Flexible money management: Uptake in mobile and internet banking boosts penetration

In January 2012 the Central Bank of Nigeria (CBN) launched the first phase of its “cashless” policy, which aims to reduce the volume of cash transactions and in turn cut the cost of banking services. Since then, the move towards electronic payments has spurred the growth of numerous electronic payment and commerce initiatives. The cashless strategy is part of the state’s Vision 20:2020, which seeks to make Nigeria one of the world’s top 20 economies.

Mobile Payments 

While mobile phone penetration was 81% as of June 2016, mobile payments in Nigeria have achieved relatively modest success. While there is a higher rate of usage than in many other West African markets, the government has failed to replicate the success of Kenya’s mPesa programme, which according to estimates now handles transactions worth up to one-third of the country’s GDP. The policy decisions made by the CBN are partly responsible, as unlike Kenya, which allowed telecoms firms to develop the mobile payments industry, Nigeria barred these companies from creating mobile payment systems, relying instead on banks to develop them. This has proved a slower and costlier process.

Nevertheless, the industry has shown positive growth, and in 2015 the total value of mobile payments increased by 27.7% year-on-year to N442.4bn ($1.4bn), while transactions in the first seven months of 2016 reached N381.4bn ($1.2bn). In addition, more bank and non-bank players continue to enter the market, such as Canadian mobile operator BlackBerry, which announced in December 2015 its intention to launch a mobile payment system in partnership with Interswitch, Nigeria’s largest payment processor, based on the company’s messaging service, BBM. Further deepening the market, the CBN granted licences to 15 non-bank and six bank mobile money operators (MMOs) in the second half of 2015.

Online Banking 

The rise in telecoms connectivity is beginning to spark the proliferation of other forms of cashless activity. “Many people compare Nigeria to the mPesa program in Kenya. But Nigeria has in many ways moved beyond mobile payments to online – as developed economies have,” Niyi Yusuf, managing director at Accenture Nigeria, told OBG.

To support this, the Nigerian Communication Commission has set the goal of reaching 30% broadband penetration by 2018, significantly higher than the 4% recorded in 2014. This increase, along with higher 3G penetration, should lead to an uptick in online banking activity. However, much of the innovation in this field is not coming from the banks themselves. “Banks are benefitting from the e-banking system somewhat. They are participating in it, but they are not leading the way or developing the next generation of technology,” Olubunmi Asaolu, head of equity research at FBN Capital, told OBG. Supported by a growing number of investors and tech incubators, such as the Nigerian firm, IT Developers Entrepreneurship Accelerator, the country’s entrepreneurs are looking to build the next generation of fintech systems to improve mobile banking operations.


While lenders have driven the mobile payments industry, non-bank firms have also been expanding their role. Providing much of the infrastructure that underpins e-payments is Interswitch, which started as a transaction switching and electronic payments processing company, but has since expanded into mobile payments, e-commerce, point-of-sale terminals and fraud management. In addition, mobile and electronic payment processing service Paga completed $13m in series B financing in late 2015, receiving significant interest from foreign investors, and in March 2015, PayPal, announced that Nigeria had become its second-largest market in Africa after South Africa. Foreign interest has also come from Visa, which plans to launch its mVisa mobile-payment solution before 2017 and reports being in advanced discussions with the major banks.