A money man’s transfer to Nigeria By Xan Rice

Paga founder and CEO, Tayo Oviosu, featured in the London Financial Times

LAGOS, NIGERIA − May 30, 2012 - Paga Founder & CEO Tayo Oviosu was featured in the Financial Times’ May 22nd print edition.  Mr. Oviosu was featured as part of the FT’s ongoing series highlighting successful entrepreneurs. Mr. Oviosu’s feature is a testament to the great strides Paga is making in the industry and establishing itself as the market leader.

A money man’s transfer to Nigeria

By Xan Rice

The boss is 34, speaks with an American accent and wears faded black jeans and green high−top trainers. In the open−plan office orange pillars bear slogans such as "innovation", "integrity" and "passion".

It looks and feels like a technology start−up should, and it even has funding from a leading Silicon Valley venture capitalist. But this is not California. It is Lagos and the offices are the headquarters of Paga, a Nigerian mobile payments company.

Tayo Oviosu, the company‘s founder and chief executive, draws a Skype conference call to a close and explains: "I was talking to my technical team in Ethiopia."

Though still young and not yet profitable, Paga is Nigeria’s largest mobile payments company, allowing customers to transfer cash across the country in an instant simply by sending a text message on any of the country’s four main mobile networks. A PayPal−like function allows users to pay bills, top up the credit on their mobiles or buy goods using their phone or computer.

Such services are extremely popular in Nigeria, where up to 80 per cent of people do not have a bank account but an estimated 60m of the 160m population have mobile phones. Despite having been licensed by the Central Bank of Nigeria only seven months ago, Paga processed $1.8m in payments in April, up from $1m in March, far more than any of its rivals, and it already has 90,000 users. The company has 78 staff and offices in four Nigerian cities.

Mobile money transfer has proved successful elsewhere in Africa, especially Kenya. But Mr Oviosu wants to take the concept further, using his nascent countrywide network of agents − who number about 800 and typically run small shops selling basic goods − and the mobile phone as a platform for offering savings accounts, loans and insurance products to a mass market in Nigeria. "From the beginning, our idea was not just about transfers but delivering a range of financial services," he says.

After a middle−class upbringing in Lagos, Mr Oviosu studied electrical engineering at the University of Southern California, winning a scholarship after a year and supporting himself with "two to three jobs at any point". He worked at two start−ups and turned down an opportunity at a little−known third before deciding he needed "a proper job". That unknown company was Google. "You could say it‘s a regret," he laughs.

He worked at Deloitte and Cisco, and completed an MBA at Stanford. Life was good: he liked to rollerblade and ski. But he wanted to make his mark back home.

"Some friends had warned me that Nigeria was still too much about who rather than what you knew. But there was also a feeling that Nigeria might be at the point where India and China were 15 years ago,"he says. Nigeria had had stable civilian rule for nearly a decade, the economy was growing fast and its large population represented the biggest market in Africa.

He considered outsourced payroll and selling women‘s hair extensions − "almost no Nigerian woman you see is wearing her own hair". But it was always having to carry cash − credit card readers were far from common − that sparked the idea for Paga. "It really frustrated me," he explains. "Then I suddenly realised that most Nigerians had a bigger problem − no access to financial services at all."

To send money to relatives or trade partners in distant towns, people would have to entrust cash to a bus driver, who took a cut as payment.

Another option was to buy mobile top−up cards and text the pin number to someone who would sell it on for cash. That worked across the country because of the extensive mobile network coverage. "I started thinking: can the phone become the primary means of electronic transactions?"

Mr Oviosu spent six months researching Paga − the name, from the Spanish for "pay", was decided on a whim − and seeking finance. He knew it would be tough, because of negative perceptions about Nigeria. The VC firms that are willing to invest are usually interested in $40m to $50m deals for established businesses, he says, rather than modest funding for start−ups like Paga.

He raised seed money from friends and family before a friend from his Stanford days suggested meeting her boss at Draper Fisher Jurvetson, the US venture capital firm. Tim Draper, a prominent Silicon Valley VC whose successes include Skype, Baidu and Hotmail, agreed to put an undisclosed amount of his own money into Paga. "I believe he invested in the strength of the idea and the team we have pulled together," Mr Oviosu says.

It helped that Mr Oviosu had other Nigerians with US experience on his management team, including his chief technology officer, who had established an IT business in Ethiopia that looks after Paga‘s systems and product development.

Just as Mr Oviosu has had to adapt to Nigeria‘s more formal business culture − though he still rarely wears a suit − his new employees are often taken aback by the relaxed atmosphere. "It‘s tough work getting people to drop the habits learnt from a typical Nigerian company culture," he says. "I wish more people [would] sit with me at lunch, but often they will wait for me to finish in the canteen before coming in."

There are bigger challenges, however, from electricity blackouts to the slow pace of business compared to the US. Thirteen other companies, all early−stage and not yet profitable, also have licences, but Mr Oviosu estimates that Paga has more than half the market. The VC funding has allowed it to grow fast to capture market share without having to worry about making profits immediately. Mr Oviosu expects the business to break even in about two years.

Most customers are individual consumers. Deposits and withdrawals are free, but the company makes money on all other transactions. For cash transfers, the sender pays a fee − 250 naira ($1.57) on 5,000 naira. For bill payments, the vendor pays Paga a commission.

By the end of 2012, Paga aims to have 600,000 unique users, rising to 15m in five years. Much will depend on how fast Mr Oviosu can expand his network of agents. "The agents are where the real work lies. We have to train and manage them. My staff must see every agent in person once a week to ensure that there is cash in the till, cash in the bank," he says.

Once the network is wide enough, Paga will offer banking and insurance products, working with established financial services companies and the mobile infrastructure.

But for now he is focused on keeping the money transfer and bill payments service running smoothly − and safely. In recent weeks, fraudsters have used stolen or cloned credit cards to load money into their Paga accounts over the internet, forcing him to suspend the online deposit facility while security is improved. "We‘ll get it right," he says. "We have to. The trust in Paga won‘t come from marketing but from ‘does it work?‘"