I recently ran into this interesting article from Forbes highlighting Paga a Nigerian money transfer service startup. Paga launched in 2009 and has a current user base of 32000 users and $1.6M processing volume so far, attracting even US investors in the person of Tim Draper. Paga’s founder, Tayo Oviosu explains that there is a current need for this type of service in Nigeria given the fact that it is a very cash driven society and the security and logistics issues involved with carrying a lot of cash around, coupled with the ever increasing mobile ownership and phone coverage, makes a compelling case for a mobile based service such as Paga. Similar to the Kenyan M-pesa model, users who want to send money can visit a local Paga agent who will process the transaction for them minus the fee ($1 to $4), or they can transfer money directly from a prepaid Paga account using their mobile or internet enabled device.Recipients of the money do not need to be Paga customers and can withdraw the funds from Paga Agents or partner banks, or even notably in the future plans, ATMs. If you have lived in most African countries, this is a model that makes sense and works. Of course the question of stacking up to the Kenyan heavyweight M-pesa came up and Oviosu’s answer is sensible in explaining the particularities of the Nigerian market:
- There are no efficient, secure, and universally accessible ways of transferring money across Nigeria
- There is no dominant mobile company in Nigeria as Safaricom is in Kenya
- The banking sector in is very fragmented in Nigeria
Tough parameters but Oviosu believes that with help from the Central Bank of Nigeria who is pushing for a Cashless Nigeria, Paga should be able to create a sustainable market that would make market entry in other African countries easier. Security, especially in Nigeria is a concern and Oviosu lays out Paga’s security architecture which includes multiple layers of authentication and access depending on the level of credibility the user has established with the system.
To the question of establishing reasons for the relative success of Paga in Nigeria, Oviosu attributes it to word of mouth while highlighting that more standard marketings efforts are in place to make more of Nigerians aware of the benefits. As for the future, Paga is looking to expand its Agent network to 40,000, which currently consists of 400 trained Agents with 4000 waiting in the pipeline. Paga also sees an opportunity for its bottom up approach to bring financial empowerment into the lower, less connected levels of Nigerian society while at the same time growing its customer base from Nigeria’s expanding middle class. A goal of 15 million users is not so far off for this Giant of Africa and I personally believe from reading this interview and analyzing Oviosu’s strategy and thinking that this goal is not so far fetched.