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).