Mobile Money In Nigeria - The Case of Pessimistic Indeterminacy

I am sure there are very some very serious people at the Central Bank of Nigeria (CBN) and Sanusi Lamido Sanusi the Governor of the apex bank is on top of that list. He did a lot of things people did not like in his first year in office but he gave us a stronger financial sector and we are grateful for that. A lot of what his administration corrected was however due to flawed policies of previous ones.

The CBN also finally kick-started efforts towards greater financial inclusion by issuing mobile licenses and we were very hopeful. One year later however, there is more uncertainty than hope as none of the Mobile Money license holders have been able to reach any meaningful scale. The total number of Mobile Money users so far is less than the population of one suburb in Lagos. If Ernest Ndukwe (the former Executive Vice Chairman of the Nigerian Communications Commission) had been put in charge of the Mobile Money initiative the same way he presided over the GSM licensing process, we would have had all licenses revoked by now for dismal performance.

Nobody said it was ever going to be easy and nobody expected it to be but nobody also expected things to get so messed up that we will have over 20 players and not a single one with a clear plan or the clout to move things forward rapidly. It is now very obvious from the way the initiative has gone that a lot of the players are seemingly totally out of their depth in terms of financial clout and expertise and the regulator probably made a the wrong call with the framework.

The Nigerian Mobile Payments Problem Explained Using Peter Thiel’s Framework

The Mobile Payments framework document (on which the initiative is based) is sometimes ambiguous and vague in certain areas and was more like a school term paper with general guidelines than a visionary policy document. It is not determinate on expected outcomes and also not based on the realities of micro payments in the emerging markets. It seemed like a document crafted by bureaucrats to protect the interests of a few institutions at the expense of the greater purpose of the public it was meant to serve.

The Central Bank of Nigeria is pursuing a Cash-Less or (Cash-Light initiative) as they have termed it. The idea is to make the financial sector more efficient as cash management has become a burden to the system.

The fundamental flaws in the process by the CBN can be explained by the famous entrepreneur and venture capitalist Peter Thiel’s  “Determinate, Indeterminate, Pessimistic, Optimistic” framework described in his Stanford University CS 183 course. Details of the lecture can be found here and the diagrams below summarizes the framework



The NCC Telecommunications Approach

Using the framework and looking at the rapid growth of the telecommunications industry in Nigeria, the previous NCC’s options in licensing GSM companies could be explained as such:

·         Optimistic, Determinate: 

Nigeria needs solid telecommunications infrastructure to spur economic growth. The potential for success is high when done right and it will help a lot of people out of poverty. There is a clear plan for success in telecoms initiatives and only serious players with clout are allowed to play. We decide to bet on GSM technology, make the barriers to entry high to allow only serious players in but keep them strictly regulated.

·          Pessimistic, Determinate: 

Nigerians don’t really need phones and it would be a waste of time to craft a robust policy or invite bidders. “Phones are for the rich and not for the masses” - according to a former telecommunications minister. We should focus on building the public telephone monopoly NITEL and put enough payphones in public places for those who must use them but can’t afford them


·         Optimistic, Indeterminate: 

Nigeria needs telecommunications infrastructure but we don’t know how much it will cost to put it in place and what is best or will work. We do a whole portfolio of things, we try everything until we find what works best.  We allow all players in and give everyone a chance. Anyone who survives wins the race.


·         Pessimistic, Indeterminate:

We don’t know what the best way to provide telecommunications infrastructure and the investment required to provide basic infrastructure is more than what we can afford at this stage. Any serious players we may bring in will make the services costly as they will provide their own infrastructure and would want to recoup investments, the masses may not be able to afford it if we allow the big players to come in. Take a portfolio approach with many small players and let each one provide infrastructure for their own niche. Build regional or local networks all connected to the National Carrier Nitel.

The NCC decided to do two things, for GSM they took the “Optimistic, Determinate” option by licensing a limited number of players after inviting all prequalified players to bid for licenses.  For CDMA they took an “indeterminate, optimistic” approach allowing smaller niche players to build local or regional telecommunications entities. While people may argue that the technologies may have made the difference in the huge disparity in growth, the GSM companies fared much better than the CDMA companies as the players were more serious and committed.

