THUR, MAY 30 2019-theG&BJournal- ‘’With the exception of Nigeria and Zambia, mobile money is the largest retail payment platform in Sub-Sahara Africa (SSA) universe and represented 76% of collective GDP (latest annual figures).’’
That is findings from the latest EFG Hermes survey (Mobiles: Deepening financial inclusion, but at a high cost) on mobile banking across Frontier markets, a survey which also compared the penetration rates and cost of mobile money payments and credit in these markets.
Although credit penetration across countries in SSA continues to lag global penetration levels, the use of mobile to access financial services ranks SSA countries amongst the highest in the World. The only current notable exception is Nigeria, but this is expected to change with the introduction of Payment Services Banks (PSB) this year.
According to the survey findings, in Nigeria, the value of mobile payments is insignificant, as the preferred payment platform is NIPs (NIBSS Instant Payments). In 2018, the total value of transactions on NIPs was USD225bn (57% of GDP). In Zambia, the value of ATM transactions is slightly more than double that of mobile payments.
‘’Of note, mobile money payments were 159% and 88% of GDP in Zimbabwe and Kenya, respectively,’’ EFG Hermes said in the report on the survey made available to theG&BJournal.
EFG Hermes noted that adult mobile penetration across Sub-Sahara Africa (SSA) countries is 154% with the highest level of adult penetration in Ghana (227%), followed by Botswana (213%).
Kenya ranks third (165%) and it is the only East African country to rank in the top five within the SSA. EFG Hermes survey shows that penetration rates are higher in Zambia, Nigeria, and Zimbabwe than Tanzania, Rwanda, and Uganda.
‘’The mobile revolution is therefore not unique to East Africa, but has happened across SSA.’’
But mobile payments are expensive. Based on EFG Hermes sample group of mobile money providers, the average cost of sending USD1 to a user on the same network is 9.5% (USD0.095), while the cost of sending USD20 to the same person is 2.6% (USD0.52). The cost of sending and withdrawing USD5 on M-Pesa today is 9% (USD0.43). Except for EcoCash in Zimbabwe, the more you send and withdraw the less it costs.
‘’Whilst we are very encouraged by the depth of mobile banking across our universe of SSA countries, we believe that now is the time to focus on the costs and would encourage both the central banks and ICT regulators to review the cost of this financial inclusion,’’ EFG Hermes said.
Current tariff rates are disproportionately expensive for the poor, according to the report. The cost of sending and withdrawing USD5 is more than double the cost of sending USD20 on M-Pesa (in Kenya) and MTN MoMo (in Uganda). Only in Zimbabwe is it cheaper to send and withdraw USD5 (vsUSD20), but it will still cost a user7%.
EFG Hermes said in the report that mobile will play an increasing role in financial inclusion because of the infrastructure gap and low penetration of salaried workers which is unlikely to change materially in the near term. Encouragingly, it noted, this is already happening as per the World Bank’s latest Findex Data Survey.
SSA countries currently rank lowly with regards to the number of adults that have an account with a financial institution, but rank very highly with regards to the number of adults that have used a mobile phone or the internet to access an account.
Notably, the relatively low level of SSA penetration of mobile phone usage to access an account can be explained by the DRC, Ethiopia, and Nigeria. They all have very large populations and low levels of mobile phone usage for account access as per Findex.
On Nigeria, EFG Hermes said: With the development of NIPs (NIBSS Instant Payments), a shared agency network and low cost framework, Nigerian banks should remain dominant in the retail payments space for the benefit of its low-income users. Its spirit of ‘fair play’ and open competition is the difference and should be an example for the rest of SSA.
The report explored the introduction of Payment Service Banks (PSBs) in Nigeria and declared it a possible answer to low-cost instant payments. The Central Bank of Nigeria (CBN) policy initiative on National Financial Inclusion which was aimed at ensuring that over 80% of bankable adults in Nigeria have access to financial services by 2020 led to the licencing and operations of Payment Service Banks (PSBs) in Nigeria.
PSBs are expected to leverage mobile and digital services to improve financial inclusion and are also expected to enable high-volume/ low-value transactions in remittance services, micro-savings and withdrawal services in a secured environment.
EFG Hermes highlighted the key features of PSBs in the report also which include to serve the unbanked (To do this, the PSBs must operate mostly in rural centres and unbanked locations, with not less than 50% of their physical access points in rural areas’ as defined by the CBN), maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme, operate electronic purse and invest in FGN and CBN securities. But the PSBs are not allowed to grant loans, trade in FX and insurance underwriting. The minimum capital requirement of PSBs will be NGN5bn or cUSD14mn and their minimum capital adequacy ratio (CAR) will be 10% and the principal promoters are banking agents, telco companies, retail chains and mobile money operators (MMOs).
In addition to the above features, the CBN insists that PSBs will be on a level playing field with banks.
‘’In our opinion, this is critical as it will force fair competition between banks and PSBs,’’ EFG Hermes said.
In addition to regulating the introduction of PSBs, the CBN (in conjunction with Nigerian deposit money banks, NIBSS and licenced mobile money operators) started the SANEF (Shared Agent Network Facility) Project in April 2018 to accelerate financial inclusion in Nigeria. To improve financial inclusion to 80% of the adult population the SANEF Project is focused on the following three core deliverables:
Aggressive agent roll-out. When the SANEF Project started in April 2018, they acquired 30,000 agents and currently have around 110,000 agents. The plan is to have 500,000 agents by year-end 2019. The roll-out of these agents will be driven by the 10 operators (three mobile money operators and seven super agents) that they have signed up to the SANEF Project. Although these agents are shared by the deposit money banks, they have signed bilateral agreements with each of the banks individually to complywiththeirKYCrequirementsandmodusoperandi.Notonlyistheroll-out intended to be large, but also provide blanket coverage across Nigeria. To do this, the SANEF project is working on ensuring that all local governments are covered.
BVN (bank verification number) enrolment and eKYC approval. Under the current biometric identification system implemented by the CBN there are around 33mn registered bank customers. The plan is to scale this up to 70mn unique BVNs by 2020. To increase the number of accounts and BVNs registered, the banks pay agents NGN100 per account opening and NIBSS will pay the agent another NGN100 for each BVN registered. To speed up the process of account/BVN registration, the CBN is working with the deposit money banks to develop eKYC guidelines.
Introduce new products. To encourage financial inclusion, the SANEF Project has designed a new savings account that is bundled with an array of features (insurance, pension, microcredit).Other new products include micro retail loans, micro retail savings, retail insurance and micro pensions.
Once these accounts/BVNs are increased to 70mn, bank customers will be able to use NIPs to transfer money in real-time to each other and business accounts. Currently, the cost of transacting on NIPs is NGN50.
‘’However, in the long run we believe that these transactions should be free,’’ EFG Hermes said.