1. Cards vs. Mobile Payment vs.
Mobile Money
Who will Win?
Presented by
David Olatilo
* Presented at InterSwitch Nigeria on May 09 2012 Victoria Island, Lagos

2. Outline
Card Payment In Nigeria
 Opportunities
 Our Present State (Achieved)
 Why we are here (Challenges)
 Positioning Card to Win (Way Forward)
Mobile Payment/Money In Nigeria
 Opportunities
 Our Present State (Achieved)
 Why we are here (Challenges)
 Positioning Mobile to Win (Way Forward)
Who Wins (Verdict)
Conclusion

3. Electronic payment are becoming an increasingly important part of our
daily life worldwide –consumers, businesses and governments.
The Nigerian e-payment industry has grown significantly over the last two decades,
resulting in a fair penetration of ATM usage within the economy, as well as card
payments and the entrance of mobile payments. These developments and
progress are exemplified by the following facts:
MasterCard, one of the most notable e-payment brands globally has identified
Nigeria as a top market in its report on top 10 sub-Saharan markets
Impressive growths in deployment of POS terminals as well as ATM machines
around the Country
The Central bank’s redoubled emphasis on electronic payments through issuance
of guidelines and policies to facilitate transactions also the cash-lite project.
However, all this notwithstanding the Industry remains underdeveloped relative to
where it ought to be given its market potential.

4. Payment Cards in Nigeria
This ranks Nigeria 3rd in the world, behind
only Algeria and Vietnam.
The industry has gained significant
Ground
• Nigeria’s e-Payment industry is
now worth approximately
N23.4tn
• E-payment transactions are
come to about N40bn daily,
• Point of Sales (POS) transaction
about 140, 000 weekly
• About 9,500 ATMs and about
180,000 PoS terminals
• Over 30 million debit cards in
issue to bank customers though
figures shows that about 50%
of the cards are not active

5. Penetration of Card in Nigeria
Card issuance viewed in terms of levels of adoption relative to total population
size, it may be seen that the levels of penetration remain quite low in Nigeria

6. When compared to other nations, there is significant
opportunity to improve the level of card penetration in Nigeria
Country Number of Cards*
(millions)
Adult Population
(15-64 years)
GDP
(estimate)
Card Penetration
(per 100,000
adults)
Brazil 424 134,337,024 $2.041 trillion $315,624
Spain 49 31,345,019 $1.379 trillion 156,325
South Africa 36 32,313,792 $512.2 billion 111,408
India 154 754,308,456 $3.736 trillion 20,416
China 1,999 959,031,874 $8.95 trillion 208,439
Ghana 0.32 14,409,184 $36.53 billion 2,241
Mexico 38 72,654,880 $1.485 trillion 52,302
USA 1174 207,856,018 $14.33 trillion 564,814
UK 168 41,835,808 $2.154 trillion 401,570
Nigeria 30*** 90,480,624 $506.2 billion 16,572
Data Sources: EuromonitorInternational, CIA World Factbook(July 2012 estimate)

7. A recent survey on card usage revealed the key reasons for
low card penetration in Nigeria…(1/2)
Over 40% of the respondents who do not own cards presently attribute this to
lack of awareness and unsatisfactory experience.
Reasons for Not Owning a Card
I want to control my spend
I don't want to pay bank fee for the card
I haven't gone to my bank to pick my card
I had a bad experience (e.g. fraud or technical issues) before
I just don't want a card
I learnt from bad experience of others
I don't know much about it

8. A recent survey on card usage revealed the key reasons
for low card penetration in Nigeria…(2/2)
Fraud
Technology
Cost of
Cards
Inadequate
Awareness
Low Cost
of Cash
Lack of
Incentive
s
Consumers do not consider cards and all other enabling components to be
reliable and risk-free as a result of the prevalence of fraud (especially during
the Magnetic Stripe card era).
Frequent downtime in communication infrastructure upon which most
payment channels run. 60% of cardholders experience technical problems
fairly frequently when using their cards*
12% of individuals who do not own cards consider the cost of cards too high*
Some banks charge customers at least double the amount it costs to produce
and personalize the cards
Erroneous perception by some individuals that payment cards are “ATM cards”
and can only be used on ATMs. 7% of cardholders are unaware that they can
use their cards to make payment via POS*
Banks’ subsidy of costs associated with cash management on behalf
of retail merchants
93% of cardholders said they have never been provided any incentives for
usage of their cards*
Poor promotion of rewards and loyalty schemes for card-based transactions

9. Credit Card Penetration against Market
Potential in Developing Market
It is very evident that there is huge opportunity in our market and a lot need to be
done to achieve this

10. There is a potential to significantly increase the level of card
penetration in Nigeria by addressing the identified issues.
…with potential for marginal contribution of about $130m to yearly GDP growth.
Increased card transactions –leading to increased consumption and economic
growth.

