Payments in Nigeria, can we look for a way forward?

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Hi, ever since the BVN saga died down I have been having this tots in my head.
I dont have the answers but i hope we can make some meaningful remarks that can spark up some changes

In a country with about 100 million bankable individuals

  1. only 21million unique account holders
  2. about 8 million active cards
  3. 2.5 million active internet banking users
    there are more internet users in Nigeria than Account Holders

However we are all still developing loads of apps and platforms that we hope to monities for this 21 million account holders, who can only pay with their cards majorly. In essence only 8 million card users and another 2 million internet and mobile money user are our market.

Question:
What can we do to bridge the gap and increase our eCommerce market size
Where are the remaining 80 million bankable individuals keeping their money and how can we build a business from this large market.

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The bottle neck in online content products and service monetization is that we have adopted the established western model of payments as our regular means… That will are some time to get rooted.

In a few days we are making an announcement of what has been in the works for a while now… A very unconventional route for payments.

Trust me, monetizing has become easier with this product…

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In an ideal setting; teachers ask questions - to stir the pot- while students feed on research. Infact, binge on research till they hit sweet eurekas.

OP, tonnes of topical may have discussed payments in `one capacity or the other, whole or in part here on radar, and other neighboring hangouts.

I’d be applauding, in genuine gratitude, if someone can sieve through that load of data, some half baked, some gems, and endorse a conclusion or upon research findings engage us with deeper questions.

Not open another thread.

Buddy its really nothing personal, just my progressive 2 cents.

Am one of those people that would like deeper, more engaging questions/discuss happen around Payments from next year. Not the same ole rehashed ones.

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@Oboraxe i totally agree with you , “we have adopted the established western model of payments as our regular means”. I personally feel Cards are not for africa, mobile should have done the magic but our mobile structure seem to be dead on arrival

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YAPP. :grinning:

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Not sure where these ideas rank in the trash-gem continuum, but here are few thoughts that might help electronic payments move forward.

I’m going to assume that by “eCommerce” you mean, using anything other than cash to make payments (RFID, NFC, magnetic, mobile, etc.)

If that’s the case, then the problem is simply that the 80million unbanked don’t have any compelling reason to do so and it might boil down to the classic network issue that since most vendors don’t offer it, users won’t see a point to it.

Honestly, I thought this was something paga (modeling after mpesa) was going to address, but it hasn’t yet gotten traction because most vendors are not on it.

Here’s a crazy idea:

  1. pick a small town with a polytechnic (i.e. a town small enough that its student population is about 5-10%), and get all students to sign up with some incentive (discount on first few purchases or usb memory stick or something)

  2. convince a few vendors of the advantages of using your payment system (no cash to be stolen, no need to make change, no need to make a trip to the bank).

  3. Concentrate on making this system work well in this small town; your aim is to have 50% of transactions in this town electronic before attempting to deploy in a bigger city. Ideally you’d have parents wire money into your business students’ accounts directly, so there’s no need to collect cash.

Another one: governments should insist that all fed/state/lga/city employees get bank accounts that will be necessary to get paid.

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Working back.

  1. At federal level…TSA requires only account to account transfers., no cash handling involved…most States already enforce account - account payments only for workers.

  2. This narrative has been on for years…the merchants are mostly misinformed (note: not illiterate) and prefer cash due to less bureaucracy

  3. Infrastructural challenges and cost are usually deterrents to this model u have prescribed.

I recently had to come up with an alternative payment method for a transport scheme involving a school outside Lagos…by the time I mentioned cost. The people asking for solution stopped picking my calls.

Paga has had to incorporate card schemes even though their original model was linked to mobile numbers as virtual wallet. This is because of its predominance.

Mobile money may be making a comeback in the form of bank USSD options. e.g. *737#, *894# but it’s bank led and that is part of the problem. If a bank does it, we’re cool, if paga or any other person does it the market does not bother.

BTW: I think USSD can turn around / boost mobile payments, but how secure?

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I agree with you about USSD boosting mobile payments. It is very easy to adopt. As for the security, I think it is quite secure. The problem is cost. Correct me if I’m wrong but don’t USSD sessions cost money ? Who bares the cost ? Banks ? If the telcos owned the payment services then maybe it won’t be an issue. Isn’t mpesa owned by a telco ?

Even for more 21st century solutions like alipay and wechat wallet in China, telcos are in a better position to pull it off in Nigeria. There’s no homegrown social network with such penetration. But telcos can easily push payment apps to smartphone users for free. It would be an uphill battle for anyone else.

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Banks bear some and transfer some of the cost to the customer. It depends on the service type. Maybe part of CBN’s fear with TELCOs is putting money supply in their hands (just saying)

And Interswitch is carrying Verve to kenya. The battles ahead will be fun to watch.

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Well I guess its a numbers game. Banks can only sustain the present USSD money transfer services if there are enough interbank transfers to cover the cost of the same bank transfers.

CBN’s fear ? Well I don’t know why they’d be afraid, but Glo has already gotten into payments joining etisalat. The mpesa factor is just not there.

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JVs exist for some reasons…

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@Oboraxe got it right. I also think the issue is that we’re adopting an established model instead of trying to solve the problem ourselves. The problem with that is that the same solution does not work for us because our market, culture and technological advancement is different from that of the west.

A good solution would be an electronic replacement for cash that is readily available and something not plagued with the problems @blacquay listed (i.e. less bureaucratic, little to no infrastructural challenge and low setup cost) and something that can be easily converted to cash.

