Mobile money has the potential to give millions of people access to a broader range of financial services, writes Obinna Chima

Globally, mobile money is becoming a powerful tool for building more inclusive, stable, and secure financial sectors. The potential of mobile technology to improve people’s lives has continued to grow exponentially.
Mobile money has been described as innovation that lowers trading costs, transaction time and allows for immediate financial transfers (credits and debits) by both formal and informal sectors. It has the potential to drive financial inclusion by providing efficient transaction options and greater reach. Mobile money is also a tool for economic growth and development, if fully explored. It enables monetary transactions to be done on mobile phones through text messaging.

Unfortunately, the level of mobile money penetration in Nigeria has remained very low, despite the huge number of persons that have mobile phones in the country. A recent report by Ericsson had pointed out that there are lots of barriers to adoption of mobile money services for personal use on mobile phones. In addition, almost half of the respondents in the report had not heard about the possibility to use mobile money on their own mobile phone.
The Swedish multinational communication technology and services company stated this in a report titled: “Financial services for everyone.” The report presented insights from a national sample of 6,215 respondents aged 17-59 years old, representing 150 million people across five countries: Angola, Democratic Republic of Congo (DRC), Ghana, Nigeria and Uganda.

A survey by the NOI Polls had attributed the slow pace of adopting the mobile money services to the low public awareness on the payment transfer system. As a result of this, experts have stressed the need for improved awareness.
In its contribution, the Financial Derivatives Company Limited (FDC) noted that borrowing from Kenya’s story, mobile banking remains the most feasible means to create a successful cashless economy.
Also, a report by McKinsey stated that in most of sub-Saharan Africa, only a small percentage of upper-income households enjoy the convenience of card-based, online, and mobile banking and payments, while most consumers still pay with cash.

The study showed that more than 90 per cent of retail transactions in parts of Kenya remain cash based, and Gallup’s survey of 11 countries in sub-Saharan Africa found that more than 80 per cent of adults there have made bill payments or remittances with cash.
“Given the lack of digital-payment penetration, consumers, banks, and governments in sub-Saharan Africa are still bearing the high cost of cash payments—costs associated with manual acceptance, record keeping, counting, storage, security, and transportation,” the report added.

Furthermore, it reiterated that lack of mobile technology is not the major obstacle to increasing mobile-money penetration in the region as two-thirds of adults in sub-Saharan Africa currently use mobile phones.
“And in Kenya, mobile-payment penetration is at 86 per cent of households. However, the payment-digitisation gaps between Kenya and other nations in sub-Saharan Africa still vary widely (exhibit). Nonetheless, regulators in many markets are paving the way for e-money and the entry of nonbank operators.

” And business models and systems for electronic remittances—both domestic and international—have already been well tested in other markets around the globe. Together, these factors should make it easier for digital payments to leapfrog the costly development of formal banking by introducing advanced mobile systems,” it added.

DFS and Poverty Eradication

AIso, another report, titled: “Financial inclusion insight (FII),” by InterMedia, stressed that digital financial services (DFS) can play a key role in managing expenses and setting individuals and households on paths to stay out of poverty permanently. According to the report, through digital technology, financial services can reach billions of new customers quickly and efficiently. It noted that digital accounts cut the costs of transactions by as much as 90 per cent.

In addition, it showed that digital accounts give people the ability to save and budget for the first time in their lives, allowing them to withstand financial shocks and direct money toward specific uses, such as education and healthcare. Also, new customers and financial interactions have a domino effect of growth, touching providers, merchants, service providers, among others.

“When cash transactions that once circulated outside the formal economy are channeled within it, merchants and providers have new customers and new revenue, which can inspire more services and innovation. DFS gives people a secure way to save, which allows them to build cushions against financial shocks that would otherwise pull them right back into poverty,” it added.

Furthermore, it showed that more than 90 per cent of the world’s poor are covered by a mobile signal, which allows people to conveniently make payments digitally rather than in person.

It pointed out Africa is living proof that DFS can effectively reach the unbanked, stating that in Cote d’Ivoire, Somalia, Tanzania, Uganda and Zimbabwe, more adults use a mobile money account than a traditional account at a financial institution. In Tanzania, ownership of mobile money accounts surged from one per cent of the population in 2009 to 32 per cent in 2014, according to the report. Also, 60 per cent of Africans live in rural areas (per United Nations). DFS is the only way to reach them cheaply, affordably, and at scale.
“In total, the worth of Africa’s mobile money market is expected to top US$14 billion in just another five years,” as a result of greater adoption of DFS.

Based on its findings that four out of 10 adult Nigerians do not have access to any form of financial services, it concluded that “life is not only more difficult, but also more expensive” for these set of people.
“These individuals must rely on informal services, which are not always trustworthy, such as: keeping their savings hidden — in pots, under mattresses, in fields where they constantly worry about thieves; sending money to a family member in another village is risky and can take days; obtaining even a small loan for an emergency is often impossible.

“When they do use a formal service—like cashing a check or sending money—they often pay high fees and conduct transactions in person, which can mean giving up valuable time and traveling long distances,” it added.

Its findings on trends in mobile money and other digital financial services in Nigeria showed that the potential for increasing financial inclusion is ripe—particularly among young people.
“Those who are unaware of mobile money are largely young (15-34 years, 60 percent), educated (70 per cent), and employed (60 per cent). This group has the financial skills and equipment required to register and use mobile money, and could potentially use the service to pay school fees.

“More than four in 10 Nigerians experience some form of economic vulnerability, and financial inclusion is needed to create resilience. Most of the vulnerable are numerate and few are literate. Nine in 10 are poor and nearly two-thirds live in rural areas,” it added.

Need for Greater Collaboration
The Head, Mobile & Acquiring Channels at Stanbic IBTC, Francis Nwoboshi recently highlighted the importance of collaboration between the government, banks and telcos in other to promote mobile money. He pointed out that limited mobile money agency distribution outlets across the nation were also impeding the development of mobile money in Nigeria.

Experts have also called for increased awareness on mobile money as well as consumer education.
According to the Head of Financial Inclusion Strategy of the Central Bank of Nigeria, Temitope Akin-Fadeyi: “For mobile money participation, the major concern has been limited availability of access points. If I have money on my wallet and I have to go 50 kilometres to the next banking agent, then it is no longer convenient.

“So, to address that concern of limited access points, we brought up the issue of shared agent network where partners can come together and develop many more dispense such that it is easy for consumers to reach. We also have the super-agent licence that has been issued presently to two operators which promotes agency banking and the deployment of more agents such that they are closer to people and the services they offer becomes more readily accessible.”

To the Chief Executive Officer of the Enhancing Financial Innovation & Access (EFInA), Mrs. Chidinma Lawanson, digital financial services method can help bring a lot more persons into the financial services industry, through micro savings, micro insurance, etc.

She added: “Then, there would be sufficient funds to lend out to other stakeholders who run micro, small and medium scale enterprises (MSMEs). Think of where those MSMEs have those funds in terms of loans, they can create more employment, manufacture more goods and have a lot that would make them compete and the economy would have more products in the non-oil sector. All those activities add to the GDP of the country.

“So, obviously, DFS matters a lot in reaching previously unbanked people, bring them into the ecosystem and assist them to reduce the shocks in their lives, make more funds available to the economic system and build more activities around the MSME sector.”