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Thursday, June 10, 2010
Low awareness may mar CBN’s m-Payment regulation
By DAYO OKETOLA
As applicants await approval to operate mobile payment in Nigeria, stakeholders complain that the issue of low awareness must be addressed to ensure success, DAYO OKETOLA writes.
The Central Bank of Nigeria, announced in January that it would issue provisional approval to prospective operators this month to commence mobile payment in the country.
Prospective players were expected to have been granted provisional approval last week to commence m-Payment pilot projects to enable the apex bank to appraise the efficacy of the system using international best practices and standards.
The Acting Director, Banking Operations, CBN, Mr. Abayomi Atoloye, had earlier in the year, said that the apex bank had received many applications for licence to operate m-payment in the country; adding that a policy and oversight unit had been set up to ensure compliance and recommend modalities for approval.
Heightened expectations, which pervaded the financial / Information Technology landscape became palpable when some telecoms operators in the country reportedly embarked on intense lobbying to acquire the necessary licences to also provide Mobile Money Transfer and Payment services.
Companies that have aready indicated interest in the m-Payment licence are Mobile Media Info Tech Limited, Eartholuem Networks, Tagattitude Nigeria, Mtec Communications, TXTPAY, Easipay, United Bank for Africa Plc and Guaranty Trust Bank Plc. Others include Ingres Quality Rollout, Pagatech, and Celltrust.
MTN and Zain Nigeria are also reportedly planning to enter the mobile money market. Each of the licensees, according to findings, must pay a minimum capital of N500m to the CBN as part of the conditions that must be met before licences can be granted.
The m-Payment system is expected to stir exponential growth similar to that of Nigeria‘s mobile subscription, which grew from 450,000 fixed lines to 55 million mobile subscribers in nine years.
MoneyBoxAfrica, a mobile savings and payment platform, had been licensed for m-Payment in Nigeria in 2009.
Experts believe that when m-Payment services are rolled out, it will radically transform the manner in which Nigerians make payments for their business transactions with the mobile phone expected to be deployed as the main platform for payments.
According to them, m-Payment will reach over 80million mobile subscribers in a country of 140 million people with only 22 million bank accounts and less than 10,000 bank branches. This will also include people without access to formal financial services in urban and rural areas.
Although a brighter look subsists with m-payment system in the country, experts are of the view that the regulatory framework by the CBN needs to be tightened.
The Chief Executive Officer, Mobile Money Africa, Mr. Emmanuel Okoegwale, said, ”While I commend the CBN on the efforts and mileage gained in the last few months of promoting mobile financial inclusion in terms of educating the stakeholders, it seems the education side of it has been focused on large commercial banks.
”Some weeks ago, some potential players in the Nigerian mobile money space complained that they were not in the know of happenings in the industry in Nigeria. While about six of them were not aware of licence requirements, seven of them were not even aware of a regulatory framework by the CBN. Having personally mailed out the CBN regulatory framework more than 60 times to interested parties in Nigeria and beyond, my conclusions are that, either the CBN did not cover all the stakeholders segments adequately or this group of people are far from the industry.”
Okoegwale, who is also a director with the Center for Mobile Financial Inclusion, noted that unregulated money operations with mobile elements were already on the upsurge in the country with little hope of the CBN regulatory tentacles ever reaching them.
He said, “The month of May opened my eyes to some existing fringe e-commerce service providers with strong mobile elements in Nigeria that are not currently holding any electronic licence from the CBN or in any way affiliated to the banks. It was alarming to find such operators in Nigeria. The CBN licensed providers will have to compete with these shadowy firms that are already actively building agent networks and operational in major cities and yet avoiding the attention from the regulator.”
Microfinance banks and cooperatives societies that are supposed to act as the agent points for the industry, according to Okoegwale, were, as at May, not aware of such opportunities and potential for them in the emerging industry.
According to him, ”The Central Bank of Nigeria should not treat mobile money as a technology play. It is clearly beyond technology. To make mobile money work in Nigeria, stakeholders‘ education, cooperation and contributions are very essential since the success will depend on interdependencies that can only evolve if they are well involved into the overall strategy.”
He urged the CBN to provide online updates like changes in the capital requirements for applicants, application submission, approvals and other necessary information; since it was easily accessible and should serve as a formal channel of stakeholders‘ engagement.
According to the GSMA, mobile money transfer services include services whereby customers use their mobile device to send and receive monetary value. The market for mobile money transfer leverages the mobile phone and the interoperability of the technology to provide easy to use and secure mechanism for millions of people, worldwide.
In countries like Philippines, where mobile payment and transfer was quick to gain ground, 40 per cent of day-to-day transactions had already moved to the mobile payment mechanism. This, experts say, is quite significant.
Experts believe that mobile payment and transfer will significantly lower the cost of transactions in Nigeria since small value transactions can take place without leaving the comfort of the individual’s home or office. It will drive growth and development, especially among those who do not have the basic requirements to open a bank account.
According to Mr. Ahmed Dermish of Bankable Frontier Associates, achieving inclusive mobile money transfer and payment system should clearly be demarked by a proportionate regulatory framework. To this end, experts call for a consolidated regulatory framework by the CBN and the Nigerian Communications Commission.
Experts said the un-banked and under-banked population of Nigeria estimated to be about 80 million, would benefit immensely from the m-Payment system.
The Managing Director, MoneyBoxAfrica, the only mobile money operator approved by the CBN, Mr. David Kaye, said m-payment put people in control of their financial transactions, making it possible to execute those transactions “using any mobile phone, anywhere, anytime, on any network, with any bank and by any individual.”
The Secretary, United Kingdom Department for International Development, Mr. Douglas Alexander, said, ”Advancements in technology and growth in mobile phone usage is changing how we all live our lives and has the potential to give people access to financial services no matter where they live.”
Speaking against the above background, the MoneyBoxAfrica boss, asked, ”How come the banking industry, which had been in Nigeria for over a century does not command more than a fraction of the market success and popular subscription currently enjoyed by the mobile telephony industry?”
He said, ”On the one hand, when one looks at the statistics for a country of over 140 million people, with over 70 million individual mobile phones, an estimated potential of over 87 million bankable individuals, with limited options for and access to financial services, and one adds those statistics to the fact that less than 22 million bank accounts actually exist, it is easy to see why market penetration for the banks and banking services have met with less than 17 per cent success.
”On the other hand, mobile phones have achieved over 67 per cent market penetration. This huge disparity is partly due to the fact that it is easier to obtain a mobile telephone starter pack than to obtain even a simple bank account - mainly due to the different flavours of regulatory constraints faced respectively by the mobile telecoms and banking industries.”
Kaye noted that the traditional approach of opening new bank branches in an attempt to increase banking reach is not only costly, but also not effective for the banks.
With the mobile money transfer product, he said, partner banks were not only able to overcome the paradox, but were also able to bring the bank to the un-banked masses, rather than wait for the un-banked to come and queue up in the banking halls.
Mobile banking has transformed the way people in the developing world transfer money and now it is poised to offer more sophisticated banking services, which can help improve people‘s lives.
Currently, 2.7 billion people living in the developing world do not have access to any sort of financial service. At the same time one billion people throughout Africa, Latin America and Asia own mobile phones.
As a result, mobile money services are springing up all over the developing world. According to mobile industry group, the GSMA, there are now 65 mobile money systems operating around the globe, with a further 82 about to be inaugurated.
Most offer basic services such as money transfers, which are incredibly important for migrant workers who need to send cash back to their families.
Thursday, June 10, 2010 7:54:09 PM (GMT Standard Time, UTC+00:00)
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