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Mobile money war: Telecoms threaten banks’ future in Nigeria

Mobile money war: The future of commercial banks is gradually slipping into the hands of telecommunication companies.

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The future of commercial banks is gradually slipping into the hands of telecommunication companies, and this doesn’t bode well for the Nigerian lenders, as the inroad into mobile money market by network providers is likely to make banks redundant soon. 

Before the entrance of the GSM firms in Nigeria’s telecommunication industry in 2001, having a mobile phone and getting across to people within seconds, no matter how far they were, was something akin to a miracle. They had made the seemingly impossible to become easy. But no matter how much of a feat it had accomplished, no one expected it to grow into an industry capable of making financial payments. Drawing a correlation between network providers and bank functions was far-fetched, but fast track to 2019, and they are now officially recognized as operators of payment service bank (PSB). 

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Mobile money is the payment of services or financial transaction between a buyer and merchant through mobile phone. The payment system is also called mobile payment and mobile wallet. Individuals can buy goods and pay for services through the use of USSD code or mobile app.

The quest to bring banking closer to the under-served for financial inclusion has accelerated the value of telecoms firms. The idea of allowing telcos to operate as mobile money service providers had been frowned at in the past, but all that is changing, as Central Bank of Nigeria (CBN) has come to realize that achieving its 80% financial inclusion is impossible without the likes of MTN Nigeria, Airtel, Glo and other telecoms firms.

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Banks sentiment 

A handful of bank Chief Executive Officers (CEOs) have talked tough regarding the readiness of commercial banks for the inclusion of telecoms in the mobile money market, however, putting the lenders and telcos side by side, it’s evident that the CEOs will be singing a different tune when this becomes fully operational.

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The likes of Ifie Sekibo, Managing Director and CEO of Heritage Bank, Nnamdi Okonkwo, MD/CEO, Fidelity Bank, and some others have all stated that the presence of telecoms in the mobile money service brews no fear. 

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Such is expected, as market rivals are known to never speak of themselves as inferior to competitors; but if statistics are anything to go by and with comparison to other market in Africa where mobile money is thriving, banks are gradually heading towards that “inferior” direction if the threat posed by telcos is not handled properly. 

Numbers are against banks 

It would be unwise to bet against telecoms firms in the mobile money market, considering the position they hold and number of subscribers they each possess. While banks had only until recently began to drive traction to their mobile payment platforms, network providers have been building their customer base since their entry into the Nigerian market. 

In the telecoms sector, all network providers account for over 122.2 million subscribers, with interested mobile money operators such as MTN Nigeria and Airtel Africa accounting for 52.2 million and 31.9 million respectively. This is more than the number of customers in GTBank, Zenith Bank, Access Bank, UBA and other banks. The total number of active bank accounts is 72.9 million. 

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The subscriber number of Airtel Nigeria is more than the number of app downloads of these banks put together. And when you add MTN, Glo and 9mobile to the list, the chances of the lenders acquiring sizeable market share in the mobile money market become slimmer. 

GTBank, Zenith Bank, Access Bank all have about 1 million downloads, but note that not all downloaders make use of these apps, and having multiple apps for each bank account is stressful, so telcos provide a seamless payment system that doesn’t require multiple accounts or cards. 

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While these banks have tried to simplify their transaction processes with USSD codes, the codes are not as popular as the network provider’s USSD among Nigerians. 

History favours Telcos 

The inclusion of telecoms as payment service banks by CBN was encouraged by the rate of financial inclusion success in Kenya. The country’s financial inclusion is pegged at 95%, and this is because of MPesa, Africa’s first mobile money platform. 

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MPesa was created by telecoms firm, Safaricom, to close the gap between the under-served and financial transactions. When Saraficom’s mobile money began, there were 3000 ATMs (Automated Teller Machines), but the volume dropped by 1000 because Kenyans no longer visited banking halls to make payments. 

The expansion of Kenyan banks also slowed in response to bank customers’ behavioural changes regarding transactions. Also, account opening dropped, since Kenyans began to prefer using mobile phones to send, receive and store money. But in order not to be devoured by the onslaught of telecoms-sponsored MPesa, the banks in Kenyan drafted an initiative to partner MPesa to stay afloat; that move has paid off well. 

Divide and conquer 

Since the function of banks is not limited to payment or financial transactions, one might think the bank’s relevance is still vital enough to be significant to Nigerians, however, the responsibility of providing loans to customers to help inject capital in the business is not restricted to Nigerian banks only. 

The functions of banks have been split over the years. While network providers only recently received the nod to operate mobile money without loan service, Fintech companies and Venture Capitalists have been offering needed capital to Nigerian businesses especially start ups and have become perfect substitutes of banks for monetary needs; even rating agency, Moody, has argued that commercial banks might soon lose their services to Fintech firms due to their growing popularity.

This division of bank duties has reduced the essence of banks in Nigeria. Their monopoly over payment and monetary transactions has been lessened, and already, the inclination of the middle-class and lower-class towards them regarding loans isn’t favourable. 

In the report of FUGAZ for the year ended 2018, the companies loan to customers dropped except for UBA. GTBank recorded N1.2 trillion in 2018 compared to the N1.4 trillion of 2017. Access Bank also recorded N1.993 trillion in 2018 from the previous year’s N1.995 trillion. Zenith dropped from N1.9 billion to N1.7 billion in 2018. While this drop in some quarters could be attributed to banks cutting back loans given, it could also be argued that Nigerians are reducing their dependence on banks. 

With this division of bank duties, the future of banks is on a cliff edge, and operation in banking halls will be rocked to its foundation, which might result in job loss. The 4th industrial revolution has stretched the banking sector so far that lack of innovation by Bankers Association of Nigeria might leave the traditional financial market counting their losses. 

