Opinion Piece: Accelerating transition to digital financial services

By Usoro Usoro

The COVID-19 pandemic and the movement restrictions that are in place to slow its spread have severely impacted economies across the globe and accelerated disruption to traditional business models in a way that few of us could have imagined only a few short months ago. While economies are beginning to open up, it is clear that there will be no full return to normalcy until a vaccine or treatment option is found that reduces the virus’ threat.

In Nigeria, the disruption has been spread across sectors. Food markets and farms have been particularly hard hit as they remained open but faced challenges given the restrictions on people gathering in one place. The transition to home delivery happened almost overnight. We’ve also seen it in other essential service sectors, such as pharmaceuticals and the rise in telemedicine. For us at Yello Digital Financial Services, it has been the demand for cash-in cash-out services at our agents for those struggling to find ATM’s, and transfers to the family for customers without access to digital services.

We recognised very early on in this process that the need for digital financial services would be significant during a lockdown, and moved to offer our customers free transfers through our agent network for the month of April. We saw over 100,000 people send over 1.7 million free transfers during this period. More than 90% of these transactions were below N10,000, a clear demonstration that we were able to meet the needs of the bottom of the pyramid, which is the same constituency government regulation is designed to empower following the passage of the new Finance Act and the increase in the threshold of stampy duty to N10,000 per transaction.

This was possible because, over the last 12 months, MTN has been building a network of mobile agents that support our customers to access and carry out simple transactions. At the end of 2019, we had mobilised 100,000 agents. This accelerated in the first quarter of 2020, hitting 178,000 by the end of March. Our target for 2020 is to expand to 300,000 agents, and we are well on our way to achieve this. In our first year, we focused on the basics. Airtime and transfers, but we began to expand these services in April and are slowly incorporating the ability to deposit and withdraw funds, to pay bills and to distribute products.

Why is this relevant today? Because the shock factor of COVID-19 has acted as an unprecedented catalyst for the transition to full digital financial services. In urban areas, many of the people who were previously reliant on the bank branch made the move to an agent network, or a direct digital service during the lockdown. Traders who were unable to access their physical shops transitioned to selling through platforms like WhatsApp and Instagram, or other social media or online platforms while cashing in and out at agents. Those that were successful will begin to question the value of

continuing to pay the fixed costs for physical space, especially when sales are down and demand is likely to remain deflated.

This acceleration in digital adoption and remote working means that the way people interact with the financial system is going to change fundamentally. It will accelerate the rationalisation of bank branches because their commercial viability at scale is going to accelerate an already slow decline. Customers will still want geographic proximity to be able to cash in or cash out, or to conduct more sophisticated transactions, and increasingly these can be provided by the agents that we are mobilising. The fabric of the financial services ecosystem will no longer be made up of thousands of large branches, but hundreds of thousands, if not millions of small and efficient contact points. This transition was already happening, but the pace of change will now be greater. Click here for the full article