Category: Nigeria

The Central Bank recently relaxed the rule on Mobile Money (MM) participation by giving out telcos invite to the party. Yes it’s a party but then everyone’s gone home.

Specifically telcos are now allowed to be Super Agents, which means they could use their thousands of retail touch points to serve MM customers. But unlike what most people are clamoring for or what some think CBN did, telcos cannot operate MM systems, they cannot accept deposits or give loans.

While we may want to quickly apply a generous dose of cane to CBN’s butt, we should for once understand their position and what it portends to the industry.
The problem, in my own opinion only, is that telcos cannot serve two masters and with some of them so powerful and rich, turning them to banks (banks collect deposits, :-)), is creating a monopoly. The NCC, a very strong regulator, is the umpire for the telcos while CBN patrols the financial sector. Trust me, nobody wants to mess with both of them.

Should that be allowed to happen, who controls who? What happens when CBN issues a counter memo to what NCC has issued? What about deposit insurance? If a telco is doing well providing voice and data services but tottering under banking related issues, can CBN move in and take over to prevent an implosion?
What about very large telcos that are like industry to themselves?

MTN is the obvious example here. While they control just about  62,813,111 active lines as of June 2015 which is 42% of 146,486,786 nationwide, data from other sources such as banks suggest that 75%+ of customer main lines are from MTN. Their 2014 $2.6B profit is a testimony to that. I believe that such a single entity controlling the bulk of telecoms and banking would simply be impossible to manage.

Another thing is CBN simply takes a more serious, no-nonsense approach to regulation. While getting hit by her stick might be painful, the disciplined stance has been of benefit to everyone. As we speak, there are clear laws by CBN barring banks from entering into the telecoms market. Oh, there are wider rules barring banks from doing anything apart from banking. #EnoughSaid.
This takes me to another point – what made the original efforts to skid of the track?

Transaction Charges
MM transactions are expensive for the target market and sincerely there are no feasible means of making it cheaper. There are no incentives for agents to cash in and cash out for free. If this is the case, how will it be different when telcos are super agents?

So you ask, how are banks able to do cash in and out for free? It’s simple – banks make money from lending the deposits they have. Click here to know a bit about banking. Unfortunately the advantage of float isn’t available to MM operators (MMOs) whose settlement accounts are ring-fenced. Visit the CBN website to read about guidelines of MM operations and pay attention to article 9. Don’t worry, you won’t lose your mind from reading it, it’s actually in next-to-everyday language.

Interoperability
MM died slow and painful deaths because they simply can’t connect to each other even though the CBN mandated it. Today everyone takes it for granted that you can easily zap money from Bank A to Bank B using common standards (NIBSS and QuickTeller) but try to do that for MM and you are out of luck. Try to move funds from Bank A to MM B, and you may get slapped. NIBSS has fixed the major interconnection issues but maybe its 3 years too late, maybe not.

Cash Out
Today you don’t think twice before using any random ATM of any random bank. After all, the worst is you get wacked with N65 from the 4^th adulterous transaction on an amorous ATM. To do that with MM is just almost impossible as there isn’t any national standard for ATM cash out that’s bank agnostic. InterSwitch has been working on something for eons but as the target customers are dumping MM in droves, there hasn’t been any incentive to roll it out across all banks. And by the way, if that ever happens, MM customers will pay N100 per transaction as against free for ordinary bank customers.

Shopping
Whether online or in store, your card is always there to make you poorer. Unfortunately that can’t be said with MM. Even if you had N1B in your MM wallet today, you are probably going to die of hunger as the next restaurant doesn’t have any means of accepting your payment. Oh, if you told them you have N1B in MM they probably will beat you up as nobody will believe you.
Same problem exists online – you can’t pay for anything on all the major Nigerian websites. Paga made some in-roads but then how many people are on Paga and how many online stores even accept Paga? When you are shopping online and you want to pay, you don’t select banks, you merely select UPSL or InterSwitch, Visa, Verve or MasterCard.

International Acceptance
Ok, this is taking it too far. Your MM money dies right there at the airport. Even if you sneaked out through Seme Border, you can’t use it as Cotonou. Case closed.

CBN KYC Tier
I don’t know if this is a problem but according to CBN, banks are allowed to open accounts for everyone irrespective of race, religion or net worth. The target market of MMOs are better served by banks and unless they are cretins, which they are not, they wouldn’t touch an MMO with a 10 foot pole when all they get are hassles, fees and lack of interoperability.

How Can We Fix This?
It shouldn’t be all woes. I believe the Central Bank can fix the financial inclusion problem but it may be tough:

• Allow telcos to to do MM. All they need do is develop a robust framework with NCC. They may also make the telcos to create Chinese walls between their different operations
• I know it sounds dull, but CBN may have to wade in and review prices of transactions to allow the business to grow. Cash outs and cash ins should be free but agents to be reimbursed by MMO. Transfer will incur charges
• Implement a common ATM cash out standards and ensure all banks comply within a reasonable time frame.
• Implement a common purchase standard on POS and online and ensure banks, merchants and switches comply. Within a reasonable time of course.
• Tie in the card schemes and make it easy for MMOs and customers to latch on without having to put up their relatives for sale on OLX.
• Bar banks from having customers at the lower tiers of KYC.

Some of my recommendations sound despotic but then what do you expect from me on a Sunday afternoon?