Financial inclusion as a challenge is a mysterious concept. Experts agree that there is a pressing problem that needs immediate solution. Scary numbers are thrown about. Two billion people are excluded globally and a whole lot more are underbanked, lacking access to the suite of financial services they need to live, do business and thrive. There is a consensus that the current traditional banking system; driven by the brick and mortar infrastructures and underpinned by their legacy platforms holds little value for the excluded who at worst lack financial literacy, are innumerate and could do with a financial system that is affordable, simple, flexible, agile and solves more problems than it creates.
In Nigeria, the problem is acute and The Central Bank, the Nigerian Communications Commission and other stakeholders have been very active. They have charted roadmaps, sponsored seminars, undertaken researches and has held numerous meetings as they seek to chart a formidable financial inclusion roadmap.
However, whenever the stakeholders gather in their air-conditioned rooms, clad in three piece suits, colourful ties and squeaky clean shoes, they exchange ideas, make resolutions, formulate policies and launch products that adds no value in the quest to deepen financial inclusion in Nigeria.
In such confusing sessions, some banks will show off their latest Artificial Intelligence programme that will replace Bank Tellers. Some will launch their Crowdfunding platform, others will start an impressive tirade on how Machine Learning and Big Data will revolutionize financial services. At the end of the session, thunderous applauses will ring out and yet the smallholder farmer, deep inside Mashegu in Niger State, Baruten in Kwara, Yala in Cross River or Otuocha in Anambra State is forgotten. The stakeholders will retire for tea or lunch and at the end of the day enter their big cars to their massive offices in Abuja or Lagos while congratulating themselves.
The truth is that the financial inclusion challenges bedeviling Nigeria is wildly different from the one confronting Canada and United Kingdom. In developed economies, the demography is different. The literacy levels are higher, there are increased access to critical infrastructures like good roads and network services due to industrialization. Therefore the higher standard of living means that mobile penetration are optimal. These are the countries that should be launching financial inclusion services through products that leverages Machine Learning, Cloud Computing, Artificial Intelligence or even Internet of Things.
Not Nigeria.
There is a discomforting disconnection between the excluded and the Nigerian financial services system. The disconnection is in value proposition. It is the gap between what the butcher in Tangazza, Sokoto needs and what The CEO of a Nigerian Bank is delivering. The Butcher wants a payment system that will enable him deposit money and withdraw conveniently. The butcher would want the ability to process transactions offline securely. The CEO is offering him that finds it difficult to utilize his basic phone, an artificial intelligence powered chatbot that will assist him with paying bills, trading stocks and buying airtime. These suites of products is a mismatch. The system places the cart before the horse. In this case, the tail wags the dog.
The system knows precisely what the financially excluded needs. At least they know that a robust, effective proposition accounts for a customer’s pain points and proposes a product that will address them. Therefore, when a bank states that they expect their Artificial Intelligence and Machine Learning platform to spearhead their financial inclusion quest, it reveals a disconnect. That should not be the purpose and certainly, without mincing words, chatbots and cloud computing has nothing to offer the excluded in Nigeria especially when we confront the realities of their demography. The excluded are either illiterate or semi-literate, despite mobile phone penetration ranked high at 84% in Nigeria according to the Nigerian Communications Commission, a lot of the excluded lack access to mobile phones and their locations often lack access to mobile network services. Indeed, the NCC has been confronting this issue headlong but has made incremental progress at best. Mobile network is a critical requirement for the basic mobile money offerings that rides on USSD. According to an article published by Business Insider, The number of Smartphone users in Nigeria stands at 97 million. This figure is impressive until one considers the demography of the users and its spread. Further still, a juxtaposition with the population of the country, touted at 180 million people reveals that only roughly half of the population have smartphones. Smartphones are usually clustered in the cities and often concentrated in the hands of the middle class who can afford to own two or three smartphones.
So maybe the mobile phone might not replicate its MPesa utility in Nigeria. Particularly, I believe that the payment system that will deepen financial inclusion in Nigeria measurably is the system that simplifies transaction, give consumers decisive powers over their accounts while sparing them from the irrelevant processes. That system will be underpropped by a strong agency network. A customer in remote locations should be able to replicate the basic banking scenarios at an Agent Location. She/He should be able to present an ID, thumbprint or input a PIN to withdraw or deposit from her account. A basic, low-end phone equipped with calls and text messaging capacity costs averagely between $10 – $20. This is costly, especially when About 152 million Nigerians live on less than $2 a day, representing about 80 per cent of the country’s estimated 190 million population (Africa Development Bank). In sharp contrast, an ID card costs less than a dollar and the government can provide that free of charge. That could be a veritable payment tool and will not take too much thought.
The problem seems to be a lack of will. Nigerian entrepreneurs are incredibly smart. They have seen the opportunity in the sector. Foreign Direct Investment into innovations or products targeting financial inclusion in the past 5 years is already above $20m. There is an entire unserved segment of the market to capture and the potential return on investments far outweigh the risks. At the danger of sounding crude, there is money to be made by striving to include the excluded. The stakes are about over 70 million new customers. According to EFINA, billions of Naira circulate through the informal sector (Informal sector according to EFINA is anyone who do not have any banked or formal other products, but have access to or use only informal services and products eg. Esusu/Ajo) which could be a source of resource mobilization resulting in a positive impact on Nigeria’s economic growth and development. Their earlier Access to Financial Services in Nigeria 2014 survey revealed that 25.5 million adults save at home; if for illustration, just 50.0% of these adults were to save N1,000 per month in the formal sector, then up to N153 billion could be mobilised annually, this indicates there is a significantly large un-tapped market for formal savings products which is sufficient data for CEOs of Financial Institutions could craft a business strategy around.
Does it mean that our business development experts and corporate strategists are not seeing this palpable need and opportunity to reach the excluded through a deliberate disruption of the financial system driven by innovative financial technology and a strong value proposition? Are we victims of a self-imposed glass ceiling that advises a one-size fits all strategy to solving the exclusion puzzle? Must it be either Mobile Money or the highway?
Some FinTech organizations have started looking at the possibilities of leveraging disruptive processes and technologies towards driving the inclusion of the unbanked. Launching QR based payment platforms that can enable beneficiaries access their accounts at remote locations ID cards, NFC payment technologies and Biometric-based payments models, layered on top of an innovative agency network and management model, Fortis Mobile Money has emerged as a partner of choice for both The Federal Government and International Non-Governmental Organizations. The organization wields a most critical understanding of the base of the pyramid propositions and has included offline options for their cash transfer programs. Digital Finance for Rural Agricultural Development (DIFRAD) which was also launched to wide publicity found an innovative way to fund smallholder farmers and has currently channeled funding to fifty farmers who has farmed six hectares of rice in Kaduna by partnering with banks and cooperative organizations.
Suffice to note that these drives were established in partnership with Banks, Microfinance Banks, Cooperative Societies and Payment Terminal Service providers because the organization is running on a mobile money license from The Central Bank of Nigeria.
There is a war. A war of will. The will to innovate. To create something new.
Regulators are willing to entertain innovations from the private sectors and have expressed a willingness to run an agile system that will protect consumers’ interest and still allow innovation to have expression.
The only thing holding us back is a stubborn refusal to give consumers what they are asking for. The Bible cites that as wickedness, for “which of you fathers, if your son asks for a fish, will give him a snake instead?”
In business, that is no way to get results.
Pius Okwuanya is a Digital Finance Professional with avid interest in FinTech innovation and disruption.