Experts see wealth creation as missing link to tackling unbanked population in Nigeria

Over 90 percent of financial technology (fintech) companies are focused on providing payment services leaving only a few to offer savings and lending to individuals and businesses.

Experts at the Nigerian Fintech: State of Play moderated by Economist Intelligence Unit and sponsored by Mastercard, said more operators are needed in the digital savings and lending space because the majority of unbanked Nigerians do not fall among the salaried population. Rather they are involved in businesses from which they earn daily income which does not give them room to plan ahead unlike salaried people.

And, given that many unbanked individuals are not necessarily interested in making payment using online platforms because of issues around trust, charges, and proximity to financial institutions in case they have complaints, hence the high preference for cash among them.

However, when there are more options in digital savings and access to loans, adopting online payment channels could become more attractive.

Patrick Akinwutan, managing director Ecobank Nigeria Plc, said to expand the digital savings and lending market to increase financial inclusion, leaders in the financial services sector have to come to the realisation that the real competition is not among themselves. The major competition is cash.

But the country has seen significant adoption of electronic payment since 2013 when the Central Bank of Nigeria released its policy on cashless economy. For instance, a breakdown of data obtained from Nigeria Interbank Settlement System ( NIBSS) showed that NIP recorded N105.3 trillion from

January to September this year while POS deals were worth N6.4 trillion during the same period. In the first nine months of 2019, total NIP transactions amounted to N75.52 trillion while POS payments were valued at N2.24 trillion during the same period. In January this year, instant money transfers valued at N10.3 trillion were reported by NIBSS, compared to N8.11 trillion in the same month in 2019.

These gains notwithstanding, the market still has a lot of untapped potential according to experts. Usoro Anthony Usoro, General Manager, Mobile Financial Services, MTN Nigeria said opening up the market for other players could unlock these potentials and bring the country closer to achieving its target for financial inclusion. As of 2019, the CBN has granted 79 licences to players in the payment system, while another 26 have approvals-in-principle.

The CBN recently issued Payment Service Bank (PSB) licences to two telecommunication companies including 9Mobile and Globacom, and one financial services player Unified Payment. The apex bank is yet to issue the licence to applicants like MTN and Airtel which already have digital banking footprints in countries outside Nigeria. While Globacom is still planning to launch, 9PSB has rolled out its digital banking services on Tuesday, 24 November 2020. While the fourth largest telco now has the first-mover advantage, it only controls 6.21 percent of the market compared to MTN and Airtel that collectively own 70 percent of the mobile market in Nigeria.

Usoro who said the big elephant to solving financial inclusion is creating a level playing field for players, also noted that, “We cannot be seeing ourselves as competitors because we are still at the stage of collaboration and cash is the main competition.”

For him, addressing the macroeconomic issues and providing clarity and speed to implementation of policies will go a long way to enhance collaboration among players in the market.

Ngozi Megwa, SVP, Digital Partnerships, MEA, Mastercards says collaboration needs to happen at different levels including with fintech companies in the country. This is why the company has developed different partnerships with many fintech providers because it recognises that addressing financial inclusion is a collective responsibility.

“Mastercard Accelerate gives startups and emerging brands support and assistance for every stage of their growth and transformation, from market entry to global expansion,” Megwa said. “For our financial institution partners, Accelerate provides access to the next generation of innovators, with a portfolio of startup partners and fintechs and fintechs ready to co-create and collaborate on new experiences.”