Mobile Banking and USSD Transactions Come Up- How Mobile Banking is Disrupting Financial Inclusion in Nigeria

Introduction:

Nigeria is already experiencing a revolution in its financial system, fueled by its large population and ever-growing mobile penetration. USSD (Unstructured Supplementary Service Data) transactions and mobile banking are two extremely potent weapons that weigh the democratization of access to financial services against record financial inclusion. This essay analyzes the phenomenal rise of USSD and mobile banking in Nigeria as the part of financial inclusion, the reasons behind their rise, and lastly, challenges and opportunities for the future.

1. Context of Financial Exclusion in Nigeria:

There have been past records of Nigeria having a huge majority of its population outside the formal financial system. Exclusion is typically caused by the following:

-Limited Access to Conventional Banking Infrastructure: The existence of bank branches with a physical presence in the urban cities, while the rural communities have no access whatsoever to banks.

-Expensive Banking Services: Maintenance charges for capital, charges for transactions, and other charges on banking could discourage poor wage earners from availing themselves of banking services.

-Deficit of Trust in Formal Institutions: Few keep away from formal financial institutions due to historical experience or certain cultural orientation.

-Poor Financial Literacy: Most individuals have low financial literacy but not sufficient enough to efficiently make the banking system work.

-Overburden of Documentation Requirements: In vesting these requirements in the instance of banks, those who lack any kind of identification lose traction.

2. The Mobile Revolution and Its Consequences:

The unprecedented spread of mobile phones thus provides a special chance to combat financial exclusion in Nigeria.

-High Mobile-Friendliness: Nigeria boasts one of the highest rates of mobile phone penetration in Africa with millions of Nigerians possessing mobile phones.

-Affordability of Cell Phones: Increasing affordability of smart phones and low-end feature phones has made the mobile technology accessible to an even larger segment of the population.

-Increase Network Reach of Mobile: The telecommunication service providers have been expanding their reach, reaching the areas where they see the footfall to be minimal.

3. Emergence of Mobile Banking:

Mobile banking has grown to be one of the key drivers of a sustainable alternative for conventional banking.

Mobile banking apps: Banks and fintech companies collaborated to design easy-to-use mobile banking applications offering the customer an array of financial transaction services from his or her own cell phone.

Features of Mobile Banking Apps:

-Account Control: These are account-specific settings, transaction history, and balance checking.

-Funds Transfer: Transfer money to and from a mobile wallet, or between different banks: inter- and intra-bank transfers.

-Payment for Bills: Settle utility bills, purchase airtime, etc.

-Loan Applications: Apply for loans, access other credit facilities.

-Investment Services: Available and potential investment opportunities, as well as investment portfolio management. *Mobile Wallets: Storage of funds in a digital wallet, making payment using digital wallets.

Benefits of Mobile Banking 

-Convenient: People do their transactions by mobile even everywhere and anytime possible.

-Accessibility: Mobile banking conceives a new way of getting financial service to the much underserved or completely lacking in service.

-Reduced Transaction Costs: Transactions done over a mobile channel are often considerably less expensive than traditional in-branch banking.

-More Security: Biometric authentication and encryption improve the security of mobile banking.

-Financial Inclusion: Mobile banking allows users to access the formal financial industry more than ever before.

The Potency of USSD Transactions

USSD transactions are handy tools for accessing users with feature phones, the lowest-end models, who lack basic features and have lessened access to the internet.

-USSD Technology: Short for Unstructured Supplementary Service Data, it allows the communication protocol to extract service from a mobile phone through short codes without the internet.

-USSD Banking Service Balance inquiries: Check your account balance.

-Fund Transfer: Transfer funds and receive money.

-Top-ups: Purchase airtime for your phone using USSD.

-Bill payment: Payments for bills can be done through USSD.

Benefits of USSD Transactions: 

-Accessibility: Any mobile phone , even a basic feature phone, can perform USSD transactions.

-Affordability: Such transactions are often cheaper than other forms of mobile banking through any banking fort.

-Simplicity: Usability of these transactions is simple even for a person with minimal digital exposure.

-Reliability: The transactions can be transacted even when there is bad internet connectivity.

5. The Effect on Financial Inclusion: Mobile banking and USSD transactions have been very significant contributors to financial inclusion in Nigeria.

-Expansion of Access to Financial Services: Mobile and USSD transaction have made financial services available to hitherto non-existence clients, especially in rural areas. Some of those included are:

-Increases Account Ownership: Banks and mobile wallets are becoming home to more and more individuals because of mobile banking and USSD transactions.

-Promoting Savings and Investments: They allow people to save and invest through less hassle and more personalized automated solutions provided by mobile banking.

