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Nigeria is moving to a MasterCard sponsored National Electronic ID Card that opens up financial institutions to the unbanked, but is it really a good thing?
The West African nation of Nigeria has just announced the launch of a new national identity card. This might not seem like much of a big deal to most people as many countries have national identification cards. It might also come as a surprise to people who remember that the voters of Nigeria already voted down this idea only ten years ago. This attempt however has several crucial differences from the last attempt. This time, the politicians in Lagos have added a new wrinkle: They have combined a national identity card with a MasterCard debit card. This effectively ties the government identity database directly to the banking and financial industry (and vice versa) and all but precluding any currency except bank accepted currency from becoming successfully in the economy.
The new card has numerous features that seem very attractive on the surface. In practice, this card will be the only thing a citizen needs to do their banking, identify themselves, vote, even travel. The government claims that not only will citizens be able to receive government benefits directly to this card, but they will also be able to load the card and use it at ATMs anywhere in the world. Eventually, they plan to use the card as a passport surrogate for residents traveling in West Africa, allowing them to simply swipe their cards at border check points to pass. When these checkpoints would be equipped with the infrastructure to make this possible was not speculated upon in the announcement.
West African nations now have 85 % of their population “unbanked”, or has at most, limited access to banking services. Some of this stems from the remoteness of much of the population from the cities and the lack of infrastructure in the rural areas. Another huge problem for most Africans is remittance fees. A large portion of the Nigerian and West African population relies heavily on monies sent from families that have immigrated. Under the current system transfer fees will add up to a large percentage of the total sent. If these fees were removed however it would add as much as 30% to the national remittance economy each year but at the same time remove 30% from the bottom line of companies like Western Union, which is owned by a wide range of financial sector investors, including Barclays.
Bitcoin is becoming increasingly popular in Nigeria and the entire region for the very reasons that the government is promoting this new card, i.e. lack of access to banking services. The problem for banks and money transmitters is that they are not getting a part of Bitcoin transfers and the new paradigm is cutting deeply into their revenues. This move by the government in Lagos seems especially like a way to isolate Bitcoin from the “official” economy. The announcement did not state whether the card would be mandatory but, one Reddit commenter suggested that it was.
According to reports, the government in Lagos has been in talks with MasterCard and Cryptovision (for biometrics) for several months. Interestingly enough in a German software developer named Rüdiger Koch was speaking at the Mobile Money Africa in Lagos and told his audience that with only a cell phone camera Bitcoin could support a system of low payment on a mobile platform that anyone can use economically. Koch was a consultant to the U.K.-based bitcoin exchange Intersango, and wanted to promote the idea of a decentralized payment system that did not bleed people dry.
One interesting feature of this move is that with Bitcoin, there is no requirement for the installation of expensive POS technology. With a standard debit MasterCard this is a requirement. Daniel Monehin, MasterCard’s Division President for Sub-Saharan Africa told MPD CEO Karen Webster in an interview:
In 2012, we had just about 22,000 devices in the country, but today there are about 150,000 deployed. Nigeria is on a steep curve when it comes to acceptance of POS technology, and opens to democratizing acceptance – liberalizing it, and making it more functional and deployable. We will be seeing mPOS soon in the market, and that will reduce the cost of the POS devices which are $500-600 to about $50-100 depending on the device. But all of them will be EMV certified, and safe and secure. In addition, 500,000 additional locations that accept mobile payments have been added in the country, speeding up the payments acceptance process.
So, instead of democratizing acceptance of much less expensive Bitcoin the plan is to “democratize” expensive POS systems that go through centralized and highly paid banks. This plan by Nigeria could result in a disturbing flood of new national plans around the globe to hedge Bitcoin out of the market by completely nationalizing the economy by using the banks as a cover. The very idea that the financial sector will also have complete access to a person’s records is also very disturbing.
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