11. Areas of Business Potential for Cards
 Micro-Finance Banks and Institutions
 Transport, Insurance and Education
 Credit and Prepaid Cards
 Fleet Card (gasoline, diesel and vehicle maintenance)
 Contactless functionality Cards/Technology
 Drive Online transaction (very low in Nigeria)
Market research need to be carried out to
unlock more market potentials/opportunities

12. Positioning Card to Win (Way Forward)
• Provide incentives to merchants for accepting cards for more
transactions e.g. variable fees depending on:
−Transaction size
−Number of transactions (per day/week/month)
−Type of purchase
−Promotion periods
• Engineer viable partnerships to promote card product and services.
• Create incentives for use of cards such as rewards and loyalty schemes
for customers
• Embed cards in transactions across various industries e.g. transport,
health, insurance, education etc.
• Develop merchant centric loyalty programs that:
−Offer opportunity for developing exclusive offers to
cardholders (e.g. rewards and exclusive offers at point of
sales with use of card)
−Increase merchant acceptance e.g. lower merchant fees to
new retailers for the first year
• Communicate the benefits of using cards for purchases and transactions
to customers and merchants
• Ensure the enforcement of all regulations available on cash handling and
payment transactions
• Ensure all stakeholders plays by the industry standard and regulations
Economic
Model
Policies
Awareness
Value
Added
Services

13. Positioning Card to Win (Way Forward)
• All POS terminals and ATMs and other channels should be configured to
become EMV compliant or other best security standard available
• Strict security and safety measures should be ensured at all levels of
transactions
• Payment infrastructure must be given adequate attention in terms
of provision and maintenance
• Deploy contactless technology (i.e. POS equipment and contactless
capable cards) to fasten payment process and improve customer
experience
• Use of Innovative technology that conforms with our unique market
requirement
Security
Technology/
Infrastructure

14.  Mobile Payment/Money Services
In Nigeria

15. Population
170
Banked
40
Mobile
115
Internet
45
How Access Channels stack up in Nigeria
180
160
140
120
0
20
40
60
80
100
Mobile Payment: Opportunity
Presented by Mobile Penetration
Much Excitement, Hype and Expectation
about Mobile Payment
The introduction was seen as a viable tool
to promote financial services and create
access to the huge unbanked and
financially excluded in Nigeria
Mobile subscriber base as at end 2012 is
115million (NCC Figures)
urban subscribers account for 63 percent;
rural subscribers at 34 percent
 Expected to translate into opportunity
for Mobile Payment
80% mobile penetration against over 50%
still financially excluded in Nigeria
Mobile exceed personal computer
167 million population
Need for leveraging the mobile telephony as
an effective payment and access instrument
for providing financial services to the
financially excluded including payment
services.
Are we doing enough in this
direction?

16. Key Opportunities
Source: McKinsey – FAI study (2009)
A fast growing mobile subscription rate coupled with a still high
number of unbanked adults in developing countries.

17. Global Mobile transactions Market Projection
(Informa Telecoms: M-Commerce: Outlook for mobile payments,
banking and NFC services; market report Dec 2011)
Global M-Commerce
transactions by segment
(millions)
Source Business Insight
High
acceptance!
A huge
potential!

18. Mobile Payment Now Where We Are:
 Slow Adoption
 Services are yet to achieve significant traction.
 Most of the licensed operators not in the market
 Only 4 operators active in the market
 According to EFIna since launched just 400,000
users against over 100m mobile users
 3,000 Agent against 250, 000 needed (One
Network)
 Mobile Payment /Money services amongst this
huge base of subscribers is, however, very low.
 Less than 1% of existing bank customers use
mobile payment services
 High expectation without proper strategy for
penetrating the market.
 Much emphasis on M-Pesa success while
forgetting that MP is not Cut & Paste for success
 Failure of market research or pilots prior to
implementing MPS.

19. Challenges to Mobile Payment in Nigeria
 Regulatory and Policy Issues
 Lack of Awareness
 Interoperability
 Poor Agent Network
 Lack of Value Proposition
 Infrastructure
 MNOs Apathy
 Faulty Business Model and Inadequate Market understanding
 Lack of Industry Cooperation

20. Guiding Principles to Win
Do not copy & pasteDo not copy & paste
Understand your market environmentUnderstand your market environment
Communicate, communicate, communicateCommunicate, communicate, communicate
Choose your implementing partner wiselyChoose your implementing partner wisely

21. Invest time in developing your distribution networkInvest time in developing your distribution network
Test your productTest your product
Monitor your productMonitor your product
Collaborate with regulatorsCollaborate with regulators
Guiding Principles to Win

22. Who Wins? (Verdict)
“The best way to
predict the future is
to invent it’’
Alan Kay

23. Who Wins?
Much Expectation, Hype and Speculation in the Industry of late on Mobile
Payment, Financial Inclusion, Cash-lite Project etc.
Fact:
 Much yet to be achieved
 Opportunities (earlier highlighted) still huge
My Submission is that:
 It is far too early to be looking for a winner
 Much attention should be on addressing the issues impeding our market
 Service providers must put in place effective market driven strategies
which will ensure business objectives success (win)

24. Conclusion
 Stakeholders must agree that the market potential will not be achieved if
the industry is left to grow naturally, without some conscious efforts to
drive growth
 WIN – WIN STRATEGIES for Service Provider (InterSwitch)
Conscious effort to be competitive and sustain LEADERSHIP
Innovative, Dynamic, Market Driven, Best Practice and Strategic
 WIN – WIN STRATEGIES for the INDUSTRY
 Government and Private sector driven policy directions to encourage e-payment
 Conscious change in psychology among industry players to adopt a posture of
Coopetition rather than competition
 Improving Value propositions to e-payment users
 Conscious effort to drive awareness in the market place
 Focused drive to reverse infrastructure gap vis a vis ePayments
 Business and Operational Strategies