Funds transfer in Nigeria has come a very long way. Today, if you want to transfer money to your kid in a University located in another state, all you need to do is open your banking application and punch in the amount, select bank and beneficiary and in seconds the money will get to your child. The beauty about this is that, you and your child don’t need to have an account in the same bank to ensure that the transfer goes through. You also need not be in the same location or even call anyone to confirm the transaction. Everything is handled in a matter of seconds by the respective banks without having to go through another third party.

Now imagine a world where this wasn’t possible? If you had to transfer funds from your account to your child’s, you would perhaps operate the same bank account instead of separate ones. If you wanted to withdraw money from an ATM, it would have to be the one owned by your bank. Withdrawing from a third-party bank would likely be impossible. This scenario is reality in some African countries today.

M-Pesa is the most popular, no doubt
For a lot of Nigerians looking to start a Fintech company, one of the products often cited as a model for financial inclusion is M-Pesa, the Kenyan mobile money transfer product that has taken the world by storm. M-Pesa allows users to deposit, withdraw, transfer money and pay for goods and services easily with a mobile device. Using a combination of GSM technology and a mobile software application, M-Pesa facilitates sending remittances across the country from one user to another, bypassing the banks. It also relies on an agent network structure that enables users cash money easily without having to visit any bank.

M-Pesa is so successful, it has been viewed as a model for financial inclusion across the world. Such is the popularity of M-Pesa, that several other Startups across Africa have tried to replicate the same model in their home countries. Nigeria is of course not excluded going by the plethora of M-Pesa like products across the country. Unfortunately, none of them have been able to replicate the wonders of M-Pesa despite millions of dollars of venture capital backed investments. The reason why this incredible product can’t be replicated in Nigeria with such success is perhaps due to what you and I as Nigerians enjoy today, the Nigerian Interbank Settlement System (NIBSS).

The NIBSS was introduced in 1992 by the Bankers Committee following the need to introduce a Shared-Service infrastructure for facilitating payments finalities, streamlining Inter-bank payments and settlement mechanisms, and to drive and promote Electronic Payments across the Nigerian Financial Industry. The NIBSS which is owned by the Central Bank of Nigeria (CBN) and all licensed Deposit Money Banks in the country, drives collaboration with all Nigerian Banks, Card schemes, Processors, Payment Terminal Service Providers (PTSPs), Mobile Money Operators (MMO), Telecommunication providers and other Payment Service providers to improve adoption of Electronic Payment in Nigeria.

This infrastructure is the reason why you and I can transfer money from one bank to another and receive payment confirmation within seconds. All you need to own is a bank account and a mobile phone. You also do not need have an internet connection on your mobile phone to effect transactions as banks have now introduced USSD applications that facilitate transfers between their customers and recipients, again without having to share the same bank account.

In Nigeria, payment for goods and services is also made possible via an infrastructure gateway provided by Interswitch, a digital payment company that commenced operations in Nigeria in 2002. Interswitch facilitates the electronic circulation of money as well as the exchange of value between people and business, allowing them pay for goods and services over the internet.

Why is this important?



READ MORE: https://nairametrics.com/why-m-pesa-model-has-failed-to-work-in-nigeria/


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