MICROFINANCE PAPER WRAP-UP: “Measuring Fees and Transparency in Nigeria’s Digital Financial Services,” by William Blackmon and Brian Mwesigwa, Published by Innovations for Poverty Action

Digital financial services have evolved greatly in Nigeria over the last decade, but many people in the country still struggle to access formal financial services. This study explores three issues discouraging such inclusion: “the reliability of financial services, the cost of using these services and the limited transparency of cost information.”

The authors performed 900 mobile transactions via 29 banks and mobile money firms to test reliability as well as to compare actual versus stated fees for services such as opening accounts, checking balances and transferring funds. Stated fees included those published on company websites as well as those quoted by customer service staff via telephone and social media. The authors also reviewed regulations set by the Central Bank of Nigeria and the Nigerian Communications Commission in order to assess compliance.

Transaction failures were common – 58 percent of transactions failed when attempted using Unstructured Supplementary Service Data (USSD) menus, and 18 percent failed when attempted via mobile applications. Transactions initiated via mobile money operators failed 57 percent of the time, and those initiated via banks failed 36 percent of the time.

Regarding transparency, prices are rarely listed on providers’ websites, and contacting customer service can be difficult and expensive. Even when pricing information is provided, it is “unlikely to match the true price measured during the audit.” Prices stated by customer care staff were equal to the tested price 27 percent of the time, and the prices were different in 22 percent of cases. Meanwhile, customer care provided inconsistent information in 39 percent of cases, and the tester could not collect a stated price during 12 percent of attempts.

Another issue is that actual prices occasionally exceeded regulatory caps. While fees for transactions conducted via mobile applications were compliant with price caps, those for transactions conducted via USSD exceeded applicable caps by an average of 11 percent. Meanwhile, mobile money providers were compliant with pricing requirements for transaction fees, but bank transaction fees exceeded price caps by an average of 17 percent. In addition, 62 percent of all providers required customers to pay a fee to receive an automated teller machine (ATM) card when opening an account even though regulations stipulate that such cards must be free of charge.

The study concludes that by “strengthening their infrastructure, improving access to accurate pricing information, and increasing compliance with existing price caps,” providers can build client trust and hence increase the usage of digital services.

This is a summary of a paper by William Blackmon and Brian Mwesigwa, published by Innovations for Poverty Action, February 2022, 72 pages, available at https://www.poverty-action.org/publication/brief-measuring-fees-and-transparency-nigeria%E2%80%99s-digital-financial-services

By Arin Atluri, Research Associate

Additional Resources

Innovations for Poverty Action homepage
https://www.poverty-action.org/

More MicroCapital paper wrap-ups
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