“Thoughts from the Playhouse”?“Thoughts from the Playhouse” is a series of reports, essays and case studies onall things digital from us at Playhouse Communication Ltd. We plan on producing atleast one „Thought‟ a month but if we find a lot of interesting stuff happening, we‟renot going to limit ourselves. If you would like to subscribe to receive these thoughtpieces, please email us at firstname.lastname@example.orgIntroduction to Mobile MoneyBy Ogo Chizea, Account Manager3rd October, 2011IntroductionThe Central Bank of Nigeria, in collaboration with the Bankers‟ Committee, recentlyissued a circular placing cash withdrawal limits on individual & corporate accountholders, with the aim of reducing the high dominance of cash in the Nigerianeconomy.The „Cashless society‟ policy is due to start in a pilot scheme in Lagos on 1stJanuary 2012 before eventually being rolled out across the entire country.We at Playhouse believe that this Cashless society policy will have an impact onthe growth of digital based businesses in the country so we thought we would givean overview of one of the anticipated „side effects‟ of this policy - Mobile Money.What Is Mobile Money?„Mobile Money‟ also known as „Mobile payment, simply means using your mobilephone to conduct financial transactions. That is a consumer can use this meansinstead of paying with cash, credit cards or cheque. A customer can also use thismeans to transfer money to another person. It is the latest electronic bankinginnovation and revolution changing the lives of millions across the globe.How does this work?Imagine the scenario of a customer wanting to pay for/purchase goods. This is howit could work using mobile money:1. Customer sends SMS of his/her mobile number to the supplier.2. Supplier then sends a request to customer for payment.3. Mobile money then sends an SMS with a bill reference number to the customer requesting the customer to reply with a security PIN given to the customer for approval.
4. Customer authorizes payment by replying the SMS with the said bill reference number and PIN.5. Mobile money authenticates customer‟s security PIN and requests for bank approval on transaction.6. Upon receipt of bank‟s confirmation to debit customer‟s mobile account, mobile money will send a payment notification with details to customer as well as the supplier.7. Supplier then delivers the goods and services.Simple. Also, just got to hope that there isn‟t a long queue of people behind youwaiting to pay.Another scenario. This time, transferring money by SMS. Again, please note that ishow it could work:1. Customer enters recipient‟s phone number and the amount to be sent and customer‟s PIN.2. Customer is asked to confirm the information entered e.g. Send money to 0721 234567, N5,000)3. Customer confirms it is correct and presses „Ok‟.4. Customer and the recipient receive an SMS confirming the transaction.5. Recipient then finds an agent and presents the confirmation SMS, along with tel number and shows original ID.6. The agent enters code into the system.7. Both the agent and the customer will receive an SMS confirming the transaction.8. Agent pays the recipient the cash.Much simpler.What are the advantages?The advantages of mobile money are:1. Affordability2. Convenience3. Security4. Empowering people to forge their own paths out of poverty5. Reduces the cost and risk inherent in dealing with cashAnd the disadvantages?1. Transactional payments can easily fail as messages might get lost due to network issues2. Messages can be slow and can take time for the supplier to get receipt of payment from the customer3. Phone Hacking
What else?Mobile money is not popular in Europe and the U.S However it is very popular indeveloping countries like India, Kenya, South Africa and Tanzania. However Kenyais the most successful in the world with their mobile money system called M-PESAwhich was set up in March 2007 by mobile operators Vodafone and Safaricom.According to researchers it gained a subscriber base of 2.37million a little over oneyear. M-PESA is changing the ways Kenyans manage their money by letting themborrow, save and pay for services more easily. Researchers have also found outthat since its inception, 38% of Kenyan households have at least one M-PESA userin them. The success of M-PESA has been attributed to the environment of thecountry which has an underdeveloped banking infrastructure and high poverty rate.Interesting facts about M-PESA: Their volume of transactions per month has reached $400 million while the total annual transaction volume for Paypal mobile was $600 million for the entire year globally1. The number of transactions passing through the M-PESA system (in a country with a population of 38 million with per capita GDP of less than $1,000) is greater than all of the transactions Western Union had globally.So what about Nigeria?The Central Bank of Nigeria recently issued mobile money licences to 16 firms,namely; Fortis Money, UBA/Afripay, GTBank, Pagatech, E-tranzact, Monitise,Eartholuem, Paycom, FET, Ecobank, M-kudi, Parkway, Corporetti, Chams, Stanbic,MFB and Firstbank. These firms have been given the go-ahead to do a test runand demonstrate their competence, failure in which would mean they lose theirtemporary licences.On the 26th of August this year, Glo signed an MOU with Afripay (a member of theUBA Group), which has obtained a mobile money license from CBN, in preparationof the commercial launch of Nigeria‟s first mobile money service. This deal willenable mobile subscribers open mobile accounts to store Electronic Value(E-Value)of money easily on their mobile phones, using their mobile number as their accountnumber. Customers will also be able to transfer money to any mobile number,spend the money directly from their mobile phone account to pay for goods as wellas buy airtime. This service will be branded as “U-MO” and it has successfully beentest-run through select agencies. Both parties have promised to ensure that theproduct is available all over the country, in both rural and urban areas. Similarly,MTN signed an agreement with GTBank in August this year with the launch of themobile money platform.There are strong indications that Nigeria may become the largest mobile paymentsmarket in sub-Saharan Africa, even though it has not taken full effect. No timelinehas been given yet by CBN as to when it will go „public‟. However, mobile moneyhas started seeing early adoption in the hospitality industry. Protea Hotel, a five star1 mPay Connect Mobile Payments Blog - http://mobilepayments.wordpress.com/
hotel in the country has set up the infrastructure to allow their guests andcustomers to spend all they want without pulling out a Naira note. And Pagatechhas already run tests with DStv which will enable subscriber s to pay their monthlysubscription via their phones.Playhouse’s thoughtsWe believe that mobile money has the potential to make an impact on Nigeria andthe Nigerian digital environment. The benefits are already stated above but there acouple of things we think observers need to keep an eye on; first, how long will ittake to take off? If one assumes that the reason for the high number of unbanked inNigeria is because the majority of the population would prefers to keep its moneyunder the bed, just how willing is this same population going to be trust its money tomobile phones? Especially in light of fears about 419/fraud. So, some time needs tobe allowed for the audience to not only learn about the service but then also cometo trust using it.Secondly, if however we assume that the reason for the high unbanked is becauseof the lack of access for the population to banks, how sure are we that the mobilemoney licencees will be willing to invest in the infrastructure to make their serviceswidely available? For example a key part of the infrastructure is mobile lines yet theword on the street2 is that the mobile operators have decided that the cost ofextending their reach into the rural areas is not worth the cost-benefit and so arefocusing on increasing their range of services in the already covered urban areas.Anyway, looks like another case of „wait and see‟.About Playhouse Communication LtdPlayhouse is a full service digital advertising agency. If you would like to find outmore, visit our website at www.playhousecomm.com, email us email@example.com or call us on +234 (0)13205232.2 Nigeria - Telecoms, Mobile, Broadband and Forecasts - http://www.budde.com.au/Research/Nigeria-Telecoms-Mobile-Broadband-and-Forecasts.html