Universal licenses were later introduced with the players not limited to technology and we are better off for it with subscriber growth now over 100 million from only 500,000 in 10 years. The financial sector has not seen the same growth because the Central Bank took a different approach.

The CBN’s Mobile Payments Approach

The problems with the financial sector started way back before Sanusi’s era when the foreign owned banks were nationalized and the financial sector left in the hands of local investors. One of the central bank regimes earlier took a portfolio approach with massive deregulation of the financial sector allowing players with a small capital base to enter the sector. A lot of licenses were issued for banks and non-bank financial institutions including boutique finance houses and primary mortgage institutions.

That approach led to several failures and almost total collapse of the financial sector with several costly corrective measures taken afterwards to consolidate the portfolio of institutions into more solid players. A lot of people lost their life savings (many I know personally) and it led to a crisis of confidence by consumers with the result that cash became the predominant transaction mechanism.

With the banking and the rest of the financial sector, the government had initiated a “Pessimistic, Indeterminate” approach with nationalization of institutions. The central bank later moved to the “Optimistic, Indeterminate” quadrant by choosing a portfolio approach with deregulation.

After several failures and almost systemic collapse they have adopted a more “Optimistic, Determinate” approach by consolidation, raising the barriers to entry with increasing capital requirements, liquidity ratio and stricter regulation. They also allowed the foreign banks back in as well. All the damage and backwardness in the financial sector could have been avoided if they did not embark on the costly experiment earlier.

We are seeing history being repeated again with the same portfolio approach that failed with banking being repeated again in mobile payments. The current mobile payment initiative that has failed to achieve scale in the last year can also be explained by Peter Thiel’s framework.

·         Optimistic, Determinate: 

Nigeria needs a solid and sustainable mobile payments infrastructure to spur financial inclusion and economic growth. There is a clear plan for success and only serious players with clout and can scale rapidly are licensed. Allow prequalified players to bid for licenses, the barriers to entry are high and the industry is well regulated.


·         Pessimistic, Determinate: 

Nigerians don’t really need a separate mobile payments framework, and it would be a waste of time to craft a separate policy. We should focus on bank consolidation and growth. The banks and companies like Interswitch, Etranzact  or NIBSS will drive payments.


·         Optimistic, Indeterminate:

Nigeria needs a mobile payments infrastructure to spur financial inclusion and economic growth but we don’t know what is best approach is and what may work. We invite all players and do a whole portfolio of things. We also don’t enforce strict regulation to allow the free market determine the best option or players.


·         Pessimistic, Indeterminate: 

We need to reduce the cash burden on banks and The Mint. Mobile payments is one of the options we have to tackle this but we don’t know the best way forward with it yet. We will take a portfolio approach and see if it will work but we will exclude the big players with existing infrastructure, as we don’t want monopoly or unfair advantage to the banks we regulate. We also can’t really regulate this sector properly with the telcos involved as it would mean reaching into NCC’s turf so we stick to our comfort zone with bank and non-bank players. Telecommunications companies will remain only as infrastructure providers and they must ensure that they work with the other players who will take the lead.

If historical antecedents in the financial sector have a predictive value of future prospects then we all know what will happen if we choose either an “Optimistic, Determinate” or “Pessimistic, Indeterminate” approach to mobile payments.

The same deregulation, portfolio approach, indeterminacy and pessimism that characterized banking in the early days is being replicated in mobile payments and it should come as no surprise that there is slow growth.  Excluding telecommunications companies from being primary license holders out of paranoia shows a tendency towards pessimism and the portfolio approach in issuing over 20 approvals indicates indeterminacy. 

The Nigerian Cash Problem And Paranoia By The Banking Sector

Money is a store of value while bank accounts, mobile wallets and other storage locations are repositories of value. Successful payment initiatives are simply those that allow value to flow between repositories with relative ease and convenience. If cards and cash are more convenient than barter then so be it. If other mechanisms come that make these flows more efficient and convenient, the market will adopt them.

