The Nigerian telcos are doing great in their airtime credit playbooks, just as category-king fintech companies in most parts of the industrialized world are milking it on Buy Now Pay Later redesign. The latter has seen new generation financial companies like Afterpay become very valuable as young people shift from the construct of credit cards to instantaneous credit systems, with the benefits that in some cases the merchants pay for interests fees!
If you have not noticed, the most impactful innovation in the telecom space in Nigeria in the last 12 months is the pricing model. Data from MTN and Airtel, both publicly traded, show that selling airtime on credit (borrow now, pay later) is a great business in Nigeria.
The message is clear: there is value in the credit economy in Nigeria if you can develop a way to mitigate risk.
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Telecommunication giants MTN and Airtel Nigeria reported massive growth in their airtime credit businesses otherwise termed ‘borrow now, pay later” services. This is contained in the annual report of the GSM giants for the quarter ended June 2021.
MTN, Nigeria’s largest telecommunication company reported a massive 69.6% growth in its Fintech segment which comprises its MoMo Agency business and its Xtratime airtime credit service business. According to the company, its FinTech segment was the fastest growing business rising 69.5% to N31.6 billion in the first half of 2021.
MTN’s FinTech business includes Xtratime, its use now pay later business, and MoMo its agency business.
MTN also reported that revenue from Xtratime makes up about 95% of revenue from its FinTech segment. Airtel reported strong numbers during the quarter with its airtime credit services revenue from Nigeria rising by a whopping 70.9% year on year. Both companies lead in the airtime credit services space.
Meanwhile, MTN has noted that it makes 70% of its money from 30% of its customers: “Nigeria’s largest telecommunications company, MTN, has revealed that it earns 70% of its revenue from about 30% of its customers. This was mentioned by the company in an investor call with analysts and investors, held after the publication of financial reports. MTN relies heavily on salary and wage earners to keep boosting revenues.”
As noted earlier, the telcos made tons of money last year in Nigeria: “According to the Nigerian Communications Commission’s recently released 2020 Subscribers/Network Data Report, the telecoms industry reported a collective revenue of ?2.889 trillion ($7.05 billion) compared to ?2.516 trillion ($6.14 billion) made in 2019. The report further disclosed that revenue generated by GSM operators increased by 12.33%, from the ?2.02 trillion ($4.93 billion) recorded in the previous year to ?2.27 trillion ($5.54 billion).”
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Can we also try ‘Fly Now Pay Later’ in the aviation sector? Because we need to get a lot more people flying. That sector needs to come alive across the land.
The telcos have your fingerprints, so it’s not like you can borrow and discard the SIM card, anywhere your biometrics show up, they will still see you. The sector still fall short of $10 billion in cumulative revenue, for a country of this size, reaching that figure shouldn’t be difficult, but it shows the level of disposable income in the land. Many people carrying smartphones still don’t have data in them, so the challenge is still palpable.
If we try ‘School Now Pay Later’ in our traditional educational institutions, it could be a disaster, because there’s no guarantee that those kids will get jobs to pay. But this is the size of problem we must figure out how to solve, because our productivity depends on them.
Obviously the Use Now Pay Later doesn’t work well in our energy industry, because you might end up exchanging blows, so it’s better to prepay, before consuming the energy.
We cannot scale credit economy in Nigeria without viable insurance sector, else it will be too chaotic and devastating.
Of course the real estate sector will need it: Stay Now Pay Later, since the income comes in drips, asking people to pay annual rent is head scratching too.
Plenty and interesting experiments to run, but we first need to design a recognisable economic system, so that majority of our people can participate.