Abiodun Ogunlabi Senior Manager, VAS, Content & Data MTN Nigeria Mobile Payments; A Telco’s Perspective

Background  Demand for modern banking services is increasing across Nigeria but bank branches availability remains low outside key urban economic centers. ~ 1 bank branch for every inhabitants  Banks in Nigeria are focused on rich urban customers through high cost channels  Low income individuals do not have access to financial services resulting in a substantial unmet demand for financial services  Telcos have recruited over 90million users (MTN > 40millin users) in less than 10 years compared with the banking industry that recruited only 30million account holders after several decades

Mobile Payment Models  Bank –Focused- Financial Institutions as Lead Initiator  Bank Led – Financial Institution(s) and/or its Consortium as Lead Initiator  Non-Bank Led- A corporate organisation as Lead Initiator

Technologies for Mobile Money  Short Message Service (SMS)  Unstructured Supplementary Services Delivery (USSD)  WAP/GPRS  Phone-based Application (J2ME/BREW)  SIM-based Application  Near Field Communication (NFC)

Nigeria - High density urban centres account for less than 50% of the population Page 5

Nigeria – GDP composition and growth Nigeria GDP composition (2005) Nigeria Socio Economic Segmentation (2007) Sources: The Economist Intelligence unit Nigeria Real GDP Growth 1% of the population. Average income $80,000 4% of the population. Income $40,000 - $80,000 10% of the population. Average income $20,000 15% of the population. Average income $4,700 35% of the population. Average income $1,200 35% of the population. Income lower than $470

Life in rural Nigeria

Lagos

Mobile phone is used for more than talk… Source: Ericsson primary research in Nigeria – 2007 Sending money via prepaid airtime scratch card Dare has a younger brother who attends school and is often short of cash, and on occasion calls his older brother to ask for money. Dare then sends an SMS with a scratch card PIN. The brother sells the PIN to a Scratch Card Dealer, who in turn gives him cash. Dare buys a N3000 scratch card in Lagos Dare sends an SMS with the PIN code to his brother The brother sells the PIN number at a Dealer and gets cash (N2700) The estimated commission for converting a N3000 card to cash is between N300 – N500 (10% – 15%) AcurrentMoney Transfermethodintheinformalmarketin Nigeria Hello brother. Here is a PIN for N3000 for your school fees. Love, Dare SendBack

 Only 21% of the adult population has a bank account, which is equivalent to 18 million people  74% of the adult population have never been banked, which is equivalent to approximately 64 million people  40 millions may require financial services according to the Central Bank of Nigeria M-Banking: Banked vs Unbanked  Bank penetration is relatively low  85% of adult females are unbanked  86% of rural population are currently unbanked Source: Efina

Constraints to the Un/Under Banked  Illiteracy (KYC form…)  Far from bank culture (dressing code…) Sweaty, not feeling welcome in banking agency  Deposit/withdrawal to low  Bank opening hours  Transport/Opportunity cost

Needs of the unbanked  An easy way of saving money with easy access to funds  Access to basic financial transactions  Sort out security concerns related to cash  Move from informal sector

Constraints to the Banks  Too busy to cope with heavy traffic  Closed after 4pm  Deposit too low (3,000)  Paper based business cost too high

MTN’s Role  Provision of the technology platforms that will facilitate the rendition of mobile money services. These are Messaging technologies and associated encryption systems ie SMS, USSD, IVR Transaction processing platform Provision of necessary customer care infrastructure that facilitates issue resolution for GTBank  Putting in place measures to mitigate technological risks that could arise from the deployment of MTN’s infrastructure  Facilitate access to MTN’s vast agent network for the benefit of the service.

Challenges Standards  Lack of cohesive technology standards that can provide a universal mode of payment.  The lack of standards will give rise to fragmented versions of m-payments offered by different stakeholders (network operator centric models and bank centric models). Standards need to address security and privacy concerns of consumers as well as interoperability between various implementations. Business Models  Since there are several stakeholders in the system, a viable and sound business model needs to be developed that will provide a framework for revenue sharing. Regulatory Issues  The regulations for players in the financial industry are different from those governing the telecommunications industry, which means that each industry has its own particular standards body to comply with.

Money transfer (MT) Airtime top-upCash in / out Prepaid airtime top-up Load MT Scratch Card Load from Bank Acct Cash-in Cash-out from Dealer Cash-out from ATM Phone to Phone MT Phone to Cash MT International MT Account Management Balance enquiry Statement Change PIN Bill payment Utility bills Goods & services Restaurants Key Mobile Money Services

Key to Success In Nigeria  Ubiquitous Distribution Network  Stable & Reliable services  Affordable fees  Innovations  Enlarging the addressable market

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