At the last Vanguard Economic Forum Series, which focused on leveraging Fintech innovation for unlocking growth and competitiveness in Nigeria’s mobile money market and payment ecosystem, Professor Olayinka David-West, Academic Director, Lagos Business School, Pan Atlantic University, delivered the keynote speech. She harped on the importance of adaptation of the innovative products and services to the largely informal sector of the economy to enhance financial inclusion.
By Prince Okafor
FIRST of all I think we need to understand financial inclusion. What is financial inclusion? It says the access to unleash affordable financial services. Affordable is key because not everybody can afford paying for account maintenance of N500 a month and to address financial inclusion effectively, I think there is about three things we need to think about. Innovation is one and I think innovation will help us address the issue because when we talk about inclusion, some people say oh but Nigerians are not literate, they don’t have formal education. Does an 18 months old child have formal education? No. But if you give an 18 month child a phone, they will operate it. So why can’t we give baba selling garri a tool that she can use.
It has nothing to do with literacy; it is about how we design knowing the capabilities of the people we are trying to serve. So, is a user interface problem that we need to think creatively about. When we talk about affordability, you know the processes of putting people, branches, resources, from the ground is expensive.
The whole idea of digital is that we can self serve and that is the easiest way we can break down the cursor. We have to be able to digitize to ensure that the barest minimum interaction is required in the branch. Because every time we add that human cost it is going to increase the cost of the service.
Also, the other thing is about access tool because this is critical and information is important. How do we ensure that at the last mile people can access financial services and this is where the agency banking comes in? We need those agents on the map because they are the ones that also have a trustworthy relationship with the community they are operating in. They are the ones that know your financial cycles they know what business you do. They know when money comes in if you are a civil servant or a teacher and they serve you daily.
Distribution is also critical because whether we like it or not when we talk about the likes of M-Pesa in Kenya, they only succeeded because they were available in every nook and cranny. There are some places in Nigeria where you have to travel three hours before you get to a bank branch and that is the reality. We sit in Lagos thinking that there are bank branches everywhere. Nigeria is actually a very different country outside of Lagos and we need to recognize that.
So where are the opportunities? I didn’t put person to person opportunities because I think that ship has sailed already. When you think about telecommunications (send me credit), what is that? It is the cheapest way of doing a person to person payment in Nigeria and we have been doing it because do not forget that I need to send credit to somebody today I can walk downstairs and get it because credit is already accessible, it is a commodity, it is available. I buy it and that becomes a store of value; a number; I send that number to somebody else. That person can take that number, convert it into cash at a discounted rate but think about it, it is a remittance or is it not? So you find out that the telcos has already been competing with the banks for the last twenty years because it is cheaper to do that with recharge card than to do it by trying to go to the bank, and both are at the same price and if I have to add my transportation cost, going to the bank is more expensive because the recharge card is already more accessible and available wherever.
SMEDAN (Small and Medium Enterprises Development Agency of Nigeria) and the National Bureau of Statistics (NBS) just released their 2017 results with approximately 41 million Micro Small and Medium Enterprises, MSMEs, in Nigeria and you know what, 99.8 % of them are micro and that means we are paying for goods and services everyday through this number and until we begin to think about how we will digitize the ability to collect at this level we are not there yet in distribution. Imagine paying for roasted plantain and groundnuts on the street digitally; Is it possible? And that is what we mean by micro payment.
There is more N20 moving up and down than there are a hundred thousand Naira and when you think about the frequency, monitoring the frequency of those twenty Nairas, is phenomenal and that means we need systems to be able to capture those twenty nairas and it is also about making one naira out of every twenty naira but then there are millions of those every single day.
For instance the first thing commuters do when their bus breaks down is to try to get the refund of their money unconsumed and most of the time the conductor says he does not have change. That is a need but how are we innovating around it?
And then we think about how to take taxes and levies. It is still branch related. Can’t I just sit in my house and do a lot of those?
Same with the government payments. Imagine if all the government contractors had to be paying digitally. Look at what we are doing with pensions, how do we digitize them? Because when you think of some of the industry value chain we are going through.
We need to start looking at what is going on and trying to solve today’s problems because they exist every single second. We are not saying you should give them a solution that is different to what they know. It is about how we need to mimic and digitize what they are already doing. It is not about reinventing what they are doing.
We need to open our eyes and realize that the population we are trying to reach are not in this room. So, let us not build products and services more for ourselves. Let us not build more apps for ourselves. Let us go down the market and bring more to the pool rather than re-circulating what we already have.
Whether we like it or not, we are innovating to a certain degree, but what I want to draw out is in the area of our performance in idea absorption. We are still not very good in that area. That is the only area where we almost just got 50 percent. How do we take ideas and create them and absorb them through the organization and it requires a different kind of thinking; it takes a different kind of strategy and approach to everything but it is also that continuum because it is not static.
So I think the good news is that we are there and we did this by looking at some banks and sub index as well. We are close but we are not quite there yet. We are there in terms of strategy, in terms of idealization, but absorption is low, execution is okay. Benefits and impact again is okay. These are just my own ideas and thought.