Visa recently commissioned Roubini Thoughtlab, a research organisation to carry out a study and come out with Cashless Cities Report. The study looked at the benefits of adopting digital payment by consumers, businesses and government. In this interview with AMAKA ANAGOR-EWUZIE, Emezino Afiegbe, Country Manager, Visa Nigeria gave insight into the report, the essence of adopting digital payment and the things Visa is doing to guarantee safe digital payment by customers. Excerpt:
Visa just released the Cashless Cities Report; tell us what the report is all about?
The study looked at 100 cities globally. Why cities? Basically, cities are responsible for over half of the 7.5 billion persons on the planet and if you want to get a fair view of the kind of customer journey, trend or potentials of adopting digital payment, cities are very good place to look at.
To get a proper representation for the survey, six cities were selected based on their socio-economic relevance and level of advancement in digitalisation. The six cities include Lagos in Nigeria; Sao Paulo in Brazil; Chicago in USA; Stockholm in Europe; Tokyo in Far-East and Bangkok in Thailand. About 3,000 individuals and 900 businesses were interviewed.
From the report, Lagos was discovered to be a cash centric city, meaning that over 90 percent of our payments are still cash. The outcome of the study indicated that the total net-gain for full adoption of digital payment is $2.7 billion per year. This means that when you look at 10 percent of people spending digitally, the average amount spent using card payment and the frequency spread across the whole population, $2.7 billion is the potential after one year.
This will be divided among consumers, businesses and government to determine the net-gain for each. The estimated benefit for consumers is $200 million; $2.3 billion for businesses and $300 million for government. These benefits come from time saving from going to the bank or retail shops.
Businesses have the greatest gain from time saving, increased sales, more revenue and increased job creation. For government, digital payment helps to instill transparency, increase tax revenue through reduction in loss and leakages.
In terms of catalytic benefits, it means that beyond cash, there are other benefits that affect the society at large. Here, employment increases by 4.8 percent per year and there is 0.5 percent increase in wages because increased revenue enables businesses to employ more staff. Another benefit for Lagos is GDP growth by 0.28 percent; productivity increases by adoption of digital payment because people will keep coming to patronise your business, it’s more secure and very convincing.
Globally, the net-gain for the 100 cities is estimated at $470 billion per year and if those cities do not adopt digital payment, they stand to lose $470 billion in a year. There are other statistics in the report that shows that adopting digital payment is profitable. We have businesses in cities that are heavily cash dependent like Lagos and businesses in cities that are digital leaders like Chicago. However, whether you are in digitally advanced cities or heavily cash dependent, you are still going to gain.
For instance, for $1 million of sales in a city like Lagos that is not digitally advance, you gain an average of $13,500 per year but in cities like Stockholm or Chicago, you gain about $10,800 on the average. This shows that adopting digital payment is beneficial and this is the values that Visa wants to bring and will continue to invest in. We utilise our own information because we have been in the business for 60 years. So, there is much information across over 200 countries that we will love to share with businesses and government to enable policy formulation.
As Visa is trying to limit the use of cash and free businesses from robbers, the worst criminal activities happen online. How do you plan to check digital theft?
Digital theft is a genuine concern that many people have with digital payment but one thing we emphasise in our engagement with businesses, government and banks, is to ensure adequate investment in the right technology that can immediately identify when a crime is on-going and to be able to stop it.
As the fraudsters continue to work hard to develop other ways of stealing money digitally, Visa is investing heavily in equipping our financial institutions to have the kind of technology that prevents internet fraud.
For example, we have a solution called VRM- Visa Risk Manager that works closely with another one called VAA- Visa Advanced Authorisation. These solutions enable banks to write some rules that are embedded within their platforms for authorisation of transactions.
If a fraudster now hacks the information of a genuine consumer to carry out a payment transaction, and if the consumer’s bank has implemented the VRM or VAA solution from Visa, there will be need for the rules to be implemented. For instance, if Mr. A transacts in Lagos at 12:00 and by 12:10 another transaction comes from Bangalore such cannot be approved because one cannot be in two distant geographies at the same time.
The bank may ban transaction from a particular country and if a customer usually carries out transaction of $100 per week and suddenly, it becomes $500, then, it also becomes suspicious and right for the bank to block the transaction.
These rules that VRM and VAA equip the bank with to write on behalf of the consumers, enables the bank to ask questions like, ‘is it the right person? Does he have enough money?’ before declining the transaction if there was violation. It is better that a genuine consumer is doing the transaction and he is more inconvenienced than the consumer losing money. So, there is ongoing investment in technology to equip the bank and educate them on how to use technologies.
We have another technology that empowers the consumer called Consumer Transaction Controls (CTC). This enables the consumer to go to his or her bank’s mobile banking app that has been equipped with Visa Transaction Control, and then set daily transaction limit and itemise the countries where he does not want to make any transaction.
We also equip banks with information about potential threats so that they can support in educating consumers on security tips. As fraudsters work day and night to come out with new ways of breaking security systems, we also invest heavily to ensure that our banks are equipped with the necessary tools they need to get fraud stemmed before it occurred or identified quickly to minimise loss.
What is the current value of Nigeria’s mobile money market? And what is your outlook for 2018, now that we are out of recession?
Recently, we had a report by one of the rating agencies that predicted that Nigeria will grow by 1 percent GDP year-on-year. Though small, it is much better than where we are coming from. So, we see a future for the country’s GDP based on current trend but we are aware that our main source of revenue remains oil and the price of a barrel is above $55, which is encouraging. And we know that the Federal Government budget benchmark has lower figure meaning there could be surplus territory at the end of the day. This will lead to ability for people to be more confident in spending once again as was the case before the recession.
As regards mobile technology, the volume is expected to grow significantly. We are not talking about the precise volume but the potential of growth. Visa is a digital payment provider that includes plastic cards, intangible cards and other vehicle for digital payment like mobile phones.
Visa recognises relevance of mobile. Years back, we looked at the mobile phones that are most popular and we identified Android, IOS from Apple and within android space, the key player is Samsung. So, between 2015 and 2016, we led other networks in engaging with these leading service providers. So, we are able to work with Apple to develop Apple Pay, which is mobile based. Not long after, we implemented Samsung Pay and Android Pay for all the other kinds of phones. The whole purpose is that since this is a device that people holds with so much importance, there is need to ensure that payment is done with that.
Another one is visual cards. For example, you have your bank’s app on your phone and your 16 digit number- intangible card and details securely on the phone. This is why Visa is enhancing security by tokenization- an alternative 16 digit card numbers that go with the real card number.
So, when you are using your phone with visual card to make payment, the transaction information that is travelling to complete your payment, does not include the card number you have in your wallet but includes the alternative version. It’s when it gets to our system that we re-translate, then render it in the real card number, finish the translation and if a hacker intercepts the transaction message, he cannot use that card number for anything because it is not the real card number.
Since mobile is becoming relevant, we are looking at securing technology for safe payment and we have done that with Apple, Samsung and Android, and with tokenisation, which we are implementing with partners across our region. By next year, we expect adoption of mobile payment to improve.
