A money-changer (sitting right, a wad of bills in his hand) sits in the early morning at the Seme border between Benin and Nigeria, as a woman rushes by the car of Joel Patenaude, waiting in line to find a guide for the border crossing.
Mobile payments has widened eyes throughout the financial services, technology and international development industries these past few years. It’s the next big thing, a present-tech movement that will revolutionize people’s lives and permit leapfrog progress in those parts of the world most in need of broadening financial inclusion.
On the ground though, away from the conferences, the blogs and the Twitterverse, it’s a more complex story. If Starbucks and Safaricom demonstrate what’s possible, dozens of other implementations demonstrate real-life, on-the-ground hurdles. The technology has to work and fit local conditions, the regulators must approve, business partners must commit, and the public must adopt. And meanwhile, bills must be paid. The planets don’t align all that often and when they do, there are not always masters-of-execution ready to pounce.
I’ve spent the past couple of years working with a Nigerian e-payments business and have experienced these hurdles firsthand. From customer and agent complaints about document requirements, to integration hurdles, to weaknesses in mobile operator data networks, it’s a long list. Innovation seduces, but its accompanying change frightens. Most everyone agrees change is coming, but many prefer that others act first, that rules be relaxed and costs averted.
This reality means that those of us doing this work must keep aware of research and experiments and be street-corner evangelists; I’m often looking for ways to raise my soapbox. I read broadly, and much of what is written about Africa in general, not regarding payments, is about economic integration (see, for instance World Bank report here).
Africa is arguably the world’s most fragmented continent with 54 countries, each with nationalistic tendencies. Economists measuring trade say it is curiously lacking between neighboring African countries. It may be that official statistics fail to capture informal trading, which dominates, but there is also a strong sense that there is pent-up activity that could be unleashed upon identifying and clearing blockages. As mobile has become a movement in the payments industry, cross-border is a movement within the upper echelons of African governments.
I thought it’d be fun to combine them. Perhaps the individual regulators, presented with the need to cross-regulate, might learn from one another. Perhaps the payment service providers who aggressively compete within national markets might be willing to open dialogues regarding new markets. Perhaps, at the edges of the national markets there are some unique opportunities for elusive service interoperability. Perhaps some border activities, from foreign exchange to customs, could incorporate these payment systems and boost overall adoption. That was the genesis of this project.
My first decision was to select a study area. With a limited scope project, I wanted to pick a manageable and meaningful area. Reading through a report by UN-Habitat: The State of African Cities 2008, I was intrigued by an emerging transnational economic corridor, GILA, or the Greater Ibadan Lagos Accra corridor.
GILA includes the largest cities in four countries: Nigeria (where I was already familiar with the e-payments landscape), Benin, Togo and Ghana (which I’d also visited many times). Despite the short distance (about 500 kilometers end-to-end), three international boundaries divide four distinct nations with differences in regulation, culture, wealth and established telecoms and banks. Mobile money is unevenly available and has not found much traction. I found it particularly interesting that GILA included both Anglophone and Francophone countries, as the legal and regulatory systems come from very different starting points. It is Africa in miniature: vibrant and difficult.
I set out to learn about the money-handling practices and other characteristics of international travelers at the three border crossings (Ghana-Togo, Togo-Benin and Benin-Nigeria). Two field survey firms, PracticalSampling International and Social Consulting Group, helped refine my survey instrument and their fieldworkers toiled near the border posts to identify and interview willing travelers.
On a corresponding two-week overland trip from Accra to Ibadan, I interviewed industry and government stakeholders, and found that formal cross-border services were of interest, but were low priority. The greatest interest was from those banks and telecoms with business units in more than one country.
Cash is King
Among the international travelers that circulate in the GILA region, cash remains king. Nigerian and Ghanaian nationals dominate the cross-border trade flows in the region—most carry cash for their transactions. One example of an established cash handling practice at the Seme border (between Nigeria and Benin) involves traders dividing their cash into “carriers”, or mules, who simply walk across the border unobserved. The trader then aggregates their funds on the other side of the border.
Despite high risk of theft (29% of our interlocutors had experienced theft) our research determined that these traders would probably be reluctant to switch to mobile money any time soon. For one thing, bank branches have limited hours and ATMs have maximum withdrawal thresholds. Further, existing informal and off-the-books practices of cash transfers are very well-established and they enable many traders to skirt the law. Transition to a cashless alternative would raise concerns of unwanted scrutiny.
At the same time, our research encountered a few surprises.
First, although cash remains the main method of value transfer across borders, we found that a large number of traders also carried and used bank cards. Nigerians were most likely to have a card, while citizens of Togo and Benin were least likely. Overall, in an environment where up to 75% of the population is unbanked, 45.8% of travelers had at least one bank card. This emerging pattern might suggest that people on the ground are looking to digital financial services as a potential for the future.
Next, given that most countries with high percentage of financially excluded populations show high percentage of ownership and access to mobile phones, we were not surprised to find that this was also the case across the GILA region. We were, however, surprised to find that a large number of the international traders owned smart phones—a trend that speaks to the increasing penetration of mobile technology in everyday life.
Envisioning a Regional Mobile Money Service
An extension of mobile money services across the borders within GILA would extend consumer choice for modern and safe cross-border financial services, and provide first-time access of formal services to the unbanked. This research project demonstrates that there is consumer interest among cross-border travelers, and the technology (in the form of mobile phones) is nearly ubiquitous. Coordinated government and industry effort is required for ultimate success.
With this context in mind, the final research report identified four possible test-and-learn pilots to begin offering cross-border digital money services aimed at the unbanked and the informal sector.
(A) Extend mobile money agents across borders;
(B) Facilitate a cross-border airtime market;
(C) Address foreign exchange more directly with a locally-adapted peer-to-peer foreign exchange platform;
Each could take different forms, depending on the willingness of regulators to collaborate.
The financial services technology company Fiserv describes a “snacking, lunching and fine dining” analogy to mobile, online and branch banking channels (with mobile being the snack). Most cross-border travelers in GILA are sustained by snacks—biscuits and chips, sausage rolls, nuts, and roasted cassava. What is lacking on the ground across GILA are “financial services snacks”: affordable, widely available and easily obtained. If provided, they may sustain and nourish an increased economic vitality that all seek.
I hope this small study contributes to the dialogue and am grateful to IMTFI for its support.
Click here to read final report.
Click here to read final report.