Because we want a Cashless Policy to succeed, we basically cannot force a market into a default mode because theoretically it seems more efficient when all the evidence is to the contrary. You also cannot force people to use sub-optimal solutions on consumers when the banks and other financial sector operators are not ready or totally out of their depth. Efficiencies have to be discovered by the market itself. Mobile payments and other forms of electronic payments thrive when markets discover those efficiencies. What successful payment companies do is accelerate this speed of discovery after providing the infrastructure at scale. The scale problem is what plagues a place like Nigeria and current efforts to try to force market adoption from players not structured to cope with scale will fail

The infrastructure to enable mobile payments succeed in Nigeria is already in place as the telecommunications companies have put in a lot of investment to build it over the years. These same telecommunications companies are already doing a lot of micro-transactions in form of airtime transactions of immense magnitudes but they have strangely been excluded from participating directly. It does not take the wisdom of rocket scientists to observe that the only two mobile payments initiatives in Africa that have reached viable magnitude are led by dominant telecommunications companies - MPesa by Safaricom and MTN Mobile Money by MTN Uganda.

The first product telcos enable their mobile money for is always airtime purchases and doing this at scale takes out a lot of cash based transactions and makes them electronic. They do this not just because they want to reduce churn but because it also saves them a lot of distribution costs and the customer also benefits from it. The telcos can also roll out an agent network for Mobile Money faster than any player because they already have nationwide distribution networks in place. If we are serious about going cash-less this is a win-win-win scenario.

When a robust mobile payments framework is in place it seems the only losers will be the banks as they would be deprived of commission on turnover (COT) when telco airtime distribution becomes more efficient. Loss of COT is probably the only reason why the banks are scared and are fighting this. Dependence on COT is probably the main reason why banking has not evolved properly in Nigeria

One year is enough time to look seriously at the current Mobile Payments Framework and do a review. The role of the regulator is to act in the best interest of the consumers not in the interest of the banks or bankers.

Full disclosure:  Companies I am involved with do a lot of technical consulting work for telcos and I have been part of the startup team of a major telco while working for an investor in Nigeria.  The opinions in this blog post are mine as an observer and customer/subscriber they are not of my company,  partners or clients. 

Nowhere To Hide

Someone asked Eric Schmidt the Chairman of Google a question on Nigeria after his keynote at the last GSMA Mobile World Congress in Barcelona and without skipping a beat he replied explaining with uncanny clarity the last mile problem with Internet access in Nigeria. I guess he could only do this because his company was very serious about Nigeria and are investing a lot of resources in the future of data access in the country

Nigeria and the rest of Africa are gradually moving away from the dark mysterious continent people are used to, instead becoming one not just of great fascination but attracting the attention and investment of the heavy hitters in the future of technology. Even Apple is also in on it as they have a Nigerian version of the iTunes store already. 

Samsung and other Asian companies are not to be left behind in this race and they are fervently courting the developer community with events and contests as well as partnering with telcos to introduce hardware products to the African market. Nokia is collaborating with ccHub in Nigeria and local developers to build the next generation of local apps.

Conquering invaders and their hordes are not just at the gate, they have breached the barriers and are rapidly gaining foothold. Africa is not the same again and can never be the same just at it changed the first time the European explorers discovered the rich human and natural resources. This time around they have discovered consumers. Consumers of technology, consumers of luxury items and commodities. New and used cars are probably being shipped more to Africa than any other continent. Companies like RIM who are struggling to survive on their home turf have found a loyal and growing customer base in Africa.

Where does all of this leave the indigenous tech entrepreneur and the technology ecosystem? It means that we are now the focus of global attention and a lot of us are already just basking in it or using it to our advantage by getting serious investors curious about potentially lucrative plays. Monopoly of ideas or execution has now become a thing of the past as it has become very easy for successful plays to be replicated across the continent. It also means that the foreign entrepreneurs are also gradually beginning to understand our continent more and they are becoming bolder. The mystery is fast fading and very few areas remain un-infiltrated.

These foreign entrants are mostly better funded and hire brilliant local employees to help them execute their strategy. We may laugh as some of them stumble but let's make no mistake about it, they are not going away anytime soon. The promise and potential of a very large population of consumers will make them keep trying until they get it right. They may acquire local companies for their talent and local knowledge or they may just keep iterating or pivoting until they hit the mother lode.

