Frequently offered by a mobile network operator (MNO), mobile money is fast becoming the ideal payment channel for commerce globally. The service enables users to manage an account for receiving, sending, and making payments for goods and services using their mobile devices.
According to the GSM Association’s (GSMA’s) State of the Industry Report on Mobile Money 2023, 781 million of the 1.6 billion registered mobile money accounts globally—which increased 13% year over year (YoY) in 2022—are in Africa. The report also includes that mobile accounts in Africa have increased by 17% and 22% in 2021 and 2022, respectively, reaching a total of $1.26 trillion in transactions.
According to the 2023 research, sub-Saharan African regulatory reforms, particularly in Nigeria and Ethiopia, where mobile money adoption increased quickly, were a contributing factor to the development.
Sub-Saharan Africa accounted for over two-thirds of the growth in mobile money accounts. According to the report, activity rates in West Africa rose steadily between 2018 and 2022. More people are signing up for mobile money accounts than in past years, and many of those who have done so are actively using it for their daily requirements.
West Africa now leads the way, not only on the continent but also globally, as the region’s global share of registered mobile money accounts increased from 11% in 2021 to 33% in 2022.
Mobile Money is key to furthering the financial inclusion agenda in Nigeria, as it enables the delivery of financial services at a lower cost. However, the issues of cost of usage, penetration, and poor infrastructure have hampered the normalization of mobile money in Nigeria.
Bleak Outreach
The number of mobile money accounts in Nigeria was over 60 million in 2022, according to Statista. However, the stars have yet to align as regards mobile money in Nigeria. While mobile money adoption has increased in Nigeria over the years, it is important to note that most of the adopters are banked individuals.
Interestingly, most mobile money operators in Nigeria have, over the years, targeted overbanked individuals living in urban areas. The larger concentration of mobile money services in areas filled with people with overloaded bank accounts and different payment methods tells a better story of the issue of online banking in Nigeria.
Mobile money is a crucial lifeline for people living in disconnected and underserved areas in Nigeria to receive financial services, even while those in urban areas are well supplied by a variety of financial services. Mobile money struggles to take hold in certain areas. When you consider it, there is a significant dissonance. Customer education is essential for the success of mobile money.
High Transaction Costs
Operators charge customers to use their services, and developers deduct a fee from each transaction. Consumers have complained that sometimes agents charge more even though the Central Bank of Nigeria has stated that the maximum total cost should be 1.25% of the transaction amount, up to a maximum of N2,000.00 (US$2.44).
Most mobile money agents charge outrageous prices for their services, although they are closing the unbanked gap by bringing more individuals into the financial system. As an example, some operators imposed over 30% transaction fees during the recent naira shortage. Particularly in regions with little to no competition, there is little to no oversight of the operators.
Poor Infrastructure
The Nigerian financial services system continues to face significant obstacles due to poor infrastructure. The efficient operation of mobile money transactions can be hampered by slow internet connections and servers.
The Central Bank of Nigeria (CBN) has improved the situation by introducing Payment Service Banks (PSBs). Even though this is insufficient, PSBs have developed effective banking models by utilizing firms’ strengths.
PSBs are a type of bank that operates on a smaller scale by utilizing technology services through mobile and agency banking to mobilize deposits and facilitate transfers from unbanked customers in rural areas and any location where they exist in Nigeria.
It is expected that building on the infrastructure of MTN and Airtel will disrupt the payment landscape and introduce innovative services in rural areas, even as it services the overbanked.
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