Published Friday, March 8, 2013 on http://blog.imtfi.uci.edu

1. IMTFI Blog
Mobile Money Potential in the GILA Region
Mobile paymentshas widened eyesthroughout 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 livesand permit leap-frog
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 theTwitterverse,
it’s a more complex story. If Starbucks and Safaricom demonstrate what’s possible,
many 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 in not every instance when
they do, arethere masters-of-execution ready to pounce.
I’ve spent the past couple of years working with a Nigerian e-payments business and
have experiencedthese 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. Innovationseduces, 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.Iread 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 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.

2. 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 areport 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 travellers at the three border crossings (Ghana-Togo, Togo-Benin and
Benin-Nigeria). Two field survey firms, Practical Sampling 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 travellers that circulate in the GILA region, cash remains
king. Nigerian and Ghanaian nationals dominate the cross-border trade flows in the
region—mostcarry 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 interlocuters 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 verywell-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.

3. 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;
(D) Work toward mobile phones as instruments of identity solutions.
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.

4. I hope this small study contributes to the dialogue and am grateful to IMTFI for its
support. Anyone reading this please feel free to get in touch,
joel.patenaude@j2partnersinc.com.