TBY talks to Tayo Oviosu, Founder and CEO of PAGA, on digitalization, understanding customers, and the move to a cashless society.

What are some highlights from the past year of operations?

PAGA is making considerable progress on our goal of building up our agent network. We believe in Nigeria. It is impossible to be a purely digital financial service provider without having a physical presence, and we do this through agents. PAGA currently has 12,500 agents, and our goal is to get to 15,000 in 2017. We are well on track to achieve that. The next thing for us in 2017 is building on our agent network to offer financial services to the unbanked and underbanked. We are very excited about the opportunity as our agent network gives us the needed distribution reach to the mass market.

What is the argument for continuing to use agents for financial services rather than making everything digitalized?

I do not think we can have a digital-only strategy, because until the day the central banks deliver currency electronically and get rid of physical deposits, we will always need a way to get cash into and out of a system. In four years of trading, PAGA now has 6.8 million users on its platform and a significant chunk of that growth has been over the last two years, due to our agent distribution network. With that distribution network, we are able to layer a digital platform on top. Over time, more people will get comfortable with using digital services, but for financial services, we still need that physical interaction and structure.

How would you assess the role PAGA is playing in developing Nigeria's economy?

We are already thinking about our impact, and the first thing is jobs. We have created 200 direct jobs in our company, and, counting conservatively, around another 16,000 indirect jobs, such as agents and the staff they hire. Employment is a major metric we use to measure the impact we have. Another metric we use is how many people we have brought into the formal financial sector and how many people are using our services through our platform, for example, to save and access loans to help with their businesses. For us, it is about achieving these things and then scaling them up across Nigeria. We need to look at how many communities we are in and how much are we driving commerce and enabling SMEs to collect payments and provide services easily.

What is PAGA's plan to stay ahead of the competition?

It is simple. Firstly, it is about the physical network we have built. We know it is by far the largest network and that is how we reach the mass market – we will continue to scale that network. Secondly, it is about staying close to the customer, understanding their needs and what they really want, and being able to offer that to them. We do not get too worried about what other people are doing in terms of driving our timeline. We monitor the market and pay attention to the competition, but we focus on our own strategy.

Nigeria is a cash-based society. How is the transition to a cashless society going to affect the country?

Over time, people are going to get more comfortable using digital platforms. We are already seeing this with banked people here. What we envision is a world where more and more Nigerians move toward that trend. The impact is going to be lower cost and safer transactions for people and more transparency for society, along with greater clarity on rates and other aspects. I can see us doing something similar to what happened in India, where certain banknotes were removed from the system. We are preparing for that with our agents. We see this as a positive move, but we do not think it is going to happen yet. We think the Central Bank was a bit early with its cashless Nigeria drive because the market was not ready. There are things the Central Bank can do over the next year to really drive cashless Nigeria now because the market is more prepared.

What is your view on the concerns on the link between cash and criminal activity such as tax evasion?

I have a mixed view on the tax issue because there are two separate objectives of moving away from a cash-based economy. One objective is more clarity and efficiency in the market and the other is a revenue generating objective. Requiring every electronic transaction be visible to the taxman, there will be more tax evasion. I believe we should not just tax people based on electronic transactions, but rather the government needs to give people incentives to declare their incomes and pay their taxes, irrespective of the digital side. We want digital to happen and if we try to bring taxes into that conversation, people will back away from the technology and stay with cash. Having a cash-free society will ultimately increase tax collection for Nigeria, but I do not think that should be the goal. People should be given other incentives to pay their taxes, for instance, access to certain public services and benefits if a citizen prove that they have paid their tax. Digital versus cash is also a big brother issue because people will be concerned if the government looks into their finances electronically.

What is your outlook for 2018?

For PAGA, I have a very positive outlook. We have been growing more than 100% YoY, and I see us scaling up and growing in 2018. Next year, we will be entering a period when we can fulfill our mission to offer financial services. For Nigeria, I have a mixed view. I expect 2018 is going to be a crucial year for the country. The key point for me is around the direction of Nigeria's monetary policies and the free trading of the Naira. I do not think any government that is in power here will stifle the ingenuity of the private sector, other than in these two key areas that affect the flow of US dollars into the country. The issue is about whether the Naira is freely and properly priced and traded because, the long-term picture for Nigeria is positive and its economy is going to diversify even more. There are just a few things the government needs to focus on to fix the economy.