4 thoughts on “Why Mobile Money transformed Kenya, but failed to take off in Nigeria”

  1. Posted 12/02/2016 at 13:15 | Permalink

    There will be a transformational tipping point when Bitcoin goes viral in Nigeria. It will look something like this.

    In a matter of a few months, everyone in Nigeria with a mobile phone or computer will have a Bitcoin account with Blockchain.info or some other SPV Bitcoin wallet. There will be street sellers in rickety wooden shacks selling Bitcoin, and people will be sending it in and out of the country and between each other without restriction in the size of transaction, the time or place.

    Internet penetration is good on mobiles in Nigeria, and there will be nothing that the State can do to stop these transactions. People outside Nigeria will specialize in conversion to cash or deposits to bank accounts as a service.

    Nigerians are very familiar with the utility of cash, and when the light bulb goes on over their heads in a collective eureka moment that Bitcoin is cash on your mobile phone that cannot be confiscated, there will be a mad rush for it. It fits the culture and perception of money perfectly; what is missing now is information on what Bitcoin is and how it works, and simple services to seed the population with it.

    Kenya and Nigeria are vastly different places, in the same way that Spain is different to Scotland. No one would claim that there is any reason to compare the Scots to the Spanish, and the same is true with the difference between Kenyans and Nigerians. MPESA works there because their culture facilitated it. A similar project (and there have been a few attempts) fails in Nigeria because the people think differently. Bitcoin on the other hand, is like mobile phones, that are successful in both Nigeria and Kenya.

    Bitcoin represents a fundamental low level tool, like the cellphone. Kenyans and Nigerians both have mouths and the need to talk and listen over the phone. Kenyans and Nigerians both have the need to send and recieve money. What languages they use over the phone, what they say is different in each culture, but what is common to them both is speaking over the phone. It is the same with Bitcoin; everyone needs money, and to be able to send it without friction. Bitcoin does this, just as the form factor of the mobile phone does, and this is why it is transformational across cultures and borders, whereas MPESA is culture specific.

    If this analysis is wrong and Kenyans and Nigerians are identical, then the Central Bank restrictions really is the differentiator, and Bitcoin removes this obstacle completely, making the prediction I just made inevitable despite the Central Bank’s objections. Either way, Bitcoin is inevitable, and there is nothing anyone in Nigeria or Kenya can do to stop it.

  2. Posted 12/02/2016 at 18:31 | Permalink

    “Kenya has been successful due to Mobile Money being ‘telecom-led’.”

    My take differs.

    Yes Safaricom is a telco but this alone does not account for its success (upon which others have built) and there are many, many markets where telco-led initiatives are going nowhere.

    I see two main elements that fed Kenya’s success. First there was a very dominant telco (85% market share) that was also terrific at execution. Safaricom is one of the most capable telcos in the world! In Nigeria no single telco has more than about 30% market share and, as the author points out, the largest, MTN, is facing a huge fine from the cash-strapped government. It is a very different competitive landscape. The author is right in citing a total lack of regulation as also helping prime the business in the early days.

    Second is demographics. Kenyan wage earners tend to leave their families in the village and get a room in the city. This sets up strong demand for P2P transfers, which formed the foundation of MPESA’s early business. By contrast Nigerians move with their families so there is simply less P2P demand.

    Perhaps a third difference is the far greater informality of the economies of west Africa compared to east Africa. Tax collection rates are lower and people fear the formality of any regulated account.

    Today, for all intents and purposes, Safaricom owns the Central Bank of Kenya and this is not lost on other regulators. The Central Bank of Nigeria (CBN) values its independence and does not seek a similar fate.

    Nigeria does have some advantages. It has excellent settlement infrastructure and CBN has encouraged interconnection that goes beyond what exists in Kenya. Commercial interoperability, a precondition given the competitive market, is next and is not easy as neither telcos nor banks are cooperative by nature. There are plenty of challenges, many smart people and good organizations are focused on leveraging digital financial services to achieve greater financial inclusion, but there are no easy answers. Yes there are changes in CBNs regulatory framework that might be helpful in prodding the industry but the authors basic premise, quoted above, that simply licensing telcos will produce a flourishing ecosystem, is naive.

  3. Posted 12/02/2016 at 19:51 | Permalink

    Today Safaricom practically owns the Central Bank of Kenya and this is not lost on other regulators. The Central Bank of Nigeria (CBN) values its independence and does not seek a similar fate.

  4. Posted 16/02/2016 at 14:38 | Permalink

    Telco’s cannot be trusted. They are part of the problems slowing down mobile payment in Nigeria. They did the same thing in India and many countries. Example, blocked short codes issued by NCC (saying it’s in use, leading some mmos to have multiple short codes!). Ask MMOs in Nigeria they will tell you.

    Telco’s and their low quality USSD signal is a big issue in Nigeria, The CBN regulation is killing the industry. It is as if they intend to kill mobile money. There is no other way to explain it. Everybody agrees that the Banks cannot do this because they don’t have to. After all , all the liquidity stays with them. So the Banks should not have been licensed to start with.

    In support of some of the posts here, Telco lead mobile money has not been successful in all places, moreover, CBN Nigeria allowed Telco’s to partner with Banks which they did as far back as 2011
    The arrangement then was that Telco’s will run the show, more or less, but banks own the license and the banks agreed and share commission.

    But the marriage did not work, I believe due to the fact that Telco’s have ulterior motives, which CBN is concerned about. Even up till today, the Telco’s are allowed to be super agents, but they are not interested either. So the notion that Telco’s in Nigeria are not allowed is totally wrong. Telco’s are just not interested in partnership and that is a red signal.

    If Telco’s had been licensed , I have no doubt mobile money would have progressed somewhat in Nigeria, but not like in Kenya because there was little to no regulation at the time allowing the only dominant Telco’s (Safaricom) to run the show unhindered which our CBN would not do.

    All the Telco’s (glo, mtn, airtel, etisalat) would have been running the show and that alone will still not match the Kenya model allowing just one Telco. Only one Telco ran the show in Kenya and was able to push their airtime selling over mobile money and call it mobile money transaction which encouraged other usage (real money movement later one).

    Fast forward 9 years after MPESA was launched, the offerings are diverse now and even Telco’s can’t ignore the sophisticated services and providers available now.
    The real innovation is coming from independent lead operators

    In the end, Telco led is not the only solution, but relaxed regulation, innovative providers and capital.

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