What all this attention means is that we have not been doing enough or as much as we should have especially as those opportunities existed for centuries. Chasing after the foreigners or trying to chase them out is not the solution and will not work. It is probably those policies that have made us backward anyway. Nationalization of institutions by African governments decades ago created inefficient monopolies or mediocre local institutions and protectionism is actually defeatist and more a sign of pessimism than optimism.

We need to be more optimistic about what we can do and we need to have bigger goals than just copy the next guy or try to replicate the model of those from outside. I have always believed that unique African models exist and they can be refined for greater impact and success. Those models stare at us in the face yet we don't see their usefulness in tech. From “Imu-Ahia” that has helped the Igbo to become arguably Africa’s most successful ethnic group in commerce to Ubuntu collaboration in Southern Africa that HBD has taken up as the brand for its flagship open source product. Ubuntu does not have to be the name of a product alone and “Imu Ahia” is not meant to be for only traders or artisans.

There is a big difference between Asia and Africa and it is the way the Asians have used their culture as a means of advancement rather than a barrier to growth. Asian cultures are not pushed to the back of a any business initiative but rather defines the businesses in their own way. My fascination with Asia started with reading James Clavell’s books and dabbling briefly into the martial arts. That fascination has been rekindled again as I have been reading more and more about Asians recently and currently reading Dambisa Moyo’s book “Winner Takes It All”. The book examines the international growth strategy of the Chinese and what it means for all of us. It is highly recommended as it provides a tremendous amount of insight.

Asian companies grow at unbelievable rates and a recent visit to Silicon Valley made me realize that this invasion is not only limited to Africa. Vivek Wadwha sees an exodus of talent but I see a dominance of Asian talent in the Valley over time. I was at a hotel Sunnyvalle and most of the occupants in that hotel were Asians and they were mainly people working in a number of technology companies in the valley for a short time. These guys will no doubt go back home as the real growth is happening where they are coming from and they are just in America to learn and get the right credentials. Even Vivek Wadwha or the US congress cant stop that.

I saw the advert below from HSBC on the plane as I was coming back from San Francisco and it drove home everything I believed.



The last part of the conversation is priceless: Don’t you want to ever leave? Leave? Everyone is here.

A bank should know when a market has emerged and I believe HSBC has and it is curious that they are not all over Africa the same way they are in Asia. Maybe they are coming just the same way other invaders will come. The market will welcome them with open arms as African banks have already failed us.

Gallup says: Economies south of the Sahara are poised to experience a boost in economic growth between now and 2020. This builds on the real GDP growth of 6.5% between 2004 and 2008. Most of sub-Saharan Africa has bounced back from the global economic crisis, with growth rivaling the high levels during the mid-2000s, according to a regional economic outlook study published by the International Monetary Fund. Growth is expected to average 6% in 2012 throughout sub-Saharan Africa.

Banks that focus on a customer-centric approach become market leaders.

Yet the financial system in Africa -- though stable and well-capitalized -- lacks sufficient complexity. Retail banks mainly focus on short-term transactions, which is hardly conducive to true economic development

HSBC will come and so will other Asian entrepreneurs.

Africans should learn from Asians the same way they have learned from the West and become masters of the world. We can fight them in the marketplace but we can’t chase them away. They have found the market and everyone is here already. They will either bring out the best in us or take everything from us. We have nowhere to hide.

Africa needs a paradigm shift at the speed of thought.

Why Nigerian Techies Should Wake The F**k Up And Read TechCrunch Instead

There are two things a tech blogger should learn not to do and the first one is accusing other bloggers of hustling to get page views (Paul Carr in Pandodaily accused BusinessInsider and VentureBeat of that same thing weeks ago) then turn around to do the same thing. That is HYPOCRISY.

The second one is trying to disguise a personal political rant by a closet racist as a commentary on "The American Dream". That is PATRONIZING. Insulting your readers for speaking their minds then blocking is on a different level altogether, it shows DESPERATION and COWARDICE.

