The future is in branchless banking’

Paga, a money transfer service provider works with banks, microfinance institutions and mobile network operators to bring banking to the banked and unbanked  population. Its co-founder, Jay Alabraba said Paga Merchant Services allows businesses to collect payments and conduct money transfers. He said it is deepening the financial inclusion policy of the Central Bank of Nigeria (CBN), and that branchless banking is where the future lies, COLLINS NWEZE writes.

Mobile payment is where the world is heading and Nigeria cannot afford to be left behind, Paga Co-founder, Jay Alabraba, has said.

Speaking during a media interaction in Lagos, he said the mobile payments service firm, has formally announced the launch of its new business focused service line – Paga for Business.

Suitable for large-to-small businesses, the product is a one-stop-shop solution for any business looking for a smart way to collect payments from its customers in person, online, or remotely, anywhere in the world.

The solution, he added,  also allows businesses to disburse cash, airtime  to any bank  account or phone number in real-time.


Mobile payment firms vs banks

Alabraba said Paga does not compete with the banks since its funds are saved with the banks. He however admitted that there are places where it clearly competes with banks and there are more places where it collaborates with banks to do what it is doing.

“Certain banks have licenses to do mobile payments. There are places you can extend what we are doing beyond where people do it today. For example, you don’t find many bank pursuing collections of payment by small or medium businesses the way we do.

“Banks have braches and large banks can have maximum of a thousand branches. Paga alone has 6,500 agents across 32 states in the country. This is a larger service network than all the banks in Nigeria combined. Besides, banks are serving people that are banked.”

He said people who do business  may not necessarily be in the rural areas, adding that because they are not banked, they are not finding the efficient ways to make payments. But somehow, he explained, “there is a gap and that is the place we play as well. Half of our customers are banked, just that they find Paga to be a lot efficient, creating more options for them to access their services.”

He said if you are to pay a plumber N2,000, with Paga, sitting in your office, send him a message that sends him his cash. He comes out of his store, goes left to a provision store and collects his money. He didn’t have to come and meet you in your house, neither was your bank involved,” he explained.


Lagos market

 He said Lagos has fewer geographical states that will be considered rural.

“When I talk of rural focus, beyond Lagos, there are going to be villages where you have self-owned networks. While you will not see the big splash, billboards and television in those places, pay close attention to how they use those services.”

Typically, he explains, “we have one or two agents there doing transactions. When you talk about Paga, you don’t only pay attention to the person picking up their phone to do transaction. There are multiple ways customers will use paga. People can use page to send SMS, application, paga can be accessed and used online. In that case, you are not even riding on mobile phones network.

“So when you say mobile, apart from mobile phones, think about connectivity and ability to access any kind of laptop, tablet, device, from the lowest feature phone that can only do SMS to a complicated laptops. These are all connected devices, named mobile,” he said.

He explained that there are another set of customers that don’t interact with Paga via their phone, but through agents, which is their service point in their community and that agent can do any transaction that they want to do on Paga.

As he put it: “If they want to transfer money to another person in a remote area, they can take their cash to the agent and send the money and the person receives SMS that the money has been paid. Then, they will go to the agent, present their withdrawal code and cash it. All they have done is to use the phone to receive the alert but the transaction is happening at the agent. The important thing is that as long as there is an agent point in that place; it is possible to serve those customers,” he said.


Confronting infrastructure hurdles

 Alabraba said infrastructure challenge is a subject of concern to any type of business. “Recently we were at an event hosted by one of the large international organisations and infrastructure was the subject and how it affects small and large size businesses, from the stand point of power, cost of connecting telecoms and the reliability of such connection.

“We built Paga to work in inadequate infrastructure environment; this is not importing software and assumes it is going to work. We have taken into account the fluctuations we will have in power, or telecommunication networks, or other types of infrastructure challenges. The technology is built to work in emerging markets where technology challenge exists, we use an appropriate technology,” he said.

He said should power be lost in any of its data centres, there are multiple backups to ensure there will not be any loss of data about the transaction.

