According to news agency Bloomberg, quoting Nigeria’s central bank, only about 30% of the West African country’s inhabitants have access to bank accounts. If this strategy works (an attempt to introduce ID cards in the country 10 years ago failed, in part due to corruption, reports the BBC) then it could rapidly change that unbanked statistic.
The pilot phase will see the Nigerian Identity Management Commission (NIMC) issue 13-million MasterCard-branded ID cards, although the timeline for the actual rollout remains unclear. Thereafter, the NIMC intends to issue some 100-million cards to citizens aged 16 and older. In order to encourage Nigerians to get their e-ID, the government is promoting the card’s link to the social security benefit system. The registration process is free and the so is the first issuance of the card.
From an administration and government perspective the e-ID could be a gem, but the role of MasterCard in the project has added a layer of controversy to the project. In April, ‘Business Day Nigeria’ newspaper highlighted one such concern, triggered by the US-based company being mandated by the United States government to stop servicing clients using certain Russian banks due to the volatile situation in the Ukraine. The newspaper asked if this would give a foreign company too much power within Nigeria’s financial system.
“Every international card scheme has to follow the rules and regulations of their (originating) country. There is a huge risk associated in selecting MasterCard International, a foreign company, for such a critical project as the national identity management scheme,” Victor Alaofin, CEO of Nigerian technology company Ryte Internet Technologies, told ‘Business Day Nigeria’. “If Nigeria should have a fallout with the US government, payment transactions could be blocked as part of sanctions.”
While that debate is likely to rage for some time, it remains an exciting partnership for MasterCard.
From a marketing and branding perspective, the company has been quick to downplay any self-promoting benefits. Broadcaster CNN reported in September: “A MasterCard spokesperson denied the payments company was turning the ID card project into a branding exercise. In an emailed statement the company said ‘the brand mark is not MasterCard’s corporate logo, nor is it an advertisement for the company. The MasterCard brand displayed on the card is what makes the electronic payment component of the e-ID card accepted as a means of payment’.”
NIMC spokesman, Umar Abdulhamid, said that a number of other payment providers had been approached by the government, but ‘were apprehensive’. Elaborating on this point, Daniel Monehin, President of MasterCard’s sub-Saharan Africa division, told the news website ‘How We Made It In Africa’: “The idea was put forward by the government. It did not come from us … we just developed the road map to make it work.” The process took 18 months to develop, he said.
MasterCard apparently sees a gap in the unbanked market which can be met by partnering with governments on such projects. In September, Nigerian-based technology website ‘Technology Times’ reported that MasterCard had entered into a deal with Mexico along the lines of the Nigerian model. “By supporting governments around the world with electronic payment programmes, we are helping to save money and improve efficiencies. But more importantly, together we are opening up a world of inclusion for those who have previously not had access to traditional financial services,” ‘Technology Times’ quoted Antonio Junco, President of MasterCard Mexico and Central America, as saying.
In Africa, the African Development Bank (AfDB) estimates that just 20% of African families have bank accounts. Furthermore, the AfDB puts the banking penetration in sub-Saharan Africa at just 16,6%, compared with an average of 63,5% in other developing regions. As the UK’s ‘Financial Times’ newspaper reported recently: “All sorts of products and players are sprouting up – whether it’s from traditionally established banks or from the newer, but fiercely competitive, mobile banking players such as M-Pesa in Kenya or South African MTN’s Mobile Money Account.” But, said the newspaper: “The old global payment technology rivals Visa and MasterCard are keen to join in. Both are looking to enlarge their footprint in different corners of the continent.”
The ‘Financial Times’ noted that, for both Visa and MasterCard, Africa represented a golden opportunity for growth. “Visa, for example, says it aims to generate 50% of its revenue from markets outside of the US by 2015, and wants to achieve this partly by extending its products areas where electronic payments are not yet widely used – Africa fits that description well,” said the publication
It also quoted MasterCard President for the Middle East and Africa Region, Michael Miebach, as stressing that a collaborative approach was needed in Africa. “Approaching payment infrastructure challenges across the continent requires a new model, [one] where we as a payments technology company partner with governments, banks, merchants, NGOs and other technology companies at a country level. And where, as a result, doing well and doing good go together,” he said.