You can’t say (Paul Carr's own words on Pandodaily), I hate them (BusinessInsider) because they’re brain-dead entertainment and linkbait masquerading — to readers, and advertisers — as news and insight.” Then actually provide a brain dead rant (from a closet racist in response to a political ad by a strong black man) to try to shore up pageviews on your site and say it is not hypocrisy. You just cant do that and expect readers to “scroll through”. You just cant get away that easily. Someone will call you out and I did.

They also accused Arianna Huffington of preventing editorial independence at Techcrunch so that was why they left but they use their moderator's powers at Pandodaily to block comments on the Pandodaily blog in response to their insults. They can have independence to say rubbish but readers cannot respond honestly. Mike Arrington was at least honest enough to turn off comments on controversial blog posts rather than selectively block some. 

There is an African saying that "Only your friend will tell you bluntly when your mouth smells from halitosis". Others will laugh at you behind your back as they are doing here in this post:

Twitter is not a very good place to have sensible conversations and my goal initially was to point out to Sarah Lacy that they were doing exactly the same thing they were accusing BusinessInsider and VentureBeat of doing when they sit on their high horses on the Pandodaily feature "Why isn't this news". Paul Carr (the moron) talks about journalistic ethics and purity accusing others of losing it but allows Pandodaily to shamelessly plug his controversial political story into a tech blog to increase their falling pageviews while also shamelessly publicizing his (Paul Carr's) own blog.

I was actually talking to my sick wife on Skype when the Twitter conversation featured on Techloy started and lost it when Sarah Lacy started swearing and Paul Carr started with insults. I had to make them realize that there is no monopoly in swearing or insults. If by one in a Billion chance you featured an African who was able to raise funding as a result of the publicity you should not expect others to cower each time you bark. I could have just let it go but really who exactly do they think they are? They dont feed me and have zero impact on my life or career.

They must think that we are sheep to keep taking in all the bullsh*t and nodding our heads in agreement. Maybe we probably are as Pandodaily's country ranking in Nigeria is higher than any other country yet their pageviews globally are dropping into the abyss.

Sarah Lacy came to Nigeria and ironically told us to stop reading TechCrunch but crazily Techcrunch these days is on point and provides much more relevant content to the tech ecosystem than Pandodaily and their page views have not taken the same dip.

Techcrunch was the blog to point our Pandodaily's mistake in featuring an East African Accelerator as the "First African Accelerator" by sending Mike Butcher to Ghana to talk to the guys at MEST. Mike Butcher brought out all the great things happening there over the years and Saya was able to become a Disrupt Finalist.

Techcrunch is more relevant to Africa as they are providing more objective coverage of the continent. We dont need to hear about petty peeves of people who in an NSFWCORP podcast once called referred to Africa as "a country". Racisim and ignorance seeps out in suprising ways. Douchebagery is no cover up for racism.

To borrow from Samuel L Jackson Nigerians should also “WAKE THE F**K UP” to see that reading Pandodaily is not going to help us build anything bust instead we should follow Sarah's advice and stop reading her blog. We should read Techcrunch instead because at least they don’t pretend to be who they are not and give Africa objective coverage.

I have told Mike Butcher of Techcrunch already that we have space for them in Accra should they decide to put together a dedicated Africa team and I am serious about it.

Yes I don’t know how the media works because I was naïve enough in the past to believe that a lot of objective and true journalists exist (and I still believe there a few out there) but I would rather have respect for a blatant hustler providing linkbait for page views than others who pretend and sit on their high horse yet do the same thing.


Paul Carr is the same guy who alluded to Nigeria's Okonjo Iweala being made President of The World Bank as being the same as allowing Nigerian scammers to run the global financial system.

Go Saya!! Support Saya!!!

I arrived San Francisco Sunday on another of my “learning trips” this time as a Startup Alley participant (cheaper tickets) as we decided to supportStarlogic/Pontaba an HTML5 gaming platform founded by Amaete Umanah who is also the founder of the Silicon Africa Startup Group.

