Global firms and operators will be looking at the mobile money market in 2016. They will also keep an eye on developments in FinTech to drive and bring banking to the grassroots as canvassed by global money transfer companies and financial sector regulators, writes COLLINS NWEZE.
Alix Murphy, Senior Mobile Analyst at Global Money Transfer app WorldRemit, believes that Mobile Money, FinTech and financial inclusion will drive global economies in 2016.
For her, financial inclusion will mean big business, insisting that making serious money and reaching the unbanked have not always gone hand-in-hand. “We’re now witnessing a major shift in thinking as big name players in payments and other industries are talking openly about the huge opportunity in reaching unbanked customers – and not just as a corporate social responsibility gimmick,” she told The Nation.
To buttress her point, Murphy says PayPal, Walmart and Coca Cola are just a few companies pursuing innovative financing for small businesses and products targeted towards underserved consumers, while a swathe of new payments start-ups have taken on financial inclusion as a goal.
“What is more, digital payments are now being actively promoted by global policy-makers as critical to economic stability and financial inclusion for the world’s poorest,” she said.
Murphy believes next year’s biggest fintech innovations will come from the developing world. “Forget about contactless payments apps and challenger banks: The real life-changing innovation is not happening in the developed world but in emerging market economies. FinTech heavyweights in areas like m-Insurance, microloans and Mobile Money,” she said.
For her, a financial service for unbanked people using just a basic mobile phone – are transforming lives, businesses and whole economies across Africa, Asia and Latin America.
She says mobile money in particular has become the foundation for a range of other innovative financial products like life and health insurance coverage paid for by topping up prepaid airtime, interest-bearing savings accounts for non-banked customers, instant personal and small-business micro-loans, and even investment bonds bought through a mobile phone.
“The 2016 will bring wider acknowledgement among fintech companies in Europe and North America of the lessons and experience to be gleaned from their peers in the developing world,” she says.
Murphy says mobile-to-mobile will be the benchmark for international money transfers. “In 2016, international remittances are expected to rise to over $600 billion, but most are still sent in cash informally or via risky high-street agents. As Mobile Money continues to gain popularity in the developing world, instant mobile-to-mobile transfers will become the global standard for sending money from person to person across distances,” she says.
According to her, 2015 saw a series of ground-breaking partnerships between Africa’s largest telcos, banks and global money transfer apps like WorldRemit. This trend, she insisted, will continue through 2016 as consumer expectations settle on instant mobile-to-mobile transfers as the benchmark for international remittance.
Remittances
The World Bank Migration and Remittances Factbook 2016 showed that Nigerians living abroad sent home $20.8 billion in 2015. The figure, it said, is by far the largest volume of remittances to any country in Africa and the sixth largest in the world.
“The United States is the biggest remittance sending country to Nigeria, followed by the United Kingdom. Nigerians received $5.7 billion in remittances sent from friends and family members in the US and $3.7 billion from the UK in 2015. Nigeria is also the third largest destination country for migrants from other African nations,” it said.
It says a quarter of a billion people around the world are migrants, and over $600 billion in remittances are sent annually.
The global lender says international remittances to developing countries reached over $441 billion in 2015, more than foreign direct investment and trice more than official aid flows. It says 34 per cent of all international remittances are sent between developing countries.
It disclosed that remittances constitute more than 10 per cent of Gross Domestic Product for 25 countries. It insists that international remittances have been growing steadily and remain stable even during episodes of financial volatility.
“In 2015, the number of international migrants surpassed 250 million, a quarter of a billion people, globally. International migrants now represent more than 3.4 per cent of the world’s population. South-South migration is now larger than South-North migration. Over 38 per cent of international migrants have migrated from developing countries to other developing countries. 14.4 per cent of international migrants are refugees,” it said.
Speaking on the development, Murphy, says the World Bank’s latest report shows that countries have now hit two significant milestones – quarter of a billion migrants globally and $600 billion of remittances sent annually.
“More than ever, we live in world of mobile and connected people whose financial ties extend across the planet. At WorldRemit we see the technological infrastructure evolving to meet these changing demands – in particular the convergence of mobile connectivity, instant messaging and international money transfers,” she said.
