Outlook On OPay On Financial Inclusion

Outlook On OPay On Financial Inclusion

We prepare seasonable market intelligence reports for our clients. This is an excerpt on OPay in Nigeria. I have deconstructed it, removing the jargon, to make it accessible here. The report is more professorial and technical but I do not share such when I expect high school kids to read me. Pardon that I cannot share all; it has some proprietary data as we customize for clients. (I had noted on OPay strategy here.)

Our model projects that by the end of Q1 2020, OPay (from Opera) will have the largest “agency banking” agents in the Nigeria’s financial sector. OPay is turning bike riders into “agency banking” platforms, providing a mechanism for a fusion of physical money (cash) and digital money (wallets). A bike rider will give you cash if you debit your OPay wallet in his favour, and he can also credit your OPay wallet if you give him cash. Fascinatingly, OPay has invented a mechanism that these processes can happen without a need for a bank account or any integration with the traditional banking system. 

There are three key elements  associated with this model: (1) tax efficiency to players (2) Speed and (3) Cost efficiency for price-sensitive customers. 

[…]

Just as Diamond Integrated Banking System (from defunct Diamond Bank) played a major role, arguably more than the Nigerian Police, in reducing highway armed robbery, when it delocalized account operations (you can deposit in Kano and withdraw in Lagos), we expect OPay to have a catalytic impact on financial inclusion in Nigeria. OPay is integrating food delivery (OFood), bus service (OBus), tricycle (OTrike), motorbike (ORide), etc into a mammoth system where digital financial inclusion can happen without any connection with the traditional banking infrastructure. As OPay advances, even the NIPOST stamp duty will diminish because OPay’s operating system is not connected into NIBSS for any settlement. Price-sensitive customers will see this architecture as favourable especially when the agents are everywhere. 

[…]

If market women feel comfortable loading their money into OPay wallet via the bike agents, disintermediation at unprecedented level will happen in the banking sector. Our projection is that OPay will have excess of 300,000 “bank branches” – the bike riders as agents – thereby making it a dominant “transaction institution” for a significant portion of the economy.

OPay is disruptive because it has come with a new basis of competition. Dealing with this competition will require many things. We explain tangential and parallel strategies we believe will offer realignment in the market from the O-Horizon Segment (see Figure 3).

[…]

 

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9 thoughts on “Outlook On OPay On Financial Inclusion

  1. I think the construct is a practicable one, looking at the big picture, which is creating many touch points between potential customers and the digital platform. The robustness of the ecosystem would be such that even if bikes disappear on our roads, you can still use any of the prevailing contact points among people to keep everyone connected.

    It opens a way to agency banking at scale, because the most precious commodity which is trust is now inbuilt and relatable in many facets.

    Again, this construct gives greater credence that the biggest and sometimes complex societal challenges aren’t solved by throwing biggest cash at them, but rather with clear thinking and deep understanding of relationships and interdependencies, a great solution emerges. OPay can record more successes in the financial inclusion march, without even spending one-fifth of what CBN and traditional banks have thrown into it, without much success anyway.

    One way or the other, the OPay hurricane has managed to activate the thinking mode of so many people, and now there are several pathways to crack the seemingly difficult codes.

    Table shaking is always good, at least it makes those who are either lethargic or docile to be more deliberate and decisive.

    Reply
    1. “OPay can record more successes in the financial inclusion march, without even spending one-fifth of what CBN and traditional banks have thrown into it, without much success anyway.” That is why it could be disruptive

      Reply
  2. This is a very nice concept and one that would transform the economy in terms of employment and operational efficiency. However, now that the technology side of the model has been sorted, the political side of the equation must be tackled with equal measure considering the potential impact on stamp duty and taxes which are major revenue streams for government. Nigeria is just a complex nation with short sighted leaders who would rather kill a project with great potential and instead focus on the short term. We have seen many cases like this. Also, there are people both at the federal and local levels of government who profit from the business frictions and inefficiencies, these must be tackled as well.

    Reply
      1. You just spoke my mind @ Pius. Just like Prof has said broken systems reward some big people and this is one of our biggest challenge in Nigeria. I pray Opay finds a way to navigate through all these political issues

        Reply
  3. Great insights @prof, Francis and Pius. Tekedia is like a pool of knowledge, insight,wisdom etc to take a much needed 21st century sip . Thank you Tekedia, you the black box , the think thank etc .Much love

    Reply
  4. Very educating piece…I have began to sight Opay agents in Enugu, those i have seen so far include Keke riders and petty shop owners…they are truly spreading like wildfire….

    Reply
  5. Am I the only one who thinks that there is a small issue of safety for the Opay riders being overlooked in all this, seeing they will become mobile cash machines?

    Reply

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