I was still jetlagged and woke up at 2:50am that morning and the first day’s event was like a blur. I had never expected with all the drama and departures from the company last year that TechCrunch Disrupt would get this packed. The International Pavilion was bigger than a few startups from Israel this time as Brazil, Argentina, Chile and Mexico joined this year. The international startups had to take up another space equally as big as Startup Alley itself.

I saw a couple of battlefield presentations then decided to leave early as I was tired and needed to retire on time …. BIG MISTAKE!.

I woke up again early on Tuesday morning to see chatter on Saya Mobile’s awesome presentation all over my Twitter timeline. Saya is one of MEST Ghana’s portfolio companies and the guys from Meltwater were there fully to support them as well. Watching the presentation all over and seeing their stats simply blew me away. You can see how easily we underestimate the needs of the new generation of Africans and think that those canned solutions already available on the web will continue to do it for us.

Saya is disruptive on many levels and not just because of its product but because it was the first African startup to my knowledge that has pitched at Techcrunch Disrupt’s Battlefield. This is further validation that the African startup ecosystem has come of age and we can stand our own anywhere and battle with the best from the rest of the world.

I met the Saya team on Startup Alley yesterday and everyone else I met kept talking about them. Victoria Haynes of MEST said she even met Dave McClure of 500 Startups who said he actually owned the original Saya domain as that was his wife’s name.

Saya Mobile needs funding and that is why they are here in San Francisco pitching to investors and in the Disrupt Battlefield. I have been the one shouting that we dint need money from Silicon Valley and the money is back home in Africa. Why don’t we prove this by pledging "African Money" to backup Saya Mobile? Can we get them to setup a Kickstarter page or for Meltwater to arrange this for them?

Whatever the outcome today they are already winners, if we can also get together as Africans to give them more than the $50,000 they plan to get from winning the battlefield finals then we would have also disrupted TechCrunch Disrupt. I have already pledged $1,000 and other entrepreneurs on Silicon Africa added $3000 as well so we are on our way already with $4000 pledge so far. I will keep updating this post with details of pledges made.

Clinton Dale Mutambo from Zimbabwe said today in the Silicon Africa Group:

“I worship the power of progress! Isn't it fitting that Saya and the MEST family are setting historic examples for the African ecosystem. My heart would have bled had some neo-colonial douchebags been parading themselves as the "saviours of Africa". Whatever happens from here; Team Saya has set a new bar for millions of young Africans across the continent. There is hope and this is just the beginning”

This is indeed a new beginning, the true emerging market renaissance that Africa will lead.

Whatever deity you worship please pray to it for Badu and Richard to win the final TechCrunch Disrupt battle today. Lets fill the #TCDISRUPT hashtag with #sayamobile. I will be rooting for them and shouting at the top of my voice today. I have also brought out my kente strips to wrap around them if they win this.

My very first post on this blog is validated daily by MEST and great stuff from Ghana

Update: Posterous text formating really sucks! $5000 and counting...

The Interswitch Conundrum

Interswitch is Nigeria’s foremost payments company and we had an animated discussion over the weekend in the Silicon Africa Facebook group over the decision of Interswitch to reduce connection fees by merchants registered with SMEDAN (Small and Medium Enterprise Development Agency of Nigeria).

Bankole Oluwafemi was inspired by this discussion to put up a blog post on Techloy titled “We Hate Interswitch So Much We Are Going To Disrupt Them”. A lot of this post is based on my comment in response on his article.

I guess that by the “WE” he means the new payment initiatives in Nigeria which he later acknowledged also have no choice but to connect to Interswitch as well.

As far as I am concerned, the way I see it is this: The problem with Interswitch is not Interswitch it is Nigerian banks, Central Bank of Nigeria (CBN), Nigeria InterBank Settlement System (NIBSS), Valucard(Visa) etc..... I can keep naming all the players who have been complacent and have not pushed the payments space to the very edge in Nigeria. I had mentioned in an earlier post that most banks in Africa are not innovative do little to grow markets and that was the same case with Nigerian Payments. Interswitch actually aggressively grew the payments space and we must give them credit for that.

