In Nigeria, financial technology (fintech) has quickly become one of the most prominent solutions provided by top tier banks to not only accommodate the many needs of customers flooding into the country’s growing mobile banking market but also encourage financial inclusion in growing small businesses.

In August, Brookings Institution released their 2016 Financial and Digital Inclusion Project report which explores 26 diverse emerging countries, globally, and their commitment towards improving financial inclusion. Nigeria ranked 10 out of the 26 countries featured and has proven national-level commitments to advancing financial inclusion in the country.

But despite the high rate of mobile penetration and smartphone proliferation in the last five years across Africa and particularly in Nigeria, the statistic across board for mobile money, especially amongst youth, is shockingly discouraging. A recently launched Financial Inclusion Insights study reveals that individuals unaware of mobile money are largely young (60 percent of them are aged 15-34), educated (70 percent) and employed (60 percent). This group has the financial skills and equipment required to register and use mobile money, and could potentially use the service to pay school fees.

More than 4 in 10 Nigerians are not financially secure and experience some form of economic vulnerability. Financial inclusion is needed to create resilience.  Most of the vulnerable have a good basic knowledge of arithmetic and few are literate. Nine in 10 are poor and close to two-thirds live in rural areas.  The most common forms of economic vulnerability include forgoing food, fuel or medical care. However, financially included adults living below the poverty line are more likely to have a plan for weathering financial shocks.

Registered bank users who actively use their account are experimenting with more advanced services, compared to years past. More are now saving and transferring money across accounts. Encouraging consumers to deepen their relationship with an account is critical to building retention, especially at a time when the industry is prone to attrition.

Therefore in the light of some of the above-mentioned findings, the recently concluded Nigeria Economic Summit Group (NESG) Annual Summit 2016 focused on catalyzing economic development by enabling micro businesses and SMEs. The theme “Made in Nigeria” is ripe for a conversation on the need to develop home-grown solutions for economic challenges in Nigeria and the role of financial inclusion and digital financial services (DFS).

Small and medium-sized enterprises play a crucial role in contributing to national Gross Domestic Product (GDP), reducing unemployment and generally stabilizing the economy. In Nigeria, at least 9 out of every 10 businesses are SMEs, and they employ over 30 million people and account for an estimated half of Nigeria’s GDP, according to the National Bureau of Statistics.

So, in order to bolster digital enhancement for customers, Nigerian top-tier lender, Diamond Bank Plc set a goal of ensuring that customers have access to various mobile financial service offerings.  These services range from opening accounts which offer customers a safe and easy means of opening and operating a full bank account from the convenience of their MTN mobile phones, to accounts mainly targeted at market entrepreneurs/traders.

In an exclusive interview with Ventures Africa, Head, Retail Banking Businesses, Diamond Bank Plc, Robert Giles sheds light on what needs to be done to address poor acceptance of mobile money in Nigeria and the role of Digital Financial Services in growing small and medium-sized enterprises.

Ventures Africa (VA): With the high rate of mobile penetration and smartphone proliferation in the last five years across Africa and particularly in Nigeria, the statistics across board for mobile money, especially amongst youth is shockingly discouraging. What do you think has greatly influenced this poor acceptance of mobile money?

Robert Giles (RG): The discouraging level of acceptance amongst the youth for mobile money is influenced heavily by the absence of appealing use cases for them. This is largely driven by high fragmentation of the mobile money market, which makes interoperability an issue and confuses people as to which scheme they want to belong in. Diamond Yello has addressed this for 7million customers, by providing a full bank account rather than a mobile money wallet.

VA: What strategies do financial institutions need to put in place to address poor acceptance of mobile money among young people? 

