Banks, Telcos at War over Mobile Money

An unnecessary cold war has broken out between the financial and telecommunication sectors of Nigerian economy over who controls mobile payment, the forecasted next big thing for financial inclusion and lucrative returns for operators, Nigeria CommunicationsWeek can now reveal.
It was never hot topic until telcos and banks started two years ago to eye the so-called uneaten pies following report that the mobile money market would be worth as much as $7 billion in 2012.
Mobile money is now the buzz word in Nigeria because riding on the over 70 million phones in the country; it can compensate for the uneven spread of banking halls, bad roads and slow postal services and so on.
Nigeria CommunicationsWeek gathered that attempts by banks and telcos to launch mobile money services have failed largely because of regulatory barriers, lack of interoperability with banks and other operators, service complexity and bad user experience elsewhere.
But the Central Bank of Nigeria (CBN) has opted for the creation of an enabling regulatory environment as a policy path towards achieving availability, acceptance and usage of mobile payments services. The policy is expected to open up the market.
As Nigerians await mass mobile money operations, local banks claim they have long history of managing money and confidence of depositors and businesses, and therefore better positioned to deliver mobile money particularly person to person payments (over the mobile phone infrastructure).
Disagreeing, the telcos with ever growing subscriber base insist that in their short life span that they have touched more lives and established strong nationwide distribution systems and excelled in handling micro-payments worth millions on a daily basis in the form of top-ups.
Nigeria CommunicationsWeek gathered that the telcos have every reason to feel so as their counterparts in some emerging mobile money markets have taken the lead with banks as partners.
For instance, M-Pesa is a Safaricom (Telco) service in Kenya allowing money transfer using a mobile phone. M-Pesa has a banking partner and is one of the world’s most studied models.
Elsewhere, MTN pioneered mobile banking in South Africa in 2005 in a partnership with Standard Bank.
These are however examples of markets where the financial regulators were pro-active instead of allowing the innovators to enter and create a market and then they decide how to regulate.
The new CBN policy on mobile money queued behind these markets and favours banks led model ahead of telcos and independent scheme operator.
The CBN identified three major payment models in “the regulatory framework for mobile payments services in Nigeria” recently released.
“This framework has identified three major models for the implementation of mobile payments services namely; Bank –focused- financial institutions as lead initiator, Bank led – financial institution(s) and/or its consortium as lead initiator and Non-Bank led a corporate organisation as lead initiator” the CBN said
According to the CBN, the lead initiator shall be responsible for ensuring that the various solutions and services within a mobile payment system meet the entire regulatory requirement as defined by it.
Nigeria CommunicationsWeek gathered that the war over who leads any of the initiatives is needless because both are complementary to existing financial services.
For instance, in mobile payments, the question is not who is keeping the money but who is dealing with the customer. If the customer is dealing with the bank, the mobile operator becomes a mere conduit.
The most pressing concerns should be the provision of adequate protection for consumers, ensure economic stability, provide interoperability of electronic systems and guarantee security of transactions.