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.
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