Nigeria’s Mobile Money Startup Pagatech Fills A Need, Attracts U.S. Investment

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Tayo Oviosu, Founder of Nigeria’s Pagatech

Tayo Oviosu, Founder of Nigeria’s Pagatech

Mobile money is the next big thing and Tayo Oviosu is already bringing this revolutionary financial service to Nigerians.

Oviosu is the founder of Pagatech, Nigeria’s first mobile money company. The company’s flagship service, Paga, is Nigeria’s foremost mobile money transfer service. Within less than a year of launching its service to the general public, the Lagos-based Paga has accumulated over 32,000 active users on its platform and has processed over US $1.6 million in volume.

Interestingly, Paga has piqued the interest of some internationally renowned investors, one of whom is Tim Draper. Draper, one of Silicon Valley’s more well known venture capitalists, doesn’t usually make investments around Africa. But when Oviosu, a Nigerian-born Stanford grad, approached the famed investor and shared his idea for a mobile money transfer service in Nigeria, Africa’s second largest economy, Draper believed it was too good an opportunity to ignore.

Tayo recently granted me an interview during which he talked about the idea behind his company, the benefits of a cashless society, the Nigerian opportunity, and reiterated his mission to transform lives by delivering innovative and universal access to financial services to Nigerians.

Simplify it for me. What is Paga, and what prompted you to startup this service?

Paga is a money transfer service that leverages the ubiquity of the mobile phone to bring great value to customers. Customers can use Paga to send money to anyone in Nigeria either from their mobile phone or Internet-enabled device, or via any Paga agent across the country. Recipients get the money instantly, and they don’t even need to have registered on Paga. Customers can also use Paga to pay for a variety of goods and services at various online or offline merchants.  For example, you can sit at home and pay to top-up your electricity meter or pay your cable TV subscription using Paga.

Paga began out of my frustration with having to carry cash around with me all the time in Nigeria. Nigeria is a very cash driven society; only about 20% of the population have access to what you might call formal financial services. Even for the banked set, there are infrastructure issues to contend with – roughly 60% of ATMs in the entire country are located in Lagos State; debit cards are not accepted by most merchants. As such you have to carry cash with you. Additionally there is no safe and secure way to send money within Nigeria outside of the banking sector. Carrying cash around with you everywhere, even sending cash to your family by paying a fee to the local bus driver clearly has its limitations not forgetting security issues. As I explored these sets of issues I honed in on the fact that 60% of Nigerians are within mobile phone coverage and about 40% of Nigerians currently have a mobile phone with an even greater number having access to one when you count shared phones. This raised a question for me – “Can the phone become the primary means, not the only, of electronic transactions?” Fundamentally I believe the ubiquity of the mobile phone can be leveraged to deliver financial services to all.

We’ve been around now for two years and only just got our full operating license from the Central Bank of Nigeria this month. We launched to a closed user group of approximately 70 participants in September 2010 and then, after our Approval-in-Principle from the Central Bank of Nigeria, to the general public in February 2011. This allowed us to pilot our service and test the reception with the general public. The reception has been great! Customers and agents alike see the value of the service to their daily lives and the numbers tell the story. With pretty much just word-of-mouth marketing alone, we have almost 32,000 users on our platform and have processed over US $1.6 million in volumes. This represents over 40,000 transactions since February.

Give me a very basic run-down of how Paga works. If for example, I am based in Lagos, and a loved one makes a trip to Abuja and gets stranded over there for some reason, how can I send him/her money using Paga?

There are two ways to send money to your loved one in Abuja.

The first is to visit a Paga Agent in your neighborhood and have the agent perform the transaction on your behalf – you do not need to be a Paga customer to use one of our Agents. If you use a Paga Agent you give the Agent the recipient’s phone number, the amount you would like to send, and the transaction fee. The Agent runs the transaction on his phone or internet enabled device.

The second option is to initiate the transaction from your mobile phone or from any internet enabled device – to do this you need to be a Paga customer and have money in your account (which can be funded by depositing at an agent, bank, or using your debit card online).

With either of the two methods once the transaction is run successfully Paga sends a confirmation SMS to the sender and the recipient. The sender’s SMS includes the withdrawal code needed to collect the funds. Recipients do not need to be Paga customers. Recipients of money on Paga collect their money from any Paga agent, partner bank, or in the future ATM machines. You need three pieces of information to collect money – phone number sent to, withdrawal code, and amount sent. Only the sender pays a transaction fee.

We provide Agents and Customers multiple channels to use to process their transactions – SMS, Online (PC or mobile web), an application on the phone, an Interactive Voice Response system (an automated line which can be in different languages), and eventually USSD (mobile network system that allows for interactive menus on the mobile networks).

Mobile money has thrived elsewhere in Africa. Safaricom’s M-Pesa has made a kill by providing this financial service to Kenyans. But Nigeria is an entirely different market. Are the dynamics the same? Is there really an opportunity for this kind of service in Nigeria, and why do you think it is going to succeed?

I totally agree with you – it is a very local business. The dynamics in Nigeria are somewhat different than Kenya, and it’s clear that the market opportunity is multiples of Kenya’s.

Today in Nigeria, as in Kenya pre M-Pesa, there are no efficient, secure, and universally accessible ways of transferring money across the country. Paga changes this. However, in Nigeria we do not have a dominant Telco with the kind of market share Safaricom had in Kenya. We also have a very fragmented banking sector. These are reasons we have chosen to offer a service that works on all mobile networks and in partnership with banks. The convenience that Paga offers combined with the push by the Central Bank of Nigeria for a “cashless Nigeria,” will help drive the opportunity for our service.

