The Debate over MNO-led or Bank-led Mobile Money Strategy in Nigeria – the Perspective of a Super Agent

This video featured an interview with a mobile money super agent who has provided agent training for several mobile money operators in Nigeria including MTN.  MTN had to suspend its mobile money service in late 2012 since the Central Bank’s guidelines prohibit mobile network operators (MNOs) from playing a lead role in any mobile money service in Nigeria.  After seeing the virtual monopoly created by Safaricom’s MPESA in Kenya, the Central Bank of Nigeria decided to only allow bank-led and non-MNO led third party operators to operate mobile money services in Nigeria.  The Central Bank of Nigeria clearly felt that a dominant MNO-led mobile money issuer could quickly create a monopoly and pose a systemic risk for the country.

While the reasons provided by the Central Bank of Nigeria are sound ones, this decision has not been without its own controversy. Based on their dominant market position, experience operating mobile money across Africa, the views of agents and discussions with others in Nigeria, it is quite clear that if MTN was allowed to offer mobile money services directly to its subscribers, it probably would have dominated the market.  Given the extensive network and the large advertising budget of MTN, it is an arguable point that Nigeria could have seen a much more rapid take-up of mobile money across the country than it has so far.

While personally I understand the argument and concerns of the Central Bank of Nigeria, it would have been interesting to see what might have happened if MTN and other MNOs offered mobile money directly to their subscribers via their agent networks in Nigeria. This agent for one argues quite strongly in favor of allowing companies like MTN to offer mobile money directly.  He strongly felt that the banks were too comfortable and were not as interested in this market, while a company like MTN was well positioned to understand and support mobile money services.

In the meantime, however, MTN has come out quite clearly to support the Central Bank of Nigeria’s bank-led mobile money model.  In a recent article in Ventures Africa, MTN’s Corporate Services Executive, Akinwale Goodluck, said “We are supportive of any initiative that brings financial inclusion to the masses and the Central Bank’s efforts in this regard are highly commendable.  The world today is heavily dependent on ICT.  Our future success as a company depends on how well we support services like mobile money.”

He added that “The current partnership between banks and telecommunications operators in the mobile money space leverages available cutting edge Information and Communications Technology (ICT) offered by the telecommunications operators and best practice payment protocols and expertise supervised by the CBN.”

As I mentioned in my predictions for 2013, Nigeria will be an interesting market to watch this year.  While it is clear that Mobile Money powered by MTN would have been a major player in this market, it will be interesting to see if bank and third-party led operators in Nigeria have the stamina, marketing strength and overall commitment to build and establish a sufficient agent network and overall customer value proposition to make Nigeria one of the mobile money powerhouses in Africa. Several mobile money operators say they are ready to make a difference and build a sufficient agent network and offer services that make a real difference in the mobile money space.

Time will tell, but I am interested in the viewpoints of others in Nigeria.


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4 Responses to The Debate over MNO-led or Bank-led Mobile Money Strategy in Nigeria – the Perspective of a Super Agent

  1. Hi John
    the success of mobile money transfer in Nigeria will boil down to the economics of the business case, and with the non-MNO led model being persued by the CBN the numbers just do not stack up. With the MNOs currently charging at commercial terms for access to their at-capacity networks (quite rightly too – it is their infrastructure), banks and independents are going to find it extremely difficult to offer mobile money transfer at prices that both attract the base of pyramid (crucial) and allow them to breakeven (considering all the other variable and fixed costs they face).

    If they were of a mind to, the banks could potentially loss lead on the smaller transfer sizes with the hope of cross selling other products to the non-banked. However they don’t see this group as profitable from a banking point of view. Plus they would have to cross sell a lot of other products to justify that. The independents are just not in a position to loss lead. Only the MNOs with their existing agent networks and ability to offer access to their own infrastructure at marginal cost are in a position to make mobile money transfer a profitable business. And until the MNOs are allowed to participate directly, mobile money transfer in Nigeria will have a slow uptake. The MNOs realise this and will hold out for a change in policy.

    Now the business case for mobile payments (bill and merchant) via wallets may be different when one considers the lack of basic functioning card infrastructure in the country, but here you are looking at a different economic segment (more middle class) and gets away from the financial inclusion agenda being promoted by the CBN.

    • jvowens says:

      Killian, thanks for your comment. In the end MNOs can only really offer mobile money transfer services and to be truly transformational and provide real financial inclusion, banks will ultimately need to be involved. I do agree that MNOs have the ability to access their infrastructure at a marginal cost and leverage their tremendous marketing strength to offer mobile money transfer services much more quickly than banks will be able to but ultimately strategic alliances will need to be formed. It just comes down to business value propositions that both parties can live with.

  2. Vivian Otalu says:

    What the banks have offered so far and keep claiming to offer Nigerians is not mobile money but internet banking. Sentiments has never pushed any economy to any level.

    • jvowens says:

      Vivian, this is actually not true. Several Nigerian banks I visited offer true mobile money services that do not require customers to even open a bank account. Some of the larger players in this market so far include Stanbic IBTC, First Bank, and GT Bank. Several other players have licenses and are beginning to offer true mobile money services as well. I will be preparing a matrix on the status of several players in the market and will post it soon.

      Nigeria faces many challenges in moving toward a cash-less society but there are some tremendous opportunities in the market right now. It will be up to the banks to really take advantage of their new mobile money offerings and see these as strategic new services, rather than just another channel to reach customers.

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