The Central Bank of Nigeria needs to let Free Markets work — no price regulations!
Recently the CBN released a 68 page document called “Guide to Bank Charges” that literally outlines every possible charge banks, MFIs etc can charge for any transaction.
Yesterday, I was in a 3 hour meeting with the CBN where we debated whether the charges in the new guide should apply to mobile payment transactions. In the room were banks and other mobile payment operators. The banks have given up arguing whether CBN should regulate prices on other aspects of their business but they were supporting strongly my arguments opposing price regulations in mobile payments (for now).
On one hand I see why they do things like this — banks in Nigeria have a history of silly charges. For example, you get charged to withdraw your own money from the bank! Come on now! From the CBN POV they are protecting customers.
On the other hand, we need to ensure all players investing are able to make money. Most importantly agents are able to earn a good return.
To achieve financial inclusion through mobile payments we need multiple robust networks of agents. Agents are places in local communities where people can go and get financial services rendered. Typically you go to the agent and give them cash in exchange for the service you want e.g deposit into an account or send money to someone. The agent must have pre-funded their wallet before they can process transactions where they receive cash. To pay out cash, for a withdrawal, they need to have cash on hand. Agents make a commission on everything they do.
Paga is the leader in mobile payments in Nigeria. As of time of writing, we have over 9,400 agents in 35 of 36 states. As a comparison, all the banks in Nigeria have about 4,000 bank branches. Definitely agents are the path to getting to the over 60% of the Nigerian adults who are unbanked. Paga’s network of agents is open to all banks to use, and soon we will announce a couple banks using our network.
The agents are all entrepreneurs, women and men who are looking to build a viable business for themselves in their communities. They will only push services that meet their return targets on their investments.
From our perspective, building and managing that agent network is also very expensive. We need to be able to recoup those investments.
I fully appreciate the need to have pricing that consumers find reasonable. However, that is the beauty of free markets — consumers will vote with their feet and wallet. They will only use a service they believe is giving them value for the price. A regulator forcing that price then makes companies leave money on the table. Money that could be used to build and scale the business is left
After a long discussion the CBN asked that we come back with a proposal on what the fees should be for all transactions at agents. Bottomline, the CBN will regulate prices for mobile payments. Paga will be fine. We’ve built a strong and healthy business, but I just hate when you have to compromise sound economic principles.
That said, Aliko Dangote does this all the time by benefiting from bans on imports which make no economic sense. Maybe I should start ignoring my free market principles? 🤔
I’ll be spending my Easter weekend developing pricing template to share with other players in the industry. Hope you’re spending Easter in more interesting ways!