-Facilitation of Remittances: This mobile banking is making things easier and cheaper in remittances for Nigerians wishing to send or receive money from abroad.

-Empowering Small Enterprises: This mode of conducting banking business has opened avenues of income for micro and small businesses in terms of accessible payment, coupled with the credit facilities.

-Government Social Programs: Through the use of mobile payment platforms, these government social programs or welfare payments can be disbursed directly to the needy population with better transparency and efficiency.

The Following are the Factors Contributing to Driving Adoption of Mobile Banking and USSD Transactions in Nigeria

These factors drive adoption for mobile banking and USSD transitions in Nigeria.

-Convenience and accessibility Mobile banking and USSD transactions offer all the convenience and accessibility required for a person to conduct financial transactions anywhere and at any time.

-Affordability Mobile banking and USSD transactions are cheaper compared to other conventional banking outlets.

-Increased Trust on Digital Platforms: Increased trust among individuals on digital platforms and online money services is driving usage.

Financial Education Programs: Financial education on the internet has been successful in informing individuals on mobile banking and USSD transactions.

-Regulatory Guidance: The Central Bank of Nigeria makes positive efforts for mobile banking and USSD transaction growth through various means.

-Fintech Innovation: USSD and mobile banking products are being created by fintech companies to meet the needs of the Nigerian market.

-Mobile Network Operator Partnerships: Bank, mobile network operator, and fintech company partnerships are making mobile banking and USSD transactions deeper into the market.

7. Challenge and opportunity:

There is still a lot of ground in Nigeria to be covered in the strides made so far regarding the popularization of mobile banking and USSD transactions.

-Infrastructure Challenges: In some instances of rural areas, limitation of the internet and power supply works against the adoption of mobile banking.

-Lack of Digital Literacy: A good percentage of the people do not have the required digital literacy skills to make effective use of mobile banking and USSD transactions.

-Security Threats: At times, security threats towards these modes of mobile banking and USSD transactions prevent people from adopting them.

-Trust Deficit: Creating trust in digital financial services will finally determine how widely they get adopted, especially among older generations and those living in rural areas.

-Uncertain Regulations: There is a need for flexible and adaptive regulations to keep up with the ever-evolving nature of mobile banking and USSD.

-Interoperability: Interoperability issues between mobile banking and USSD networks could create challenges among users. At the same time, some opportunities exist for further expansion of mobile banking and USSD transactions.

-Infrastructure Development: Infrastructure developments important for mobile banking include continual investments in the improvement of internet connectivity as well as availability of power supply.

-Digital Literacy Education: Investing in digital literacy education is key to bridging the digital divide and facilitating wider adoption of mobile banking and USSD transactions.

-Improved Security Measures: Building trust in mobile banking and USSD transactions, of which robust security measures are essential, are further prerequisites for enabling adoption.

Few of the key features of the change that will enable innovation and investment are as follows:

-Regulatory Consistency and Clarity: Consistency and clarity in regulation are required in order to enable innovation and investments.

-Interoperability Standards: Interoperability standards will enable an improved user experience and mass adoption.

-Fintech Collaboration: Bank, fintech, and mobile network operator collaboration may trigger the demand for innovations and promote the uptake of mobile banking and USSD transactions.

8. Future of Mobile Banking and USSD Transactions:

Mobile banking and USSD transactions in Nigeria-they have a very bright future with numerous trends moving towards the future.

-Higher Smartphone Penetration: The reduction in the price of smartphones will encourage individuals to adopt a preference for mobile banking applications.

-Improved User Experience: Mobile banking will be all about customer orientation and intuitive apps as far as customer experience is concerned.

-Tailored Financial Services: Tailored financial services on mobile banking interfaces will be provided based on analysis of data and artificial intelligence powers.

-Embedded Finance: Mobile banking will usually be embedded into non-finance locations like e-commerce portals and social media.

-Better security: The mobile banking platform will cover more security features.

-Offer greater Access to Credit: Banking platforms via mobile will provide access to credit for unbanked individuals sooner than ever.

-Greater Access to Investment: Mobile banking will provide a great deal of opportunities for investment to their users.

Conclusion:

Mobile banking and USSD payments are now part of the Nigeria deepening financial inclusion toolkit. Their broader application to its citizens, the transactions remain convenient, available, and inexpensive for both customers and businesses. The capacity to leverage the innovations into an even brighter future still remains possible though, as the challenges still abound. Better opportunities for wealthier and more inclusive financial futures can be released in Nigeria through addressing infrastructural issues, nurturing digital literacy, and building strategic alliances. Nigeria can go truly digital in the mobile banking wave. It smoothed the habits of millions of Nigerians required to make themselves into formal systems economically and acquire improvements more easily.