The golden coastline of California wasn’t enough to keep Tayo Oviosu from returning to Nigeria to found Paga, a secure payment system that since 2011 has become one of the country’s most widely used platforms.
Built on the principle of “appropriate technology” to operate in any environment and on the most basic mobile phone, Paga addresses a critical issue to Africa’s development: the availability of financial services to all. “The opportunity I saw is one that exists around the continent,” Oviosu says. “Traditional banks don’t have the reach to the mass market and so these economies are inevitably cash driven, and it’s difficult to make payments and effect commerce.
“So if Nigeria is to be the economic juggernaut it really could be, you have to solve payments and make it easy for people to pay or get paid; and it has to be easy for people to access finance.” Paga’s 5m customers can make such payments through options that range from smartphone supported online apps to simple codes punched into basic phones, or through Paga’s nationwide network of 11,000 agents, which is set to double within a year. At the same time, more than 5,000 merchants and businesses use Paga to facilitate transactions.
A 2014 report by the Gates Foundation found that 58m adult Nigerians had never opened a bank account, while the World Bank recently reported the country had only 8 ATMs per 100,000 inhabitants. This gives Paga a great opportunity to leverage connectivity and access the internet to drive electronic transactions.
But while the main means to achieve this is the mobile phone, it won’t necessarily stay that way, says Oviosu. When Paga started, almost all its agents conducted business on mobile phones; now only about 30% do, as agents find laptops easier to use for entering the likes of data and customers’ information.
“There’s too much emphasis on mobile phones,” he says. “It’s all about connectivity and the form factor will change over time. Most Africans connect via phone today, yes, but it’s important not to overemphasise it as the channel.”
Strategy for growth
Oviosu puts Paga’s success in becoming one of Nigeria’s most widely used payment platforms down to three key factors: a motivated team that remains focused on the vision of what the company is trying to achieve; a group of investors providing the required backing while allowing the company to do the work it needs to do; and a strategic focus on building the company’s agent network to facilitate payments – a process that continues with an eye to the future.
“Our strategy for further growth is to continue building that agent network and to roll out digital financial services, such as savings and loans, to the mass market, which will really drive financial inclusion in Nigeria,” says Oviosu.
Currently about 39% of Nigeria’s population are financially excluded, a figure the Central Bank of Nigeria aims to reduce to around 20% by 2020. “The channel that we provide around our agent network and the distribution there will be key to making that happen,” says Oviosu. One of Paga’s merchant partners is Jumia, Nigeria’s largest e-commerce platform. But despite this, e-commerce actually plays a relatively small role in Paga’s affairs.
“The bulk of people on Paga use it so send money to others or to pay for utilities; the market’s just not ready for e-commerce in Nigeria. It’s still very young,” Oviosu says. “About 90% of all Jumia’s transactions are cash on delivery, so they don’t have significant volumes paying online.”
Hence, while much digital ink has been spilt on the potential of e-commerce taking over the high street, Oviosu doesn’t see that happening anytime soon in Nigeria. “As elsewhere, Nigerians still want the experience of going out to the store with friends, or with the boyfriend or girlfriend. The malls in Nigeria are packed – that’s where the market is today.”
At the same time, he acknowledges that e-commerce is taking more of a hold in specific segments of the market. “It’s more services such as travel and booking air tickets, and social media that people are ready to be online for,” Oviosu says. “It’s not yet the heavy-lifting Amazon.com-type of business.”
Africa will go where Nigeria leads
During the past few years, global business has resonated with talk of Africa as a tantalising final frontier, but Oviosu is one of those less than satisfied with such a narrative. “My view is it’s not about Africa being the next frontier, rather it’s about Nigeria; the Africa story is the Nigeria story – Africa will go where Nigeria goes, and that story is still being told and has a long way to go.”
He bases this on Nigeria’s colossal scale in economic terms. Why get embroiled in accessing the markets of numerous countries, with all the different and difficult regulatory frictions that entails, when an investor can access one enormous market in Nigeria full of so many opportunities but which is conveniently under one regulatory system?
“Kenya is just about the size of Lagos in terms of GDP,” Oviosu says. “So when I ask myself why am I spending so much time here and not in other places, it’s because they don’t have the potential, certainly not any time soon. I want to see Nigeria become the giant of Africa again,” he says. “I know it has the potential, so it’s about us building the foundations to help it achieve that potential.”