RG: Firstly, financial institutions need to understand the youth and conduct research into behavioral patterns, financial needs and then bring relevant services to the youth that help them manage their finances and bring more convenience in payments. Solutions for youth will not be found sitting in a bank head office, they will be found by spending time with young people in schools and universities. At Diamond Bank, we have partnered with several financial institutions to develop solutions for the youth to save, make payments and plan for the future. Critically, we found that the youth would like to interact with us and our partners more and help prepare for the workplace, that’s why we have partnered with leading instiutions to give access to financial advice and also go beyond banking and provide webinars and seminars on preparing your CV, preparing for job interviews and transitioning into the world of work.

VA: In pursuing these strategies to further enhance adoption, what do you believe will be the greatest hindrances?

RG: Lack of cohesive marketing and customer awareness campaigns. This is largely the result of the absence of interoperability and many players in the landscape. There’s also a high degree of agent inertia given the relatively low adoption today, so we have a lot of work to do as an industry to show agents the real value of supporting mobile financial services.

VA: How is Diamond Bank supporting the growth of SMEs through Digital Financial Services?

RG: Diamond Bank is very active in supporting SMEs, through it’s three-tier Emerging Business offerings. Small businesses get access to a relationship manager who initially helps to dimension the needs of our customers over the short, medium and long term. It starts off with Business Registration–we have registered over 1000 of our customers in the last few months. Our mobile application helps SMEs to do their banking from the palm of their hand, making payments and buying services without having to leave their business to go to a branch. These customers transfer over 2 trillon naira a year on this platform alone, which helps money move around faster thereby creating more value, and speeding up the exchange of trade.

At the micro-level, we are working with almost 500,000 small businesses, mostly market women, to provide digital financial services through our BETA proposition. It’s really an enhancement of the Ajo system, whereby a Diamond Bank agent comes to the marketplace to collect cash, and the customer gets instant visibility of their savings through a digital device. The funds can also be accessed any time anywhere on the phone or the card.

This week we were really excited to go a step further and launch a “digital esusu” offering. Diamond eSUSU is a way that people can save with friends and borrow for free, regardless of credit status. It’s truly beyond banking and it’s really social. According to the McKinsey study funded by Bill and Melinda Gates foundation, 37 percent of SMEs in Nigeria are borrowing from friends and so this is a great way of helping our customers do this in a more structured way with proper record keeping and management.

VA: The study conducted by InterMedia with funding from the Bill & Melinda Gates Foundation mentioned a few potential challenges mobile money could be used to solve in the nearest future. Which challenges do you see mobile money tackling in the not-so-distant future?

RG: Firstly, research funded by the Bill and Melinda Gates foundation demonstrated the financial access was hindered by proximity to ‘brick and mortar’ branches, whilst even the most remote location is covered by cell phone signals. By bringing banking to the phone, we’ve removed the barrier of physical access to a branch and allow our customer to transact at their home or place of business.

Secondly, access to finance is also a barrier for financial inclusion and we are seeing new innovative ways to manage risk and distribute micro loans in a cost effective way through the phone. By 2025 4.6 million more MSMEs will get access to credit.

Most importantly we need to see job creation and it is estimated that digital finance can create 3 million new jobs by 2025.

VA: So far, how would you say mobile money has reshaped the lives of Nigerians?

RG: I think that the fragmented beginning of mobile money in Nigeria slowed down the initial benefits to the broad population. The relative difficulty of getting cash in and out of a wallet system was a problem.  The drive for interoperability through established national infrastructure is now changing the pace and full bank account digital financial service offerings–like Diamond Yello, now being very relevant and a better alternative to cash.

In the last 18 months, working with MTN and supported by partners such as Efina and Women’s World Banking we have been able to include 7m more people in the financial system. That’s an amazing pace of change and I strongly believe that the Vison 2020 from the CBN Financial Inclusion Division and the 2025 vision from Bill and Melinda Gates Foundation can be met – bringing 46 million Nigerians into the formal financial system.

Critically, the elimination of cash is bringing down the costs of running businesses, improving security, allowing faster value exchange and therefore wealth creation and improving physical safety.

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