Jumah: Market-led Solutions Will Bridge Financial Inclusion Gap

Managing Director, Intermarc Consulting, Jacqueline Jumah, in this interview speaks about the benefit of digital financial services in bridging the financial inclusion gap. Emma Okonji presents the excerpts:

Why is Nigeria still perceived as largely a cash-based economy, despite the efforts of the Central Bank of Nigeria to make the country a cashless economy?

There are lots of opportunities for Nigeria to become a cashless economy, but Nigeria is still a cash-based economy because a lot of people still prefer to carry cash, and the reason is that the generality of the people were not taken into consideration when policies to drive cashless economy were being implemented. There is need to develop policies that are market-led, which will benefit the generality of the Nigerian populace, rather than formulating boardroom based policies that will not benefit the masses. It is true that Nigeria has policies to drive cashless, but most of these policies are tilted more towards the corporate and not the masses. So part of my role in the Nigerian digital financial services market is to begin to shift people’s attention to the design of solutions that are needed at the grassroots market. I intend to use my behavioural science knowledge to help the market start thinking in line with those that will use the solution. We should be able to develop policies that are grassroots based, and design solutions that the grassroots people, such as the market men and women and the artisans could conveniently use. So I am already talking with some stakeholders to see how we can together, come up with a framework that will shift attention to the grassroots in the market place, instead of designing policies and solutions that are boardroom based and will only benefit some few segments of the economy.

Nigeria has a wide range of unbankedyou’re your role, how will you help the country get more people into the financial inclusion space, using Artificial Intelligence (AI)?
Using AI in driving financial inclusion is key and to achieve this, we need to design policies and solutions that will address the financial inclusion needs of the general masses, especially petty traders at the grassroots level. In Nigeria, statistics has it that about 40 per cent of the population is financially excluded, and there is need to address this set of people. This can be achieved by understanding the data of bankable people and those who are not bankable. Such data needs to be analysed using AI to address what the issues are. Some people are not bankable because of their religious belief and sometimes because of their level of education. So we need the knowledge of AI to generate data and analyse data that will be used to address their challenges and I see more of such opportunities in the northern part of Nigeria and we are working with financial institutions to see how to address these challenges that have impeded the growth of financial inclusion in Nigeria, through the use of AI.

How do you intend to generate data that will help drive financial inclusion very fast in the country?

At this stage, we should not be talking about how fast we can drive financial inclusion, but how steady we can maintain the pace in driving financial inclusion. This is because steady drive is more sustainable than fast drive. In the aspect of data generation, I think there are many data points, but we need to first understand what the addressable market is, in order to know the kind of data that will address the market challenges. For instance, looking at the 40 per cent that is financially excluded in Nigeria, let us say about 90 per cent of that 40 per cent financial exuded people are addressable, then we need to segment the market and generate different types of data and observe the data over time, to enable us get the required result. But this is rather a longer process of achieving results, so I will encourage the industry to make use of existing data and analyse such data to achieve results, and the easiest way to achieve good results is to leverage on the power of the mobile phones, which many Nigerians already have, including those at the grassroots level. Mobile phone penetration in Nigeria is high and this is a better opportunity in terms of teledensity measurement and used cases of mobile phone data. So existing alternative data at county level, institutional level, and social media data could be used to achieve steady and better results.

Fintechs have developed several digital financial solutions, but they appear running faster than the banks. How best do you think the banks can catch up with evolving technology solutions from fintechs and leverage on their solutions to serve their customers better?

The banks and fintechs are two different bodies with different ideologies and focus, but both have to complement each other in their various roles. Banks have been in existence for ages but they are yet to have proper relationship in the retail space. They target majorly the corporate space, where they think the money is, and tend to neglect the retail space, which is larger than the corporate space. So the fintechs are coming at a time where they see huge opportunities in the retail space and they are fast developing financial solutions that will address the retail space. So both the banks and fintechs must collaborate and the banks must speed up their processes to catch up with the fintechs and technology evolution. Banks must begin to see that the future banking operations are for the agile and must therefore collaborate with fintechs that already have the agility to move in a much faster pace.

There seems to be a cold war between the Central Bank of Nigeria (CBN) and the telecoms operators about who drives the mobile money market. While the telecoms operators are thinking it should be telco-led, the CBN appears to be insisting on a bank-led model. What is your view on this?

For me the issue that is going on in the Nigerian mobile money space is a misinformation issue about whether mobile money should be bank-led or telcos-led. A lot of key stakeholders are misinformed about the two models. What I have observed over time and across markets is that both models work and any of the models can work for any country, depending on how they perceived a particular model. Once everybody has an understanding of what is best placed for them, which I call their comparative advantage, they can really leverage on each other’s comparative advantage to collaborate and push the market forward. I see the cold war as misinformation that one model will take advantage of the other model. For example, the banks are thinking that telcos are not trained to manage public funds and therefore there might be issues if they are allowed to drive mobile money in the country. On the other hand, the telcos are thinking that mobile money is largely driven by technology and that they have the technology and the infrastructure to drive mobile money in the country. Both arguments are correct but what is key in all of these, is collaboration between both groups to have a better understanding on how best to drive and sustain mobile money operations in the country, which is geared towards achieving cashless economy where there will be little volume of physical cash in circulation, and where most financial transactions will be done through mobile devices that are connected to bank accounts.

