Mobile Money Adoption in Nigeria: Is there Low-Hanging Fruit?

The first mobile money service was launched in Nigeria in 2011 but, so far, there has been little mobile money adoption. InterMedia’s Financial Inclusion Insights (FII) Tracker Survey of Nigeria, conducted in fall 2013, measured mobile money usage at a paltry 0.3 percent of the Nigerian adult population (2.6 million). The Nigeria FII Tracker Survey, and a recent study by MicroSave’s Helix Institute of Digital Finance, identified some of the likely reasons for mobile money’s limited uptake, including:

  • Lack of knowledge among consumers about how to open a mobile money account.
  • Low levels of trust in mobile money’s performance and safety.
  • Unstable mobile networks.
  • Ineffective agent training and management, leading to a lack of proper monitoring and operational support for agents.
  • Lack of business incentives for MNOs to fully invest in mobile money partnerships with banks

While these issues will have to be properly addressed if uptake is to occur in any meaningful way,we were curious to identify where the “low-hanging fruit” in a nascent Nigerian mobile money market may be found. Are there any immediate opportunities for mobile money providers to increase their customer base?

The FII Tracker Survey of Nigeria tallied around 30.8 million active bank account holders in Nigeria (or 35 percent of the Nigerian adult population). Active bank account holders are defined as those who have their own bank accounts and reported using them to conduct some type of transaction within the 90 days prior to the survey.

Many of these active bank account holders potentially may be the most promising segment of potential mobile money users. A variety of mobile money products are marketed by banks in Nigeria, and banks already have relationships with an existing and substantial customer base. Value-added financial products, like mobile money services, have a high likelihood of gaining traction with existing customers, due to the familiarity and trust established between customers and banks. While this isn’t the unbanked segment whom many financial inclusion proponents seek to engage through mobile money, bank users who take up mobile money can indirectly expose unbanked Nigerians to mobile money services through P2P transfers.

There is already a good foundation for mobile money adoption among the unbanked population. According to the FII Tracker survey, most unbanked Nigerians have some sort of ID (70 percent) and a personal mobile phone (84 percent).


Which bank users should mobile money providers target?

From a market segmentation point of view, a deeper analysis of the FII Tracker Survey results point to three types of active bank users in Nigeria (see details in diagram):

  1. Basic bank users, who make up the majority of active bank account holders (75 percent). These users perform basic transactions only, such as depositing or withdrawing money, buying airtime top-ups and sending or receiving P2P payments via their bank accounts.
  2. Medium bank users, who constitute 17 percent of active bank account holders or around 5.2 million. These people go beyond the basics and make slightly more advanced transactions through their accounts, such as paying utility, school, medical, and government bills, and receiving pensions, welfare payments and wages directly to their bank accounts.
  3. Advanced bank users are the high-end customers who, in addition to engaging in all of the transaction types mentioned above, engage in advanced transactions, such as taking out loans, saving money, making investments and insurance-related payments, and setting aside money for retirement/pensions. These consumers make up 7 percent of active bank account holders or around 2.2 million users.

As, illustrated in the diagram below, the medium and advanced bank users have the highest potential in terms of mobile money adoption. Why?

Reason 1: Strong relationships with banks

Medium and advanced bank users have established, strong relationships with their banks. For these users, bank accounts are a key part of their financial lives, as indicated by the types of transactions they perform, such as paying bills, and receiving pensions and wages. Advanced bank users also are likely to have taken on other banking products such as savings, investment accounts and insurance.

Not surprisingly, medium and advanced bank users report high levels of trust in private banks: 72 percent and 73 percent, respectively say they trust private banks (compared with 53 percent among the general population).

Strong relationships and high levels of trust in banks make medium and advanced bank users more likely to take on additional services and products, like mobile money, that can enhance and simplify their financial lives.

Reason 2: Financial behavior that is ideally suited to mobile money

Medium and advanced bank users make transactions that can be done more conveniently through mobile money accounts. For example, the majority of these users send or receive P2P payments (53 percent of medium bank users and 68 percent of advanced bank users). A large number of medium and advanced bank users pay school fees and utility bills via their bank accounts. These types of transactions can be offered via mobile money, saving customers the hassle of visiting bank branches/ATMs, and enabling them to transact any time of the day, seven days a week.

Additionally, a significant number of medium (26 percent) and advanced (34 percent) bank users make business-related payments, such as paying employees/suppliers and receiving payments from customers. These users value speed and convenience, and mobile money is likely to resonate with this segment.

Reason 3: High awareness of mobile money

Medium and advanced bank users are much more likely to have heard about mobile money services compared to basic bank users, which can make it easier to persuade them to consider using mobile money. For example, 30 percent of medium and 38 percent of advanced bank users had heard about mobile money prior to the survey, compared with only 18 percent of basic bank users.

Reason 4: High penetration of feature phones and smartphones

Medium and advanced bank users have the highest penetration of feature phones and smartphones compared to other groups. These types of phones are ideal because they allow the user to download mobile money applications that create a user-friendly customer experience. Seventy-four percent of medium and 85 percent of advanced bank users use either feature phones or smartphones, compared with only 46 percent among the general population.

Different marketing strategies may be needed to engage medium and advanced bank users

While there are many similarities between medium and advanced bank users, there are also some important demographic differences that can have practical implications for planning advertising and marketing activities:

  • Location: Medium bank users are more likely to come from rural areas compared with advanced bank users (44 percent vs. 33 percent). Advanced bank users are overwhelmingly urban (77 percent). Advertising tailored to advanced bank users in urban areas, for example, is unlikely to be effective among medium bank users in rural areas.
  • Income: There are many more poor, medium bank users in rural areas than there are poor, advanced bank users in rural areas (41 percent vs. 17 percent, respectively).
  • Gender: Medium bank users represent a greater proportion of males, while advanced bank users include a more balanced gender mix. Gender neutral advertising may be an important consideration in engaging advanced bank users.
  • Regions: The largest group of advanced bank users comes from the South West region, whereas medium bank users are more likely to come from the South East and North Central regions.

Although engaging unbanked populations in mobile money is the ultimate goal, it may be easier to start mobile money adoption with existing bank users, as they already have familiarity with and trust in banks. Medium and advanced bank users may represent “low hanging fruit” for mobile money providers because they exhibit behaviors that make them more likely than basic users to adopt mobile money. These users have the potential to spread mobile money to the unbanked population through P2P transfers, contributing to financial inclusion in Nigeria.