Interswitch was primarily licensed as a switching company and NOT as an online payment gateway, a card issuing company or an acquirer but it has evolved to fill all those needs in a less than satisfactory way because the policies were flawed and the competitors were either dormant or playing by the book. The banks who were once shareholders who formed it abdicated all their responsibilities to create a monster child. Each area of business Interswitch tries to dabble into outside its core switching function are actually huge business areas in their own right and they formed subsidiaries from the main payment switching companies to address them. Other companies can also work with Interswitch to perform these functions in the marketplace but obviously Interswitch’s subsidiaries have an unfair advantage over all others and the regulators or the banks should have seen this coming.

All banks are interconnected by switches and NIBSS and every Nigerian bank has the capability to build their own payment gateway or become a major issuer or acquirer and some of them actually have done so but a majority choose to abdicate this responsibility to Interswitch. The few exceptions are either the foreign owned banks and the really forward thinking local banks like Zenith or (sadly) GTBank.

Interswitch has been successful no doubt even though its strategy for survival and self perpetuation has been aggressive. They have been able to push the envelope to the point where they almost owned the entire post office. On its way there the banks, CBN and other idle bystanders stood there waiting until they became the gatekeepers for all payment initiatives in Nigeria.

The Central Bank of Nigeria (CBN) has a lot of licenses for stored value providers, switching companies etc but how many people or enterprises have had the vision or foresight to invest time and effort in doing the hard work to get these licenses and build something truly awesome from the ground? We all dont want to do the hard work but want to do the easy work on the web. Paypal grew not because of its web front end but because it fought hard to build relationships with banks and card associations.

To be fair however, the banks seemed to have also conspired against the growth of other switches as those not owned by the banks like Etranzact have struggled while others like Chams have died. But a banker once told me that one of the main reasons why they support and prefer Interswitch was because of reliability and uptime. Other players do not take service delivery and service levels on their switching platforms as seriously as Interswitch. A lot of the consistently high service levels to the banks came from the fact that Interswitch was run by the CEO as a foreign startup and not a local bank or civil service. 

Interswitch employees are highly motivated and are well compensated for their efforts. I have not seen the same passion and zeal I have seen from Interswitch workers elsewhere in the Nigerian financial industry. Interswitch had to fight to survive as they had limited capital to start with as they were funded from SME funds set aside by each bank. The banks could not put in more money than they had initially invested and the company had to make money for itself. Mitchel Elegbe the CEO is from my alma mater and that tenacity is what you pick up from UNIBEN.

Where Interswitch has failed is in not recognizing their weaknesses and allowing those who are strong in those areas to take charge while they work with them. The payment gateway service is problematic. Backoffice reconciliation with 3rd parties take too long and they are not the strongest on user interface or user experience. Collaboration with Interswitch is difficult because of their aggresion. A lot of people are afraid to take ideas to them as they are afraid it would be hijacked and that fear is largely justified as I have indirectly been a victim but that is another story for another time.

Other than the deeply flawed mobile payments initiatives, current payment drives in Nigeria focus largely on the web interface. POS infrastructure is still epileptic and no sensible investments have been made by players to really move things forward. In 2006 when I came back from the UK, I was part of a team that tried to do a management buyout of another major payment company with the same roots as Interswitch to put in place the largest POS infrastructure in Africa but potential investors were not interested. They backed out at the last minute to go into other more lucrative areas as they thought payments was still a niche business where the banks will continue to stifle innovation. When I heard of the recent Adlevo/Helios led investment in Interswitch it was validation of what I had always said that the payments market in Nigeria needs major investment. It was basically money to allow Interswitch get the banks out of the way so they can grow.

I doubt that any of the players on the web layer will do anything to dent Interswitch's dominance in payments for now but they can give it a better more human and business friendly face by aggregating connections to it. Interswitch has always been better suited to be a backend switch and a payments aggregator and not a front-end solution so while we wait for the messiah in switching (NIBSS) to wake up we should tolerate them for now while we wait to see if the CBN will allow telcos to build the infrastructure for high speed trains to move value around instead of rickety molues or danfos. BRT buses are just glorified molues and will not make much of a difference as they will still go at the same speed when the roads have potholes in them. Once the road is made smooth, even interswitch will fly.