Mobile banking seems to be the current buzzword when discussing business in emerging economies. Jaco Maritz talks to Deji Oguntonade, co-founder/director of SugarAnt Technologies Limited about Nigeria's mobile banking industry.
Can you please give us an overview of what exactly mobile banking is?
Mobile banking is the act of doing business transactions remotely by sending instructions to a bank using your mobile phone. There are deeper intricacies regarding the mode of message transmission (USSD, SMS, WAP, GPRS, NFC, NST) but generally the message is transmitted via the mobile device and it ends up on the bank’s computer which then processes the transaction and gives feedback to the originator via the same mobile phone. Examples of these include fund transfers, bill payments, person-to-person payments, etc. It also involves some push transactions whereby the bank initiates an alert to its customer via any of these mobile message transmissions. Examples of this are deposit/withdrawal alerts, cheque deposit alerts, deposit/loan maturity alerts, etc.
Why would the previously unbanked adopt mobile banking?
There is clearly deep penetration of mobile phone usage amongst the unbanked. However, we need to understand that the mobile phone, although a critical tool in mobile banking, does not guarantee adoption, it only indicates potential. Have we ever considered why this segment is called the unbanked? Maybe they don’t want to be banked in the current form of banking that we know.
The only reason the unbanked will adopt any form of banking is if the following conditions as fulfilled: simplicity of method, ease of funds withdrawal and limited KYC requirements. Simplicity may indicate the use of a mobile phone. However, there is still a lot of work to be done, even on simplicity, before we see any mass adoption of mobile banking.
How would you describe Nigeria’s mobile banking industry?
Nigeria’s mobile banking industry, we can say, is mature enough. We have experienced this technology since 2002 and there have been various concepts and technologies applied since then. Flash Me Cash, the SMS-based offering by FinBank is the clear leader, commanding 70% of active usage in the market. Adoption of the mobile banking platform on the interswitch network, which all banks subscribe to, is surprisingly not making a significant impact yet. There are pockets of other players but the impact is not significant enough to be mentioned. On the overall, far less than 1.5 million people are using mobile banking actively. This is a far cry from the potential 50 million mobile phone users in the country.
Also of interest is that the majority of these mobile banking users are still the elites concentrated in the urban areas. The unbanked is still grossly left out which gives real cause for concern on the simplicity of mobile banking services currently offered by these players.
What are the major challenges currently facing mobile banking in Nigeria?
Our major challenge in Nigeria is that the regulators are way behind innovative thinkers who wish to deploy solutions in our environment. Investors and financiers are also very short-sighted and do not encourage entrepreneurship. There is also a total lack of collaboration between the various stakeholders in this terrain. What is often seen is each party trying to develop its own solution which eventually ends up being ineffective. I will not discuss the state and availability of critical infrastructure required to deliver such services efficiently because, in my opinion, the above mentioned challenges are more critical to the success of mobile banking.
