] when no competing platforms exist. We can but wonder what Nigeria’s financial services would look like if there was just one stand-out platform. Furthermore, the Kenyan Government also allowed for a wait-and-see approach to mobile money and Safricom’s dominance, which could never be the case here in Nigeria. The CBN could not allow it.
But we have a heavily regulated, and competitive financial services market in Nigeria; one that has by-passed the need for mobile money [which lends itself well to small payments], but does not meet the needs of millions of Nigerians who need to access a variety of financial services, through mobile banking.
Initiatives like the KYC laws for minimum documentation have certainly slowed banking at scale in Nigeria, but then they are also a necessary part of ensuring we meet regulatory requirements for opening accounts, and today, it is almost as easy to set up a bank account than it is a mobile wallet.
Banks in Nigeria have long been pioneering financial inclusion at scale — using the apparatus of choice, the mobile phone. They’ve also sought partnerships with telcos, whose infrastructure to scale is second to none. At Diamond Bank, when we launched the Diamond Yello Account with MTN, we recorded 10m users in 2 years between 2014 and 2016, and still growing.
Services like this have had a massive impact on banking penetration in the country, although I will be the first to admit that we have a long way to go. Why? Because we have a problem of scaling in Nigeria — something we need to continue to focus on. Whilst I am bullish about Nigeria’s digital financial services sector, I’m also wide-eyed about what we need to do to affect change at a more aggressive pace that we currently have set ourselves. That being said, unlike Bloomberg, I don’t believe this change comes in the form of mobile money for Nigeria.
If we are to tarnish Nigeria as a “laggard” when it comes to mobile money, let’s turn our attention to South Africa, the continent’s second largest economy with a highly sophisticated banking sector. Mpesa launched and failed to scale, closing operations in 2016, at the time stating that “achieving a critical mass of users” had not been possible. This is another example of how mobile money in a more mature economy on the continent has failed to ignite; Nigeria is not alone in this.
That being said, Nigeria has work to do when it comes to financial inclusion. A 2018 report from McKinsey, Accelerating Financial Inclusion in Nigeria [2018], revealed that, “Nigeria set a target in 2010 to move financial inclusion from 54% to 80% by 2020. 7 years later, financial inclusion stands at 58% — an increase of only 4 percentage points”. Not good enough on our behalf, of course. But mobile money, and its limitations, is not the answer.
The same McKinsey report also notes five dimensions for mobile money growth and adoption
- Economics
- Products
- Regulation
- Wide Distribution
- Investments and scale
Need for brevity doesn’t allow me to dissect each dimension here, needless to say there’s a so-called sweet-spot comprising these key factors, which Nigeria doesn’t have. But that is no reason to refer to Africa’s financial colossus as a “laggard”. Let’s also be very clear — mobile money is not a yardstick for financial inclusion. We are simply operating in a different environment; one that is actively embracing a safer and more far-reaching means of banking — mobile banking.
Markets where mobile money has scaled, boast of a large agent network — Kenya especially. But for me, real scale will come through mass digital adoption — providing full financial services through banking via smartphones, will enable Nigeria to meet its ambitious targets for financial inclusion. And wider smartphone adoption will not only allow us to negate the need for mobile money, it will also open the floodgates for vastly improved access to health services and education too.
Bloomberg’s error was muddling mobile money with digital banking, whilst making a crude attempt to compare and contrast two wildly divergent economies and economic environments. Read by international investors who may not have such a nuanced understanding of the differences, the outlet, and its high profile counterparts, all need to demonstrate a much better understanding of financial products, platforms and markets, before sharing content that will influence significant decisions.