“If a customer does a transaction, details are sent through SMS, and there are other ways to confirm. You could reach our call centre or go online and check. We have designed this to work with the challenges that exist here and exceed expectations as things improve and things are improving. We are working closely with the power and telecoms sectors.  We are working closely with the telcos and they are investing heavily in improving infrastructures so that SMS are not delayed,” he said.


Other challenges

Alabraba said the primary challenge the firm faces is inadequate awareness. He said the firm is focusing on deepening the reach of its operations to uncovered regions in rural and semi urban places.

“Today about 18 per cent of our agents are in places that are considered rural and semi urban, which is a very big focus on the CBN financial inclusion agenda. We want to reach those places and we look for products and services that will meet their needs, because when somebody you know or trust is doing something, it is a lot easier for you to pick it up,” he said.

He said the mission is to get more people hooked on to the money transfer services, from where there will be gradual propagation into the communities as well.


Market gap

 The Paga co-founder said the firm discovered a gap in the market and decided to explore it. “Today, we see a gap in that market and we have several businesses that directly address it. We are a business that desires to go online, ——they are not able to collect cash, Paga has multiple products for those kinds of businesses. In most cases, we are collaborating with banks to improve the services to their customers,” he said.

“I think the future of banking is branchless rather than mobile. One is the fact that increasingly, people are comfortable doing things electronically because you don’t need to queue in the banking halls  for hours to deposit or collect money.

Branchless in the sense that people can use connected devices to access their transactions. But even more interesting is this trend towards true branchless banking but still physical, where the retail shop in your community ends up being your bank,” he explained.


Paga overview

 Alabraba explained that a Paga agent is a place where you can go, send money, pay bills, buy airtime, deposit money into any bank in Nigeria and receive money from anybody in Nigeria.

When you really think about it, it is mini bank, where you go buy breads, soft drinks, the person equipped as a Paga agent can do any of those transactions for you. We are collaborating with banks and we are going to see a lot more around banking services being delivered through here, and this will be from partners as well.

He said those who can use their phones to do transactions will do so, but that there will be a lot more people who will rely on their low paga agent to achieve this goal. This is a person that knows them, knows the number of children they have and the fact that they are always sending money to them.  The local agent is also earning money whil;e offering this service.

It is here we emphasise that small and medium businesses are the life blood of the economy. It is trusted; they bring good products, give credit to their local communities.

That small business is pushing the future of banking and is actually in the position to explain to the local community members what the product is,” he said.


Product innovation

 He said that in any situation where value is being sent from one party to another, be it a customer or a business, Paga has a role to play and can improve the flow of the value.

“Every business needs payment, whether small or big payments. It may be cash or electronics. So, we have products under the collection umbrella that allows businesses of all kinds to collect payment.

Like Jumia, online company is able to use cards on Paga mobile payment to collect payment from their customers. The customers may be online or offline and there is opportunity to collect through our agents and it still reaches the same online merchant.

There is also offline payment. You think of the small provision store that is near your house that is a person that wants to collect cash or cards. We have series of products available and more coming that will support that kind of a business. More importantly, like the electronic company, the Ikeja Distribution Company for example; you can go to any Paga agent or go online to pay that bill. You don’t necessarily have to go to the electricity company. So, collection is another thing,” he said.

He said the firm also has corporate payment tools, called bulk payment tools.

“The company may use either bulk payment to pay all its staffs, the payments may go directly to their phones. So, think of day laborers that may be paid in bulk. So, if there are 100 people that need to be paid N10,000 each, Paga could send the money to all of them and what they need to do when they receive the alert is to cash it in their neighborhood or go to an ATM to cash out. Similar product exists for airtime,” he said.


 The Paga chief said the firm is working with its partners to offer loans to is clients.

“We have multiple partners. We are licensed and regulated by the CBN which has done a lot in advancing the future of financial services in the country.

Two key frameworks CBN has come out with, are the mobile payment framework which came out in 2009, that regulates the core business that we do. However, more recently, the  CBN has brought out the agency banking framework that guides how banks and other financial institutions can go branchless,” he said.