Emmanuel Okoegwale, principal consultant at MobileMoneyAfrica, has said that there need proper understanding of the risk involved in providing financial services through the mobile phone to banked and unbanked populations using the agent networks.
Okoegwale’s call came on the heels of the expected licensing of applicants from financial institutions and independent providers forming consortia eagerly to provide mobile payment in the country.
He told Nigeria CommunicationsWeek that the mobile payment industry will change the way consumers interact with financial services and make payments.
According to him, mobile financial services will include consumer accounts information, updates, alerts, bill payments, person to person transactions and remittances.
Okoegwale said to achieve this that there are several risks to be dealt with and mitigated with workable and proven approaches in a new entrant country like Nigeria.
He said, the outcomes of not putting mitigants in place might be severe and will determine the success of the outcomes.
According to him, there are numerous risks like systemic, reputation, liquidity, legal and operational.
The consumer is to be protected and potential effects of risks mitigated so as to establish service level that can protect them. In situation where there are shortcomings, the consumer will be faced with some situations that might have significant negative effect on service delivery.
Scenario One
Customer is charged illegal side fees that are not authorized by the mobile money provider?
Agents are signed on to serve the provider as the last mile to the customer and most customer facing transactions will take place at the agent point. Agents can take advantage of customers’ illiteracy or limited pricing information to charge extra charges. This presents operational and reputational risk for the providers.
The mitigation for the above will include, providers using picture based simple diagrams to explain fees charges for different service levels and must be conspicuously displayed at all agent locations. This should also be translated into different local languages and mandatory pricing disclosures must be strictly managed at agent locations.
In case of customers attempt to seek pricing clarification from provider aside the agents, providers support centres should be accessible and able to provide such information in a clear and easily understood format.
Scenario Two
Provider’s Agent collected cash from client but fails to provide e-money or transfers the amount to recipient bank account or desired third party.
Agent receives funds from a service user but misdirects funds to the agent’s own benefit. This situation could arise in one of two ways:
The consumer could be an existing customer without their phone with them, so they would not receive the transaction confirmation while with the agent.
The consumer may not be a customer but requests that the agent sends money to an existing customer, so does not receive independent phone confirmation of the transaction.
Mitigation:
Require that service users receive, and know they have a right to receive, clear confirmation that funds have been received and where they have been directed. This may include a paper receipt, if the customer does not have a phone. Service providers should also enforce transaction log books to be signed off by the agent and end users. This can be the only evidence that will be available for a future audit trail.
End user education and awareness that users should have their cell phone available to ensure receipt of transaction Confirmations. Cell battery level should be checked before transactions and sms inbox availability is key.
The above scenario is a Reputational risk which could also lead to legal risk.
Scenario Three
Individual poses as agent to collect deposits or payments from unsuspecting customers. Some criminal elements will take advantage of the new systems to defraud end users by posing as agents especially in the rural outpost or busy commercial centres to pose as agents.
First steps is to rely on the end users education to transact only at recognized and registered agent location with consistent and verifiable Agent ID which is clearly displayed at the agent location and in some cases where rogue agents are on the increase, providers may adopt a colour code same method used by Mobile network operators at airtime vendors outlets.
Ability for any user to check status of agents anytime should be build into the system. Some agents might had been decommission or deactivated but are still actively trading. Simple sms solutions like sending agent ID to a short code should be provided. Example,send LAG 027 to short code 3030 ( where Lag means Lagos, 027 – Agent Number).
The regulator will also update agent list on a periodic basis and make such information available to the public.
Above represents an operation, reputational and legal risk for the provider.