The fact that it is readily available will make it easy to convince customers to use it and the fact that it’s easy and cheap to setup will make it easy to convince merchants to accept it. Because none of them will really be going out of their way. But it you really need to force one of them to go out of their way, better the merchants that the customers. One of the reasons I think bank cards are not so good in Nigeria is that they force customers to go out of their way. And trust me when I say this, customers cannot be bothered. Merchants can be bothered because they need to make the sale so they can bear some level of inconvenience, but not customers. Unless that merchant is a monopoly or every merchant selling that thing is only accepting that form of payments, the customer will just go to the next guy.

This is why cash is so beautiful. It doesn’t inconvenience the customer at all. A good electronic replacement for cash must replicate this characteristic.

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@nextstep great point "80 million unbanked don’t have any compelling reason " but i will disagree with you on network issue.Infrastructure is least of our challenges right now, it was some 2 years back but not anymore. Mobile money operators in general have disappointed me, i no longer believe in them. They are more of an extension of DSTV and TELCO collection service.

@blacquay cost is a major issue and i think this is wer mobile money operators missed it, today MTN does not pay the woman under the umbrella to sell recharge cards but she sells and makes profit. Until we have a very wide agency framework that allows anybody to be an agent, we will have issues with mobile money. pple need to load and spend their money with ease as they do with cash : at no cost to them. @light “A good solution would be an electronic replacement for cash that is readily available and something not plagued with the problems @blacquay listed (i.e. less bureaucratic, little to no infrastructural challenge and low setup cost) and something that can be easily converted to cash.”

Ussd seem to be a savior but wit the way banks are rolling it out, it may just die before maturity. Too many USSDs wish we could have just one for the entire country.

Mobile seems to be the solution as it has wide spread coverage, everyone already has a unique identifier (Phone No), how to get it to work is the major issue? What will be the compelling reason to use electronic payment instead of cash?

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@Yinka CBN is afraid and confused, Afraid because they dont regulate the telco industry, to bring the telcos into payment is to make they bigger king kongs than they already are.
Confuse in the sense that they dont even understand how to run mobile money successfully in Nigeria they gave power to the banks and mobile payment operators instead of to the customer who will drive the system.

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Sorry I didn’t mean network as in infrastructure, I meant it as in " the greater number of users with the service, the more valuable the service becomes to the community." (Metcalfe’s law)

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Certainly not afraid enough to stop them. Won’t be long before all telcos have mobile money. The issue is adoption. Mobile money just isn’t catching on fast enough.

I don’t get the bit about giving power to the customers btw.

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What we have here in Nigeria are mostly airtime purchasing or transfer services. They are best classified as payment systems. I feel the present players are not pushing the right interface to the people and the present underlying technology is not flexible enough.

The consumption interface:

This is a way by which users access mobile payment services. The best interface for mobile money in our kind of environment is USSD. It is simple, cheap (for the user) and very accessible to everyone (banked or unbanked). The primary dependence on mobile applications would mainly be a accessible to millennials or people who are technology savvy.

If mobile applications must be used, it has to be simple and straight to the point; possibly doing just one single task.

The funding interface:

This describes the channels by which mobile money wallets are funded. A quick look at Paga’s website shows you can fund your account using debit/credit card, bank deposit and through a verified agent.

In a country where about 13.7 million people use card and many of them would not even entertain the idea of using their cards on any platform that isn’t an ATM, they will certainly not be funding their mobile money accounts via this channel.

I also think going to the bank to fund a mobile money service is not mobile money or mobile payment at all. I can buy airtime on my way to the bank or transfer funds at the bank without needing to fund my MM account.

The agent systems of MMO is the most preferred channel to push as the primary method to get funds in to a mobile wallet. This has been proven in places where mobile money or payment has taken off. It just makes sense for a individual to walking into a kiosk, get some mobile money credit, fund account and transact.
With this method, no association/link is made to the users’ bank account by means of card payment. No need to queue up in a bank just to fund an account.

A Proposed Solution

For a cash based economy, We shouldn’t be building services to take advantage of debit/credit cards. They do not seem to be the future. We ought to be thinking of other ways to make payment work for us.

We need an efficient process to digitize cash in a decentralized manner just as the telecom industry did airtime. If you can do this in ways people are already comfortable with then we can have true mobile money.

Mobile telecom companies have an existing agent network and are well positioned to help digitize money to make it super simple to transfer. The guys at Rupt (aka Objects) are also working on an ambitious project to help digitize and commoditize money/value for next generation mobile finance services.

I believe the most popular cashless payment method in the country today is payment via scratch cards and other pin-based payment services. When we buy airtime we are practically paying telcos and digitising money. Why not base the future payment systems on this method that comes natural to Nigerians? There is no reason not to.

When you digitise money, We can then start talking about inter-operable mobile money services sharing one large agent network much like how the banks share one large ATM network.

If MTN, Airtel, Etisalat, Globacom are given the go ahead to truly become inter-operable MMO without mandatory partnership with banks, Nigeria would become another model for mobile money.

In a separate post, I will write more on digitising money.

Happy New Year in Advance

Disclaimer: I am one of the persons working on the Rupt/Objects project

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Ahh… I almost had a heart attack when I read @ncodes post. We’re currently working on a similar project and I thought he said Rupt has launched. Ahh… that was a close one.

But yeah, I agree with you, @ncodes. I also think using the telcos already existing agents to digitize money is the simplest way to go. I’ll really like to see how you guys approach solving the problem though. Goodluck.

But I still hope we launch first.:wink:

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Heart attack ke! :smiley:

It is refreshing to know that more people are looking in this direction. Maybe It’s okay if you launch first; Your marketing budget would help educate people before we launch :laughing: . I am excited for you guys and I look forward to your launch.

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FYP Mobile Infographic inre US

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