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Airtel building.

Lessons from Kenya 

Some banks are calling for the CBN to impose regulatory conditions on telecoms interested in mobile money operation, in order to curb its growth. This shows how fearful they are getting, but now is not the time to make requests that will result in unfriendly competition and rule out collaboration, because that’s the saving grace available to banks. 

It should be noted that lenders in Kenya initially went on the offensive against network operators, but as time went by, more Kenyans ported to telcos mobile money service. To put an end to this migration, Kenyan Bankers Association liaised with Safaricom’s MPesa to create M-Shwari to offer loans to mobile money users; this stopped what could have become a banking crisis in Kenya. 

Conclusion 

Banks can’t operate alone in the 4th industrial revolution era, they need to pitch tents with the telecoms companies, rather than compete against them if they are to survive the crisis lurking around to consume them.  

The longevity of banks in Nigeria now depends on how banks handle the competition from telecoms and how innovative the financial players are, as they need to do more than create apps or USSD codes to sway or maintain customers. 

Patricia

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

4 Comments

4 Comments

  1. Abdul Bamgbopa

    August 21, 2019 at 12:47 pm

    very well put together piece and already useful as Secondary research source. Kudos

    • Fakoyejo Olalekan

      November 28, 2019 at 9:11 am

      Thanks Abdul

  2. David

    August 21, 2019 at 6:08 pm

    Bank CEO’S need to read this 🤔👍

    • Fakoyejo Olalekan

      November 28, 2019 at 9:12 am

      Lol… Yes, I think they do.

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Hospitality & Travel

Passengers can now arrive 90 minutes before departure for domestic flights – FG

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The Federal Government has announced the reduction of arrival time for passengers from three hours to one hour and a half before departure for domestic flights.

This was disclosed in a tweet post by the Minister for Aviation, Hadi Sirika, through his Twitter handle on Monday, July 13, 2020.

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The minister said that the decision was arrived at after they have reviewed passenger facilitation at the airport while noting that passengers should check-in online.

In the tweet post, Sirika said, ‘’My colleagues and I have reviewed passenger facilitation at our airports, consequently I am happy to announce that, henceforth travellers are to arrive one hour and half before their departure time for domestic flights. Travellers are advised to check-in online, please.’’

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It can be recalled that the Federal Airports Authority of Nigeria (FAAN) had earlier in June issued flight resumption protocol for both international and local passengers across the country, advising passengers to arrive at the airport three hours before their time due to the new COVID-19 safety checks for domestic flight operations and five hours for international flight operations.

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Economy & Politics

Seyi Makinde Proposes N3 billion investment plan for water supply

The local governments in Oyo are advised to submit a list of 10 faulty boreholes in the LG. 

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Seyi Makinde Proposes N3 Billion plan for water supply

The Governor of Oyo State, Seyi Makinde announced the proposal of a N3 billion investment plan dedicated to water supply in rural and urban areas of the state.

Speaking through the Chairman of Rural Water Supply and Sanitation Agency (RUWASSA), Mr. Najeem Omirinde in Ibadan on Monday, he added that N500 million of the N3 billion would be used for repairing broken and faulty state-owned boreholes.

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All Chairmen of each of the Local Governments in Oyo are advised to submit a list of 10 faulty boreholes in the Local governments.

The Oyo State governor also ordered that all new boreholes must be compliant with solar-powered pumps, to enable their longevity and save costs.

Urging residents to patronize the agency if they need to dig up boreholes for water, citing that it would be cheaper if done through the state agency than with private drilling companies.

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Minister of Finance, Zainab Ahmed stated last year that Nigeria needs an estimated N36 trillion annually for the next 30 years to solve Nigeria’s infrastructure problem. The investment, although a tiny fraction of what Nigeria needs is a bold step by the Oyo State government.

 

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Economy & Politics

FG asks UK court for more time to appeal $9.6 billion arbitration judgement

Malami stated that the Evidence of P&ID’s highly orchestrated scam had only recently come to light. 

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FG asks UK court for more time to appeal $9.6 billion arbitration judgement

The Federal Government has approached a UK court to appeal for more time to appeal the $9.6 billion arbitration award against it over the breach of contract with Process & Industrial Development (P&ID) Ltd.

Nigeria has said that it needs more time to pursue its argument that the 2010 gas supply contract with Process & Industrial Development Ltd was a sham.

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The legal dispute with P&ID is coming against the backdrop of the huge drop in the country’s revenue due to the collapse in oil prices globally. Nigeria had applied to US courts in March seeking for documents from 10 banks which includes Citigroup Inc. and JPMorgan Chase & Co, in a bid to prove its corruption allegations.

P&ID, however, has denied any wrongdoing in the whole transaction, arguing that Nigeria missed its opportunity to appeal.

The Nigerian Lawyer, Mark Howard, on Monday, the first morning of a 2-day hearing, said ‘’It is very unusual in a fraud case to discover a single smoking gun. By its very nature, fraud is conducted in secret, which makes it hard to detect and justifies an extension.’

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The legal representatives for Nigeria are seeking another hearing for the judge to decide whether any misconduct has taken place and whether it justifies overturning the contract

The Attorney General and Minister for Justice, Abubakar Malami in a statement said, ‘’Evidence of P&ID’s highly orchestrated scam had only recently come to light.’’

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It can be recalled that last year, a UK judge upheld an earlier arbitration award to P&ID, which had accumulated to about $9.6 billion. The arbitration decision was over a failed contract to build a gas processing plant in the Southern city of Calabar.

The Nigerian lawyers disclosed that they have uncovered alleged bribes to government officials and their family members dating back to 2009.

Malami in his court filing on March 24, submitted that ‘’There is good reason to believe that ministers at the highest level were involved in a corrupt scheme to steal money from Nigeria.’’

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