Digital Financial Services in Nigeria: State of the Market Report 2017
The notion supporting digital financial services (DFS), mainly through ubiquitous mobile devices as a magic bullet for enhancing access and utility of financial services is still in its nascent stages. Through research engagements, the various dimensions of Nigeria’s financial inclusion conundrum are the primary focus of the Sustainable and Inclusive Digital Financial Services (SIDFS) Initiative hosted at the Lagos Business School. By generating an evidence base, we aim to provide thought leadership and insights to address the financial inclusion phenomenon across all dimensions of the ecosystem. In 2016, the Initiative published the first DFS State of the Market Report which focused on two pivotal pillars of financial inclusion development and growth – the demand and supply perspectives. By profiling under-banked and unbanked consumers, we identified characteristics of the underserved from the community, through household and individual lenses. The customer segments were profiled using demographic parameters as well as assets (identity, phone ownership/access) and capabilities (language, digital). These profiles are intended to enhance supplier know-how and aid product development capabilities. The in-depth analysis of the supply-side identified three (3) business models for delivering sustainable DFS, namely: focused, specialist or a hybrid. The study went further to describe the portfolio of organisational assets, resources and capabilities to efficiently deliver DFS to under-banked and unbanked consumers. The themes presented in this edition expand the discussion beyond the core ecosystem and provides insights into the institutional frameworks necessary for financial inclusion.
The report addresses the third ecosystem pillar – the institutional/regulatory component, with specific focus on the legislation, policies and regulations. The policy analysis unearthed critical policy constraints and guided by the doctrinal interpretations of existing laws, market-enabling policy solutions evolved. Our presentation focuses on material financial inclusion issues, the guiding laws and solution proposals. This report does not contain legislative bills but forms a premise for the drafting of new laws, policies and regulations. Finally, these market-enabling policies or solutions for creating an ecosystem for delivering DFS to the unbanked require the cooperation and collaboration of public institutions, the private sector and civil society. Financial inclusion for all is a reality when it is a national priority.
Nigeria is one of 25 priority countries for the World Bank Group’s 
of banks and microfinance institutions remain essential, if not more so. To effectively guide their institutions, many will need to deepen their core traditional tools and introduce new ones to achieve sustainable growth.” She challenged the audience to think beyond the constraints of limited connectivity, regulatory hurdles, and vested interests in order to serve the needs of all Nigerians.
There were several important take-aways from the conference including an agreement that addressing the risks that impact both DFS consumers and providers are critical for the success of Nigeria’s broader financial inclusion efforts. The level of awareness for digital financial services is low in Nigeria given that current efforts of digitalization are reaching only the existing customer base. Compelling use-cases are important to driving up awareness and usage as many existing mobile wallets accounts are unused causing people to quickly switch back to cash. The right product design is also important to reach the excluded and should account for their lifestyles. The panelists reaffirmed the great potential of the role of microfinance and digital finance in Nigeria to achieving broader financial inclusion. Agent banking was recognized as a critical channel for driving financial inclusion into the foreseeable future however given current constraints, this will require a new mindset and greater public-private sector collaboration for interoperability. Key will be delivering on core aspects of consumer protection and customer trust. These include: transparency in pricing through financial awareness, data privacy and security, better customer services to handle recourse and for tailoring products and services.