She believes that despite being the biggest economy in Sub-Saharan Africa, Nigeria’s financial system is still deeply fragmented, making sending and receiving money very challenging for ordinary Nigerians. According to her, 56 per cent of Nigerians are unbanked, so offering a variety of pay-out options, including direct to bank account and instant cash pick-up, is extremely important for reaching everyone in society.
“At WorldRemit, we process tens of thousands of international money transfers to Nigeria every month sent by Nigerians in the diaspora using our mobile app or online. It’s technology like this which is helping to bring down the costs of remittances and transform the lives of Nigerians everywhere,” she disclosed.
The report also showed that technology is significantly driving down the cost of sending money internationally adding that the average global cost of sending remittances fell to 7.37 per cent, still far higher than global targets.
“Sub-Saharan Africa is still the most expensive region to send money to at 9.53 per cent. Online remittance products are the cheapest way to send money at 5.57 per cent. Account-to-account transfers via commercial banks remain the most expensive (11.1 per cent), followed by agent-based money transfer operators (6.2 per cent) and post offices (5.9 per cent),” it said.
The World Bank also insisted that a combination of improved connectivity, low-cost Smartphone and increased competition have contributed to lower costs.
Some of the benefits to the consumer include security, convenience, accessibility, speed and ease of transaction, competitive charges, access to quality advisory services, and integrity of transactions. Other not-so-obvious benefits, which are nonetheless important, are better cash flow management, enhanced financial planning, and inculcation of sustainable savings habit, which boost financial security and comfort in retirement.
The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) are expected to boost the use of the mobile money and make the banking platform more acceptable to the citizenry.
The regulators have taken further steps in enhancing financial inclusion by finalising a framework to extend deposit insurance cover to individual subscribers of the Mobile Money Operators (MMOs) in the form of deposit insurance.
When approved, deposit insurance cover of up to N500,000 to mobile money by the corporation is expected to boost the use of the mobile money.
The rollout of the regulatory framework for mobile money payment services in Nigeria are aimed at revolutionising the Nigerian payments system in tune with global developments as well as facilitating financial inclusion in the country. The development has led to the licensing of 24 MMO.
“To engender confidence of the public in subscribing to the products of MMOs, the NDIC has considered as imperative the extension of the deposit insurance to the individual subscribers of MMOs in the form of `pass-through deposit insurance,’’ Managing Director, NDIC Umaru Ibrahim said.
According to him, the framework for making the pass-through insurance scheme operational is currently being finanlised by the corporation. He said the corporation had guaranteed the payment of deposits up to the maximum limit in accordance with its status.
CBN Director, Payment Systems Unit, ‘Dipo Fatokun, said apex bank believes that mobile money and agent framework is the frontier of cashless boom.
“Mobile money is the next thing expected to transform CBN’s cash-less policy. The apex bank believes that such initiative will aid both telecommunications and banking industries to further serve Nigerians better,” he said.
Nigeria’s telecoms subscriber base, put at 131 million as of September, last yaer by the Nigerian Communications Commission (NCC), should play a major role in bringing the unbanked into the formal banking system.
With over 50 per cent of Nigeria’s adult population unbanked, mobile banking could be the catalyst that will help quicken the adoption of banking services by this critical segment of the population.
Offshore portfolio managers appear to be similarly persuaded and they are already positioning to take advantage of the expected growth in mobile money.
For instance, Carlyle Group, a United States-based global alternative asset manager with $203 billion of assets under management across 129 funds and 141 fund of funds vehicles, recently acquired a $147 million (about N27 billion) minority stake in Diamond Bank, partly on the strength that the bank’s new mobile banking service “will help rapidly boost the lender’s customers and profits.”
The CBN said it avoided the implementation of the telco-led model in the mobile money operation to have full control of monetary policy operations. The policy, it said, will also enable it minimise risks and ensure that the offering of financial services are driven by organisations it licensed.
In new guidelines, the CBN said the telco-led model, where the lead initiator is Mobile Network Operator (MNO), shall not be operational in the country. The apex bank said the vision of achieving a nationally utilised and internationally recognised payments system necessitates strategies to bring informal payment transactions into the formal system.
This framework has identified two models for the implementation of mobile money services namely: Bank-led financial institution(s) and/or its Consortium as lead initiator and non-Bank led-a corporate organisation duly licensed by the CBN as lead initiator.
