December 18, 2014
This piece was first published on NextBillion.
As the largest among the fast-growing economies of Africa, Nigeria is a promising market for mobile financial services. More than 80 percent of adults have access to a mobile phone and a sizeable number (64 percent) own their phones. In addition, there are now more than 20 licensed operators providing services across the country. Yet, mobile money has not taken off as expected, though almost 57 percent of Nigerian adults (50 million people) have no access to formal financial services. According to a Financial Inclusion Insights study conducted in July 2014, only 0.1 percent of Nigerian adults actively use mobile money.
The low rates of banking participation are not the result of a lack of interest. In fact, 84 percent of those who have never had a bank account report that they would like one.
So what accounts for this disconnect?
New research conducted by Grameen Foundation, in partnership with MasterCard, shows that user experience is a major factor in the stunted growth of mobile money services, especially among poor users with limited or no formal banking experience. (Click here for a related PowerPoint presentation.) Our study, which builds on the groundbreaking research conducted by EFInA, found that many were unaware of the services or had limited access to agents and other logistical challenges. Some were turned off by inflexible terms and high fees, while others simply didn’t trust the system.
We believe there are some key steps operators can take to increase the adoption and the continued use of these services.
Understand your audience and market to them
We found that most advertisements for mobile money services are in English (which we found most of our survey participants do not speak as a first language), are not posted in low-income areas, and/or portray the services in ways that will appeal more to middle-class audiences. This is compounded by the fact that 80 percent of Nigerians rely on family and friends for financial information and advice. Mobile money operators are therefore missing a significant segment of potential customers, especially among the poor or people whose personal networks are uninformed or inexperienced with these services. To address this, operators need to target potential customers in local languages and through social and cultural networks, using non-technical terms and images that can be easily understood.
Give better support to your agents
The value of agents should not be underestimated. Agents are part of the communities they serve and are often the first to introduce users to mobile money. In our study, 40 percent of people learned about the services from their agent. That local connection also inspires invaluable trust. For example, though studies have pointed to mistrust as the top reason non-users cite for not using mobile money in Nigeria, our study found that the trust customers place in their agents can be strong enough to override that suspicion. In some cases, users were willing to leave their money with agents to deposit later when network problems or power outages interrupted transactions. Operators need to treat agents as part of their business rather than as unconnected independent contractors. This means ensuring they are well trained on all the products and services, have access to capital to manage the liquidity challenge, and have strong advertising and professional support.
Design your products for your customers
For many users, the ease of using mobile money is quickly negated by monthly service charges and high fees for early withdrawals from accounts. One woman in our study, Mrs. Badmus, was dismayed when an agent deducted 300 Naira (USD $1.67) in fees from her savings account, leaving her with only 200 Naira (USD $1.11). Grameen Foundation’s past research has consistently shown that financial products designed with the poor in mind should provide the lowest possible barriers to entry and be as flexible as possible. Operators, therefore, need to ensure that they are offering services that meet the needs of their users and in a way that makes them feel valued and supported. These include making sure transactions of all types take the minimum number of steps and the least amount of time, and offering consumer protection and redress mechanisms for any new product or service.
As we’ve seen in other countries, rapid growth in mobile money usage can lay the groundwork for other types of financial products – such as savings, loans or insurance – to then be layered on top of the mobile payments systems, leading to dramatic increases in financial inclusion. In Nigeria, we believe uptake will increase when a wider range of users begin to perceive the services to be targeted at them, easy to access and use, helpful to their financial lives, and trustworthy.
The full report on financial services and mobile money in Nigeria, Opportunities for Increasing Access to Digital Finance in Nigeria, is also available here.