Contrarian Approach to Mobile Money Builds Trust to Win the Market

MARCH 25,2014.



"It took 10 years to become an overnight success," says CEO Peter Ojo.

A quiet e-groundswell out of Ibadan, Nigeria is getting a lot of attention from ordinary folks with e-payment needs. VTNetwork Limited (or VTN) has been an ecommerce payments provider for years in Nigeria's chaotic market. 

These days there is a lot of noise, announcements and confusing overlapping messages from many firms attempting to deliver e-payments to Nigerians. 

Some of these stakeholders are capable but many new entrants have a superficial understanding of the available network in Nigeria and the functional components of the payments ecosystem. 

Slowly but steadily VTN has built a loyal following, creating stickiness and trust among users and other recipients of value, who now number about 2 million. 

The company plans to spend additional $10 million over the next 3 years to continue to scale, in a country where over 114 million mobile phones are active and almost 70% of adult population are unbanked.

The introduction of mobile payments was an added service for VTN's business, and in a highly regulated environment. After nearly 5 years of exploratory talks, VTNetwork's mobile service, branded VCASH, received its license from the Central Bank of Nigeria (CBN) in October 2012. From day one VCASH led the competition.

Passion and Vision 
Ojo started VTNetwork in 2007 out of the conviction that Nigerians deserve world-class access to modern payment services and a passion for innovation. In 2007 this meant cards, not mobile payments. One problem that remains today is that cards from Visa and MasterCard issued by Nigerian banks are still treated differently by international merchants, who have the final say in accepting the cards in the ecommerce payment chain. "Nigerians deserve service", says Ojo, determined to deliver. "We did not get into the business because it is in vogue. Our passion and experience is what is differentiating us in the marketplace." 

E-commerce remains part of the company's DNA. Users can create single-use "virtual" VISA cards on the fly and pay anyplace that accepts VISA. Many pay for digital goods from international websites located in the USA or Europe. 

What determines success?
Ojo stresses there are no guarantees of success. Regulatory approval is necessary but insufficient and the same can be said for raising capital. "Money to burn is a double edged sword, it can be an enemy to progress," said Ojo.

Although the company has received numerous buyout and investment offers, the founders were determined to hand-build the business to get it right. "We've taken in some angel investors and decided early on to control as best we can the pace of our development. Our angel funding supplemented our own revenue and allowed us to do what we love doing, to forge the industry's direction, especially in Nigeria, and to build VCASH into what it is today," explained Ojo.

Still, the total invested would not make GOOGLE blink. "We are cash positive, not burning excess funds. We eat what we kill and what we grow." explained Ojo. "This approach of agility and frugality has helped build our confidence knowing what is possible and prepared us for the massive scaling now that we are at the end of the runway. The rare ability to do more with very little and having great thinkers on the team is a big plus."

The angel investor-backed VTNetwork now claims market superlatives: the largest numbers of merchants, subscribers and agents of any licensed mobile payment business in Nigeria.

The Future Direction of the Industry
E-payment providers, mobile or otherwise, must win-over skeptical Nigerian consumers who want diverse services. Person-to-person (P2P) transfer between family members in the cities to dependents in remote villages (which is the backbone of the famous MPESA service in Kenya) is yet to scale in Nigeria. So far, rural recipients still prefer the traditional ways of receiving cash. Urban-to-urban P2P is more active.

Merchant acquisition; the real driver
Ojo attributes the company's present success with acquiring over 5,000 well informed merchants early, as a large proportion of VCASH wallets are funded to pay these merchants. To attract merchants, VTN does not charge any connection fees. These 5,000+ merchants allow payments via the company's website at "Why charge people to experiment?" says Ojo, who learned this approach through his past experience with the ecommerce dynamics in Nigeria. This approach mirrors that of PayPal, and the VTNetwork platform itself has been called a cash-only version of PayPal, and is equally as easy to integrate.

"Our platform is robust and our customers tell us it is the most sophisticated they've ever seen," claims Ojo. "We can integrate with most platforms pretty easily through our API. It is often just a matter of sharing permissions."

The VTNetwork/VCASH approach is different from the rest of the pack. "We know the industry, we invented processes used by prepaid industry and bring international best practices. We also know the lay of the land," explained CEO Peter Ojo. "There are all sorts of peculiarities to the Nigeria's financial infrastructure, who to partner with and when, making payments work, reliably, is no off-the-shelf exercise, and learning as a newcomer means spending millions of dollars to get up to speed. To gain the trust of the people takes 5 years in Nigeria."

Customer service is key. "It seems crazy but I like it when small things go wrong," say Ojo. "When a customer complains and you address it, quickly and transparently, you build trust." Trust also comes through more normal channels, through repeat transactions. One third of the service's customers are regular users. CEO Ojo adds, "We need to maintain this trust, our services' stickiness, as we grow." Beyond building trust he identifies others keys: to remain nimble and to automate most of the mundane processes.

VTNetwork's keeps some of its trade secrets out in the open, such as turning a portion of their agents into virtual agents who travel to customers. "We have some virtual agents doing significant daily volumes. Some agents specialize in training and setting up other agents."

Transactions continue to increase by over 25% month-to-month and 60% of agents are actively selling airtime and VCASH electronic reload cards. 
VCASH customers predominately access the service via their laptops and mobile phone with internet access. The company expects growth to be especially strong via USSD, a service that can capture the low end phone users, who are the majority in Nigeria but who are slower to adopt mobile payment.

Alliances and Validation

Western Union
A more involved integration last year involved the world's leading money transfer company, Western Union. The exercise took several months from start to finish. Recipients with VCASH accounts can pull Western Union remittances globally into their e-wallets using the standard MTCN number. Still unsatisfied, the company is working with Western Union to improve the service. "There is a lot we can do" says Ojo, "and they are looking to us to innovate."

New Products

Last year the company launched saving clubs, allowing cooperatives to use the electronic versions of traditional Susu. "We look to our culture, our people for guidance," says Ojo. 

Airtime Auto-Recharge
VTNetwork's latest product release was just before Christmas with all the telcos: MTN, GLO, ETISALAT, and AIRTEL. It is a custom-built airtime auto-recharge platform where users set their account to auto-purchase airtime daily, and add the value instantly. "It is great," says Ojo "because all VTN subscribers have a mobile phone and most buy airtime daily."

Business and Investment Opportunities

Besides signing up for a personal or merchant account, how can Nigerians become more involved?

The company is promoting opportunities for superagents, who provide liquidity to the agent network, and are open for direct equity investments from new angels. "We welcome all and offer opportunities to all", says Ojo. "Always have always will."