In Africa, there is going to be a lot of disintermediation in the banking sector: many providers would be cut-out as companies reach end consumers. And that disintermediation will be enabled and anchored by the internet. So, if that is the case, winning the game of future banking would be driven by the quality of digital service experiences, and internet is going to become the ecosystem where that will happen. Like the disruption of Kenyan banking via MPESA which happened through mobile telephony, South Africa expects fintech to cause massive dislocation in the banking order.

Then with that knowledge, what do you do as a bank? You go and protect the flanks: you get a mobile virtual network operator (MVNO) license –  “A mobile virtual network operator, virtual network operator, or mobile other licensed operator, is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers”. Yes, you become a telecom company without physical assets. That is what Standard Bank has done, becoming the second bank in South Africa that has acquired MVNO license.

Standard Bank has finally confirmed one of the telecommunications industry’s worst-kept secrets: it will launch a mobile virtual network operator (MVNO), becoming the second major bank in South Africa to do so.

TechCentral first reported in February that Standard Bank is building an MVNO, revealing at the time that it had hired former Virgin Mobile South Africa CEO Steve Bailey to its executive team.

Standard Bank spokesman Ross Linstrom said in an e-mail in response to questions from TechCentral: “Yes, we are launching an MVNO. We expect to launch soon.”

Standard Bank joins FNB which unveiled FNB Connect in 2015 making it possible to serve its customers at scale without them spending any money on telecom charges. When I put these questions in LinkedIn based on the strategy that FNB has deployed, I got good feedbacks that a bank could technically win by delivering unmetered services to its customers.

1. If you know that a bank in Nigeria makes it possible that you can use its digital banking services (including web app, mobile apps, etc) even when you do not have mobile browsing credit, would it be a factor to open an account in that bank?
2. Then, you come to the bank for a problem, and it offers free WIFI to make it easier for you to deal with some issues you may be having, would that be a factor to open an account?

From the comments on LinkedIn, many people do believe that removing the mobile cost friction on top of delivery at par service quality would make them flip to use a specific banking institution. So, Standard Bank must have seen some movements for FNB to have responded by getting its own MNVO license. It is possible we would be seeing more banks going for MNVO. This is a typical case of moving towards the upstream to deliver unmatched value while your competitors are left in the downstream. When you do that, you would rewire the architecture of the industry competition. Provided the MNVO cost is well managed, this is a clear new basis of competition in the industry and could potentially help nip many fintech challenges.

The Accumulation of Capability Construct teaches you how to separate from everyone by going upstream when most are operating at downstream. You get more value because you are handling bigger frictions and targeting severe pain points.

Good people,

Since I mentioned NIPOST (Nigerian Postal Services) in a recent post, I have been getting InMails and notes from people telling me that NIPOST has now improved. I must disclose that I have not used any of NIPOST’s recent services. This is a comment a user left in an old piece: largely, NIPOST is improving on its mission.

Very cool analysis Prof, as per your post about NIPOST they seem to be making moves
they’ve been quite active on social media and seem to be getting good reviews from Nigerians

In a piece in Vanguard, I can read of promises but no specific transformation which has been practically deployed by NIPOST. Yet, there is a very clear roadmap which the government is pursuing and which is interesting as the government wants to unbundle NIPOST to make it more efficient.

I pay a lot of attention on NIPOST: everything I have written on ecommerce (not an online store) is anchored on my thesis that if you do not deal with the marginal cost challenge associated with delivery and broad logistics in Nigeria, ecommerce would not be competitive compared with our open markets and supermarkets across Nigeria. The biggest element of marginal cost is distribution cost since transaction cost is always there. Only NIPOST can reduce distribution cost for ecommerce firms in Nigeria.

In a perfect market, the marginal cost of a digital product is zero. This means that the price of a digital product tends to zero: welcome freemium and ad-supported business. However, only firms with network effects dominate and benefit. The core reason is that if in a perfect market, and the marginal cost of producing digital product is zero, the price will inevitably go to zero.

NIPOST Impact

If NIPOST improves, the marginal cost problem will be solved, meaning that ecommerce companies can ship items at better cost margins. Possibly, that would help them compete better with open markets and supermarkets. Yes, if NIPOST takes over the distribution challenges, ecommerce companies will then become unbounded and unconstrained by geography, making them national players. Today, our ecommerce firms are not exploiting the true value of the web since most are focusing on specific cities – you cannot be doing a web business and be restricted to a small locality. So, if NIPOST helps to fix distribution, the ecommerce firms would become more valuable as the scalable advantage has improved.

All Together

As I noted when I commented on seeing my book on print for the first time, logistics is at the heart of ecommerce. I had written a book, submitted it to Amazon and waited for the royalties to arrive. I did not even bother to get a print version of this book! Amazon is handling all and selling the book across America and beyond. Amazon does what it does because the United States Postal Service provides deep support to reach any city and location.

If NIPOST can offer that in Nigeria, a new dawn will emerge in the ecommerce sector in Nigeria. Ecommerce companies will simply focus on making sales while NIPOST takes care of the distribution for them. And when that happens, they would have scale which will then make them very competitive on pricing compared with local open markets and supermarkets across Nigerian cities. That trajectory is how the ecommerce sector will blossom in the land.