By Omodele Adigun
Despite having dozens of outfits in the country called mobile money companies, the Managing Director of Nigeria Inter-Bank Settlement System (NIBSS), Mr Ade Sonubi, says there is nothing like mobile money company in Nigeria. According to him, mobile is just a channel of communication. “Mobile is not the payment means itself. I am not sure there is any mobile money company that can survive by offering mobile money services in traditional way”, he stated.
Giving reasons for this, Sonubi explained: “They are not allowed to hold balances. So they don’t really get float on it. And because you dont have balances, you cant lend. So you are dependent on transactions. The transaction fee is a function of the value passing through you. You are targetting small holders of businesses; small value transactions; these suggest that your transaction fees are few. On the flip side, many of them were going with telcos using USSD, which the telcos were charging them money for.”
In this interview, he sheds more light on what NIBSS is doing to ease payment system in the country.
No mobile coys
I tell everybody, and this is my own view, which I hold very strongly.There is no such thing as mobile money. CBN disagrees with me, everybody disagrees with me. Mobile is a channel. We have been having “mobile money” years before we licensed anybody. Banks were offering it as telephone banking, where you come to register your phone with them and you could make payment.It has been on for a long time.
So the notion, that there is special kind of money that is digitised; that is mobile, is wrong. It is the channel that we should be focussing on. And today, unfortunately for the mobile money companies, if I wake up and I get a licence to be a financial institution- even microfinance bank- I can offer mobile services because I can just give my customer access to their account with me over a mobile channel. And there is nothing that they offer as a mobile money companies that I, as a microfinance bank giving my customers mobile access, can not offer and much more. And the licence is less. So this misnomer was driven largely by the likes of Safaricom mPesa in Kenya, with this notion that there was a different way to make payment; that was built around mobile because Safaricom was a mobile company. It is wrong.
Ultimately, your money must sit in the bank somewhere. And at the end of the day, value is exchanged from wherever it is held. So, this whole idea of mobile- the banks are offering much more in terms of mobile volume than the mobile money companies because they are getting more of their customers to be digitised. And it is logical. You are seeing many more transactions that are mobile, even on our platform. Many transactions that we see are initiated by mobile, but consummated as transfers.
So what do I mean? I go to a shop, I want to pay you. I bring out my phone, and I do some things. And my phone communicates with my bank. When you are doing the transfer, the bank initiates the transfer through NIBSS, and the women in the market sees an alert that her account has been credited. So mobile is just a channel of communication. Mobile is not the payment means itself. That confusion still remains till today.
I have heard people argue otherwise. I then asked them a simple question: Who are the major mobile money companies in Nigeria? Do you realise they are rebranding? What are they being called now? They dont called themselves the mobile money companies. They are rebranding as payments companies because they realise that really what they are doing is not mobile money. I am not sure there is any mobile money company that can survive as offering mobile money services in traditional way.
They are not allowed to hold balances. So they don’t really get float on it. And because you dont have balances, you cant lend. So you are dependent on transactions. The transaction fee is a function of the value passing through you. You are targetting small holders of businesses; small value transactions; these suggest that your transaction fees are few. On the flip side, many of them were going with telcos using USSD, which the telcos were charging them money for. They were not making money. Therefore, what do they do? They encourage you to bring your money in, but they wont let it to go out. So they encourage you to spend all your money within their own platforms so that when you give somebody else, they earn a fee. So we dont have to start paying somebody else. The money doesnt go out, that is why it didn’t grow. Interoperability is a requirement before you get a licence in Nigeria. But all of them, once they get that licence, they shut down money going out. They use our platform for money coming in, but they didn’t use it for (money) going out. That is not the way to make money. I think that concept was flawed because it was built around the Safaricom type, model or idea, rather than realising that we should make the channel easy, affordable and available to any financial institution, down to microfinance institution. So if they go out on the street, they get a market woman, they too can tell her: ‘dont worry, come in. Just use your phone’.
For me, I dont need a licence to offer that service if I have other financial licences. The people who went into it were interested in getting a banking licence cheap. Then it was cheaper than getting a proper banking licence. And they didn’t understand what they were getting themselves into.
More than half of them are in trouble today because their operating cost were much more than the revenue that they were making. So back to your question, there are more mobile transaction going through the banks today than mobile money companies. And it would always be like that.
There is a significant set of costs and long gestation period that most of them didnt get sufficient capital for. So they got the N20million that was required. Very few capitalised more than N20 million, some N50million.
There was the likes of Paga that went to raise foreign money, a lot of it, that allowed them to sustain (the business) because they would lose money for the first two years: you don’t have customers, the few customers that you have cannot generate enough money for you to cover your operating cost, which you must keep up and running, whether you have 10 customers or 100 customers. Your application at the back; you have to pay the licensing fees; you have to run your server. It is high-fees-cost business. There is a break-even volume, and until you attain it, you can’t be profitable; until you attain it, you must have the liquidity to keep the business going. Many of them didn’t.
From a platform point of view, USSD is not as secure as some of the other channels. However, you must always balance utility risks with what you are trying to achieve. And sometimes, you do not eliminate all the risks. You identify the risks and you underwrite them. I dont think we have done enough at looking at Transaction Insurance in Nigeria. You cannot eliminate the risks totally. USSD was set up for convenience. And the way banks started doing it (was like): ‘Oh! You are my customer, you have registered with me. I know you and I know your phone number. All the transactions that you are doing are with me.’
That was the beginning- buying air time- until they were comfortable.They then said ‘okay, you can now initiate a transfer, but there is a limit.’ So they ‘ve been moving the banks’ risks slowly because, in truth, there can be SIM swap. The number you get is from the phone that is not your customer but that is with your customer. The SIM password can also be compromised. Banks try to make online transactions safer by giving you tokens that will be changing values. If you know my password now, you will be knowing the token value later. Using the internet or a data channel is more secure.
But from convenient point of view, there is no data service in my village. So if I want to bring the whole into digital age, it has to be USSD. For all the concerns, for all the fears, for all the risks, it has to be USSD. So the question you should be asking me is, how do we minimise the risk and underwrite it as the risk crystalises?
And that is what we are trying to do. So one of the things we expect over the next few weeks is an initiative between all the telcos, all the banks and NIBSS to standardise and have a common USSD messaging platform. So it doesnt matter which bank customer you are, you can use standard code or you can use your bank’s code.
At the same time, if we get it working, and we have the modality right, it is something that can be extended to other financial institutions so that microfinance banks that do not have the means can make mobile services available to their customers, because they can sign on and also be able to offer their customers those kinds of mobile payment.
But it is happening today. Go to some shops, say you want to buy lace.The seller gives you his account.The buyer do transfer to his account, and he gets the alert. Then, he gives you the lace.
What we are saying now is we want to make money transfer as easy as possible through the USSD. And we will set a maximum limit to start with to minimise risk. We have gone to the insurance industry. And they are willing to underwrite that risk.
So hopefully again we will start this idea of insurance cover for financial transactions.
And why are they willing to underwrite the risk? Everybody that uses it has a bank account, and every bank account has BVN. If you do it, we will pay you. But if we investigate and find out that you are a fraudster, we blacklist your BVN.
It is slow. A lot of people are not registering as fast as we want.The whole idea was that people would see the benefits.SEC has said no more paper dividend, but it is slow.It is not as quick as we thought.The way out is continuing to push people.Push them:no more dividend cheques.If you dont have accounts that has been registered , you wont be paid dividend.It is the only way.