As mobile banking involves person-to-person payment through the mobile phone or the use of mobile phones to conduct financial transactions, this latest electronic banking innovation is gradually changing the lives of millions across the globe.
This mechanism requires delivery of mobile payment to the banking and non-banking community, with the overriding vision of achieving a nationally utilised and internationally recognised payment systems.
Currently, First Bank of Nigeria, UBA/Afripay, GTBank, MobileMoney, Stanbic IBTC, and Ecobank has licenses to partner telecommunications companies to bring about the desired mobile banking. Others are Fortis MFB, Pagatech, Paycom, Chams, E-Tranzact, FET (Funds Electronic Transfer), Monitiz, Parkway, Corporeti Services, Eartholeum, and M-Kudi.
Their efforts are expected to expand and deepen formal banking in Nigeria by drawing the unbanked or under-banked into the formal financial services sector, while enabling the economy to shift to more efficient and reliable modes of financial transactions.
For a country with an estimated population of over 150 million and which has less than 22 million bank accounts, the development impacts negatively on the country’s economic growth and development as access to financial services, and overall financial development remains crucial to economic growth and poverty reduction.
Furthermore, lack of access to formal financial services limits market exchanges, increases risk and limits opportunities to save. Without formal financial services, households have to rely on informal services that are associated with high transaction costs. Thus, increasing access to formal financial services to the majority of households remains an important policy goal, not just in Nigeria, but in all emerging markets.
Even as Nigerians continue to express doubts over the country’s readiness for a cashless economy due to the unavailability of requisite infrastructure and low literacy levels, others have also argued that ongoing reforms have generated ample momentum to leverage on all forms of e-payment, especially mobile payment to enhance financial inclusion and facilitate Nigeria’s transformation from cash-based to a cashless economy.
Mitchell Elegbe, Interswitch Group’s CEO and managing director, disclosed that there is no alternative to cashless policy if the economy is to achieve its desired aim of being among the top 20 economies by the year 2020.
Elegbe reiterated that the high unbanked situation poses a challenge to the policy, while calling for democratisation of the policy to enable majority of Nigerians use it, particularly mobile banking. The need for different types of cards either for debit or credit, according to him, is necessary for the success of the policy.
Obinna Abajue, Head, Personal and Business Banking, Stanbic IBTC Bank, during a recent Mobile Money Roundtable, argued that the adoption of mobile money services in Nigeria would enhance economic planning by unraveling the country’s actual Gross Domestic Product (GDP) matrix, with a reduction in the cost of cash handling as well as cost of funds, besides being convenient and secure.
Abajue stated that “Government and banks have been at the forefront of efforts seeking to channel the huge funds in the informal sector through the formal banking system to bolster economic development. Mobile money will fast track this harmonisation and identify economically active people previously in the shadows of the huge informal cash economy, enabling them to have access to credit facilities.”
“Mobile money,” he stressed, “will bring about transparency, improved remittances and economic activities across various sectors of the economy, both in urban and rural areas. To achieve this, it is imperative for the regulators, licensed operators and other stakeholders to embark on an awareness campaign to educate Nigerians about the benefits of mobile money. This will drive its acceptance, and subsequently unravel its enormous benefits to the economy.”
Across Africa, mobile banking is projected to become a $22 billion industry by 2015, according to Juniper Research, a consultancy outfit, buoyed by soaring cell-phone use and growing financial services demand. Meanwhile, mobile network operators is expected to earn $7.8billion in direct and indirect revenues from serving a projected 364 million low income, unbanked people in about 147 countries who are projected to use financial services by 2012.
Valentine Obi, managing director, E-Transact International Limited, disclosed that Nigeria should take a cue from Europe if the country hopes to maximise benefits derivable from e-payment, while anchoring his position on the enormous opportunities embedded in the huge customer base which a cashless economy engenders.
“It reduces cost of operation; it increases customer satisfaction because you can render personalised services. When transactions are electronic, they are easier to track and document. For government, it helps in the area of taxation, budgeting, planning, accountability and improved government services. All payments are made easier with mobile payment system,” he stated.
“For instance, you can pay your utility bills through your mobile phone. With PHCN top up system of electricity payment, it is going to be a lot easier in a couple of months when you can actually pick up your mobile phone and pay for electricity bills especially for those using top up meter,” he stated.
Other services to be powered through this platform include accounts information and updates, alerts, bill payments, person-to-person transactions and remittances. In addition, even people without formal identification documents are availed basic services just by providing a name and a phone number.
At the moment, Africa boasts of the world’s most successful mobile payment system. Though mobile money was first introduced in the Philippines in 2001, Kenya’s M-Pesa continues to be the most successful mobile money deployment globally with over 700 million domestic and international money transfer transactions, accounting for $130 million revenues in 2010 financial year. A joint venture between Vodafone and Safaricom, M-Pesa transformed Kenya’s entire economic system.
Its pervasiveness and wide acceptance has made Safaricom the biggest mobile money operator in East Africa.
Today, the service provides mobile banking facilities to more than 70percent of the country’s adult population (14 million people) that use their mobile phones to pay taxi fares, wages of field workers, utility bills, get money out of ATMs without owning an ATM card or a traditional bank account.
Nigeria, with an estimated population of over 150 million people, over 20 million bank accounts and almost 90 million mobile phone subscribers is on the threshold of deploying mobile money with the potential to become Africa’s biggest mobile money market, in spite of late adoption of mobile business.
No doubt, financial inclusion and cashless settlements in all transactions will definitely play a significant role in shaping Nigeria’s economy in the near future.