It’s interesting. My view is that Nigeria may be the toughest African market to get right for a number of reasons. It also presents the biggest opportunity. With 160 million people, GDP of approximately $207 billion, 68% literacy rate, less than 20% of the population owning a bank account, BUT with 40% owning a mobile phone. Assuming that we execute on plan and capture our target share of the Nigerian market, we are certain that entry to other markets with our partners will be made easier. The reverse is probably not true.

You and I both know that Nigeria’s financial landscape has been riddled with fraud, money laundering and other clandestine activities, and this could dissuade people from using mobile money services. Do you have any measures in place to checkmate any potential incidences of financial irregularities?

At Paga, security is our top priority. We have created rings of security to prevent the chance of any fraudulent activity, each channel we offer having its own security framework – some visible to the customer, many others not visible. For example, you must confirm every transaction you do on Paga by entering your PIN number. We train our customers to not share their PIN with anyone, even with Paga representatives.

If you use Paga’s mobile phone application or online application there are additional security measures we have developed to protect your account such as device monitoring – we monitor the hardware you are using to log into Paga. If we see you attempting to login from an unknown device we ask you your security questions.

Furthermore, there is a limit on how much a customer can transact based on how much Paga knows about the customer.  A Level I customer, which is a customer that has only provided Paga with their name and phone number, can only transact a maximum of N30,000 (~US$ 200) per day, whereas a Level III customer, which is a customer that has provided Paga with the requirements to open a bank account in Nigeria, can transact up to N 1 million (~US$6,000).

We have gone to great lengths to ensure that the customer’s account is safe and we will continue to stay ahead in terms of building in the latest technological advances to protect the customer’s account.

I’m just curious. What’s your business model? How does Paga make money from this service?

Our service is a “freemium” service – most transactions are free to customers. We currently have four services launched – money transfer, buy/send airtime, bill payments, and merchant payments. All these services are free except for money transfer where we charge a small convenience fee. This fee is the same regardless of whether you use an agent or perform the transaction by yourself. A fundamental belief we hold at Paga is that customers should not be charged to deposit their money or withdraw their money. Two of the three ways to deposit money into Paga are free (there is a convenience fee to use your debit card to fund your account), and it is free to withdraw your money. For the services where there is no charge to the customer we make our money from the business whose service we are providing access to.

You launched Paga in 2009, but you’ve already bagged over 30,000 users- which is rather impressive, considering that mobile money is a novel concept to the vast majority of Nigerians. What has been the catalyst for this growth, and how has the general response to Paga’s services been?

We have been very pleased with the response that we have received from the public.  Those 30,000 users have mainly heard of Paga via word-of-mouth!  The catalyst here is simply those people who have used the service and tell their friends how it helps bring convenience to their lives!

We have done some “below-the-line” marketing to educate customers one on one and are only now, with our full license, kicking off our “Above-the-line” marketing efforts – radio, TV, print, outdoor marketing. Our numbers are increasing exponentially as we continue to market the benefits of Paga.

How did you convince Tim Draper to invest in Paga?

Tim is a strong supporter of Paga and we are proud to have him as an investor and active participant in our business. He has a great reputation for picking and investing early in companies that have led major transitions which have had significant impact on society – in email (Hotmail), telephony (Skype), and search (Baidu). We hope Paga follows in steps similar to these great firms. Tim decided to invest in Paga after several months of due diligence by his team – they spoke to Paga management, our partners, and took the time to generally understand the Nigeria landscape. In the end I think he invested because of the clear opportunity he saw and the confidence he had developed in our strategy and our team. 

Tim is also known to be at the forefront of emerging markets investments. Two weeks ago I was at the Network CEO Forum his venture fund, Draper Fisher Jurvetson, puts on and there were over 150 CEOs from around the globe. The significant number of non-US companies there really showed that Tim and his partners at DFJ see the growth opportunities to be in emerging markets. Nigeria is the next frontier and I think Tim’s personal investment in Paga will lead other investors to consider investing in Nigeria. Indeed we are already getting a lot of foreign interest in our company.

Where are Paga’s agents located, and how can one subscribe for the service?

Currently we have over 400 approved and trained agents and a pipeline of approximately 4,000 agents ready to be trained.

Our goal is to have a Paga agent “just around the corner” from every customer. To achieve this, we seek to build a grassroots distribution network while also leveraging existing structured networks. Lagos, Kano and Onitsha are our key cities, so as of right now, the majority of our agents are concentrated within those areas. Additionally, customers can also go to to find out the location of their nearest Paga agent.

We offer various ways for customers to subscribe to our service. A customer can register by themselves via SMS, online at, or at any agent.

What does the future hold for Paga?

We are very optimistic about our future. We have an amazing team that is dedicated to making Paga a success and is singularly focused on providing a world class service to customers while constantly innovating new products and services to meet their needs.

Our goal is to have 30,000 agents across Nigeria in five years and 15 million customers. If we achieve that we will bring financial services within reach of over 40 million Nigerians. The potential impact to society is what drives us. Paga’s bottom up approach will empower the most underserved segments of our economy.  In ten years our services would have spread to those households that are poorer and less connected to the financial system.

The confluence of mobile penetration growth, latent demand for a service such as ours to provide financial services, expansion of Nigeria’s middle class and of Nigeria’s economy to become the largest economy in Sub-Saharan Africa will drive growth in our business. We are confident Paga will be a major success story coming out of Nigeria and indeed Africa.

A friend of mine recently told me a story that made me smile. Her dad, who owns a poultry business in southwest Nigeria, recently commented to her that he read in a report from Kenya about farmers getting paid via mobile money, he put it this way: “In Kenya buyers are using Paga to pay farmers!” She thought this was interesting, that Paga is becoming synonymous with payment via mobile.


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