Africa’s biggest economy has grown e-payment adoption to 39 percent year-on-year, according to data released by the Nigerian Interbank Settlement Scheme.
Despite the rate of adoption, Nigeria still falls behind when compared to a country like Brazil, which has grown its e-payment adoption to 85 percent.
The South American country, housing a population of 214.3 million, shares a similar population with Nigeria, which has a population of 219 million, data from Worldometer show.
The surge in Brazil’s e-payment system represents one of the highest increases in the banked population in decades. According to a World Economic Forum report, over 16 million Brazilians have embraced the country’s financial system since the beginning of the COVID-19 pandemic in late 2019 and this increased migration to online services.
However, the rise in Brazil’s e-payment adoption is attributed to an overhaul in the country’s regulatory framework, consistent use of technology, entrepreneurship, and commitment to creating products that address the needs of Brazilian customers.
On the other hand, the 85 percent adoption of e-payment has created an innovative financial ecosystem that works for everyone in Brazil.
According to Risus-Journal on Innovation and Sustainability, payments from electronic methods have enabled greater government control and supervision, as well as provided banks with more information about the consumption pattern of users, compared to payments via bank check and physical currency, which generates positive impacts on the Brazilian economy. This is because it encourages the formalisation of businesses, reducing the occurrence of tax evasion, and resulting in higher tax collection.
In order to achieve this milestone, Nigeria will have to strengthen its payment regulatory policies which will create a more enabling environment for e-payment, adopt more innovative technologies that will enable e-payment to thrive, and push more toward digital entrepreneurship.
David Velez, CEO of Nubank, said at the World Economic Forum meeting that the above-mentioned would facilitate innovation in the payments ecosystem, allow individuals and businesses to take advantage of new innovations, and facilitate investment by intergovernmental and multilateral institutions in the development of fintech and other technologies, which are essential for financial inclusion in a digitalised world.
To further develop digital payments in Nigeria, the federal government must come up with regulatory frameworks that support the adoption of e-payment while organisations at all levels must adopt more innovative technologies like Brazil to help modernise payments and grow e-payment adoption.
Oyindolapo Olusesi, co-founder of Mustarred Crest, said the major regulatory issue facing e-payment is the expensive cost of licence, which most of the time hinder the ideas of innovative citizens.
“The major problem is that licences are expensive. The call is that there are some people who have the idea but are withered out because they don’t have the necessary access to capital to be able to get the licence required. These could be either in payment or lending in the Nigerian fintech space,” Olusesi said.
Olusesi said the Nigerian market is still very young, and the infrastructure for mobile money is still at the infant stage, which is critical to the growth of e-payment.
“Looking at the cash crises that have affected Nigeria in the last three months, we realised that our infrastructure in Nigeria is not enough to accommodate the level of transactions that took place as a result of traffic.”
According to him, there is a lot to be done in terms of financial education in Nigeria to strengthen the trust of many uninformed Nigerias in using various e-payment channels.
“There is still low orientation of how people can trust the fintech providers; although due to the cash crisis, there is an increased adoption so far among customers and merchants in the likes of Opay, Kuda, and the others. Although there is still a lot to be done in terms of the rural areas, which are more dominated by the unbanked population in Nigeria, as they are seen to be highly illiterate and lack financial expertise,” he added.
Over the years, Nigerian banks have exposed NIP (an account-number-based, online-real-time interbank payment solution) through their various channels including internet banking, bank branch, kiosks, mobile apps, Unstructured Supplementary Service Data, Point of Sale, and Automated Teller Machines, among others, to their customers.
A 2022 report by ACI Worldwide ranked Nigeria among the world’s most developed real-time payments markets. The country ranked sixth behind South Korea, Brazil, Thailand, China, and India.
“Nigeria is one of the countries for which real-time payments provide the biggest economic growth opportunities. Its transactions in 2021 resulted in an estimated cost savings of $296 million for businesses and consumers,” it said.
“This helped to unlock $3.2 billion of additional economic output, representing 0.67 percent of the country’s Gross Domestic Product (GDP).”
The report projected that real-time transactions would rise to 8.8 billion in 2026 and net savings for consumers and businesses would climb to $2.3 billion.
“That would help to generate an additional $6 billion of economic output, equivalent to 1.01 percent of the country’s forecasted GDP.”
Meanwhile, the Central Bank of Nigeria’s (CBN) latest move towards a cashless policy has seen Nigerians embracing the available online platforms.
As a result, the volume of transactions being carried out has caused the banking infrastructure to experience technical downtime as these platforms are unable to process such transactions seamlessly.
For Tajudeen Ibrahim, director of research and strategy, ChapelHill Denham, the robustness of this e-payment platforms to accommodate a large number of users and transactions simultaneously has been a significant challenge in the rise of e-payment in the country.
“Failure in electronic transactions is also a major challenge that poses a threat to electronic transactions and adoption and more Nigerians keep facing these problems.” Gloria Fadipe, head of research at FCMB, said.
She said these challenges could be addressed by improving technology, and banks employing credible hands on the IT team just like Brazil has adopted innovative technologies to strengthen their e-payment platforms.