Most countries make reference to the M-Pesa mobile money in Kenya, which is telco-led, as a good example of what mobile money is all about. What really makes M-Pesa thick in mobile money transactions?

With M-Pesa in Kenya, the telcos made the banks what they are today because mobile money is an open market in Kenya today. In Kenya, mobile money was in existence before agent banking was introduced, and by the time the agent banking guidelines came in 2011, the banks had to partner with telcos and had the entire network of mobile money to be operated by the telcos. So the banks in Kenya realised that when telcos are involved in mobile money translations, the telcos will be doing several low value transactions and thereby pushing high volume of financial transactions, while the banks are driving high value transactions with low volume. So both realised that they can complement each other and today M-Pesa mobile money is doing well in Kenya and most countries refer to M-Pesa as a good model. But again, we have some markets like India where mobile money is bank-led. So all these depend on understanding and collaboration, because the telcos cannot successfully do it alone, neither will the banks do it alone successfully. I will advise that the banks and the telcos should look at the 3Cs in mobile money, which include character, comparative advantage and competence.

In the area of character each should be able to understand its role and play it well. For instance, the banks are good in managing public funds, while the telcos are good in distribution of technology solutions that will further drive the market. In the area of comparative advantage, both the banks and the telcos should know their area of strength over the the other group and play well in that area, while in the area of competence, they should leverage on the group with the best competence and vision to drive mobile money transactions. So I strongly believe that collaboration has made M-Pesa thick in Kenya, and there is need for collaboration between banks and telcos in other markets. So what makes M-Pesa thick in Kenya is because Equity Bank endorsed it from the very beginning, and there was collaboration from the beginning, even though it is a telco-led mobile money operation.

In the first instance, M-Pesa was designed by telcos as a micro finance loan repayment solution, but they later realised that people were using the platform to send money to their families who were in distant places. At that time, there was the argument why the telco should shift from its core responsibility of telecommunications, to selling baking solutions. But Equity Bank saw the wisdom in it and endorsed it. So in each of its bank branches, especially in the rural areas, the bank opened M-Pesa counter, encouraging people to send money through the bank and communities embraced it, and that was the genesis of the rapid growth of M-Pesa mobile money in Kenya that is telco led, but in collaboration with the banks. So the bank was working with M-Pesa agents by buying money from them and disbursing same money to the M-Pesa beneficiaries.

How can some of the security issues associated with mobile money be addressed?

The security issues are not tied to either bank-led or telco-led because with any of the models, money is involved, and the money is seated with the banks, even when it is bank-led or telco-led. The banks still have the responsibility to put some measures in place to protect financial deposits and banks take security issues very seriously.

Another concern in the Nigerian mobile money space is the issue of regulation. If there is collaboration between the banks and telcos, who regulates the market?

Regulation should not be an issue because mobile money thrives in other regions of the world and regulation has never been an issue. What most countries do is to have combined regulation. While the Central Bank regulates the financial aspect of mobile money, the telecoms regulatory authority regulates the distribution of technology solution and the infrastructure through which mobile money is transacted.

What are the benefits for small and medium enterprises in this whole process of digital financial services?

SMEs stand to gain a lot from the solutions that are driving digital financial services in Nigeria and across globe. A lot of SMEs have not benefited in traditional banking, probably because of small sizes and weak financial strength. But this is the time where SMEs are given more attention and solution are developed specifically for SMEs’ growth. Today, SMEs are involved in agency banking because they have a great role to play in that space. The FinTechs have also realised the importance of SMEs and have designed solution that will enable them have access to soft loans, and also have access to online businesses, where they can showcase their products to the entire world.

You were recently appointed as the managing director of Intermarc Consulting. What should we be expecting from you and what is your vision for the company?

I am a specialist in Digital Financial Services Marketing and I took up the position of Managing Director in Intermarc Consulting two months ago, precisely in September this year, to further drive Digital Financial Services Marketing (DFS) in Nigeria through Intermarc Consulting. I started my career in the banking industry where I worked for a number of years before I specialised in digital products development. I was passionate about the entire digitisation process and products while in the banking sector before I moved into the telecoms space and my role was to introduce technology and telecommunications solutions to the banks. I worked with a telecoms company called Mobil Connect in Kenya and later joined Micro Save, a financial consulting company that gave me the exposure to international experiences, while interfacing with several international bodies. Then I was interfacing with stakeholders within the financial industry space, spanning from Central Banks to money deposit banks and Microfinance banks, telecommunications, and the mobile money space. I had all these experiences before joining Intermarc Consulting, with a vision to help the company fully explore the intervention areas in the financial services space. Before now, Intermarc was known for research work and event management, but my role is to push a lot of financial services, in line with different trending projects, including the national financial inclusion strategies in Nigeria and other markets.

What has been the impact of Intermarc on the Nigerian economy in the entire process of digital financial services delivery?

Intermarc has existed for quite some time now, focusing on the aspect of the digital financial services, but we are beginning to play more in the e-Commerce space. So we are shifting focus from the initial idea of CardExpo to DigitalExpo, in line with the corrent trend with digital financial services. The impact of Intermarc on the digital economy space in Nigeria has been great through its platform where people have come together to interact and the platform has helped many companies discovered new trends that have helped them in their decision making policy that have kept them competitive over the years.