Consumers yet to fully adopt mobile money

Mobile money is an e-payment solution that enables one pay for goods and services with the use of the mobile phone. With mobile money, users create e-wallets on their mobile phones for storing funds. Once fund is stored in their e-wallet, they use it to pay for goods and services.

The introduction of mobile money system is to introduce more transparency and create a greater visibility in transactions and money flows, as remittances move from the informal to formal channels.

“With over 120 million mobile phone users and less than 30 million bank account holders, the mobile phone penetration far outnumbers the bank account penetration. It is estimated that over 60 percent of Nigeria’s population remains unbanked,” Nimi Akinkugbe, CEO, Bestman Games Limited, said.

Mobile money provides unbanked mobile phone users with a secure platform, which introduces easy-to-use menus on their phone to send messages through an audited system; it can authenticate both sender and recipient and record the transaction in a secure way.

In addition to its ability to increase transactions, mobile money is an ideal medium of storage of money for both the banked as well as unbanked subscribers.

A recent poll by NOI, a Nigerian research firm, revealed that only six out of 10 Nigerians know about the service (59%). Out of this number, only 13 percent use it. Even more discouraging is that 93 percent of the mobile money adopters use it in conjunction with an existing bank account. The remaining 7 percent had a bank account, but operated it separately. This implies that the target audience – the unbanked – is still missing out.

Three years after the introduction of mobile money system by the Central Bank of Nigeria (CBN), most Nigerians are yet to buy into the initiative. The essence of the financial inclusion strategy by the apex bank was to connect the “unbanked” population with the formal banking system.

Due to low bank penetration, a large part of the population is financially excluded from the formal banking system. In the absence of access to the formal banking system for most Nigerians, transactions tend to be cash-based, leaving no audit trail for regulators to monitor.

While reports suggest that only 25 percent of Nigerians have bank accounts or access to basic financial services, this leaves the remaining 75 percent without access, a situation, industry experts believe mobile money could solve for millions of people.

The recently released MasterCard’s Mobile Payment Readiness Index (MPRI) brought to the fore the need for Nigeria to ramp up efforts in making the country embrace the mobile payments platform.

The MPRI, which gauges the readiness for mobile payments of 34 global markets, representing about 85 percent of the world’s household consumption expenditure, shows Nigeria as lagging behind Kenya in the usage of mobile payments.

The three varieties of mobile payments on which the countries were gauged include person-to-person (P2P), mobile e-commerce (m-commerce), and mobile payments at the point of sale (PoS).

Comparing the mobile payment readiness indices of Nigeria, a country of over 160 million people, with that of Kenya having a population of about 44 million, it is glaring that Nigeria is still timid in the awareness and actual use of the mobile payment platform.

The MasterCard MPRI scored Nigeria 31.3, while the east African country had a score of 40.4. The survey shows that about 28 percent of Nigerian consumers are familiar with mobile payments, 55 percent willing to use and only about 5 percent are using it. In Kenya, 50 percent of consumers are aware, 56 percent willing and over 25 percent are using it.

The MPRI is comprised of six components, which include consumer readiness, environment, financial services, infrastructure, mobile commerce clusters and regulation, is a data-driven, quantitative survey of the global mobile payments landscape.

According to the survey, Kenya is the leader of the Consumer Readiness component, thanks to Kenyan consumers’ very high levels of familiarity with and frequent usage of mobile payments.

Consumer readiness scores are driven in large part by how frequently mobile payments are currently in use. In Kenya, due to the popularity of P2P payment services – especially M-Pesa – 89 percent of Kenyans are familiar with mobile P2P payments and 68 percent are frequent users.

The report reveals that Nigeria lacks many of the sufficient conditions for a vibrant mobile payments market, adding that payment card penetration is close to zero (0.01%) compared with the index average of 24 percent. However, Nigeria beats the index average in familiarity in all three payments media; willingness to use P2P is nearly 70 percent.

According to the survey, low environment, infrastructure, and financial services scores are part of the reason for M-Pesa’s success in Kenya. The country has the world’s highest rate of P2P payments familiarity at 89 percent and a reported usage level of 70 percent.

“Nigeria is not a hospitable place for mobile payments,” MasterCard said. “The regulatory environment, the legal system, the technology grid, and the banking system lag their sub-region and global counterparts. But Nigerian consumers turn the country’s index performance around with their strong desire for mobile to replace the insecurity and volatility of cash and barter.”

While mobile money has recorded huge success in countries like Cote d’Ivoire, Kenya, Gambia and South Africa, Nigerians are still waiting to see if the same story would be said about the country’s mobile money at the end of this year.

Nigeria can replicate the record in Kenya by putting in place infrastructure and the enabling environment for the adoption of mobile payments by more Nigerians.

Anne Agbaje