Partnerships with Telcos, Fintechs and Banks crucial to support Nigeria’s cashless economy
COVID-19 brought a public health challenge to Nigeria, but it also resulted in an economic downturn on the back of a pandemic-induced recession. The pandemic highlighted the need to diversify the economy to develop a wide range of growth industries and sectors in addition to the more traditional ones such as oil and gas.
The growth of the digital technology sector in Nigeria is an indication that the sector can serve as a catalyst for advancing the digital economy, while enabling economic recovery and growth.
The NBS report noted the significance of the ICT sector, as it was the leading driver in the non-oil sector that lead to GDP growth and economic recovery in 2020. The World Bank’s Nigeria Digital Economy Diagnostic Report highlights that Nigeria is uniquely positioned to reap the benefits of the digital economy as the country accounts for 47% of West Africa’s population, and half of the country’s 200 million people are under the age of 30.
The report goes on to acknowledge Nigeria as the largest mobile market in Sub-Saharan Africa, supported by strong mobile broadband infrastructure. At the same time, minimal fixed infrastructure and connectivity in rural areas can leave the most marginalized people behind. Partnerships with government, fintech players, telecom companies and other strategic partners to provide digital solutions and support the cashless economy, offer the greatest potential to overcome infrastructure barriers to accelerate financial inclusion and drive economic growth across multiple sectors.
Digital innovations are key to advancing financial inclusion. They are the big equalizers, enabling and spearheading financial inclusion for people and small businesses alike.
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The foundation to enable payment technologies for a robust digital economy is being laid one regulation at a time. Recent frameworks issued by the Central Bank of Nigeria on Sandbox, QR, Open Banking and others, are expected to galvanize and accelerate the digital economy agenda by allowing more innovation. Creating certainty in other areas such as contactless payments can energize the industry even further.
As a trusted partner that has developed its secure, innovative payment technology over many years, Mastercard is driving growth in digital financial services through digital partnerships, solutions and technology, extending acceptance infrastructure and aiming to connect 1 billion people to the digital economy by 2025, including 50 million micro and small businesses, with a direct focus on 25 million women entrepreneurs. This can be achieved by making it easier to accept electronic payments, along with greater access to credit to grow and scale.
An example of this is Mastercard’s recent partnership with MTN which enables millions of consumers in 16 countries across Africa to make global e-commerce payments safely and securely, with or without a bank account. Last year, we launched a Pay-on-Demand mobile platform in Uganda with Samsung, Airtel and Asante Financial Services Group which provides end consumers and MSMEs with asset financing to access smart handsets at a low upfront cost while making affordable payments over time.
In addition, Mastercard and Airtel’s digital partnership will enable access for over 100 million mobile phone users in 14 African countries to virtual card numbers (VCN) and QR Payment capability – even though they don’t have a bank account. Mastercard also aims to onboard over 40K SMEs as merchants on QR. The partnership has made Airtel one of the largest offline-to-online digital payment networks in Africa.
We have deployed product solutions designed to achieve three key objectives. The first objective is to grow acceptance, especially for micro-payments in rural areas. Secondly, to provide cost-effective merchant payments (near zero cost) for domestic payments. And finally, to achieve instant settlement for all merchants, regardless of mode of payment or acceptance. We delivered these objectives via market product solutions such as Mastercard QR which enables consumers to pay via their mobile devices by snapping a photo of a QR code sticker or poster presented by merchant, Tap on Phone solutions that allow a merchant to turn their mobile phone into a contactless acceptance device and Mastercard Payment Gateway Service which enables acquiring banks to offer e-commerce payment solutions to small merchants via our Simplify system.
Mastercard solutions assist businesses and consumers to thrive in the digital economy by utilizing safe and secure digital payment channels. But governments are benefiting too, Mastercard applies its technology to assist countries and stakeholders to digitize economies and develop successful, interoperable payment ecosystems that can support sustainable growth and wider financial inclusion. Our research has found that cash prevalence can have a high economic cost – estimated at 3.2% to 4.5% of global GDP. Mastercard’s Payments Ecosystem Design & Development (PEDD) methodology offers cash-cutting solutions and helps governments develop a blueprint of their digital economy to mitigate the costs of cash and build domestic payment ecosystems.
The PEDD approach consists of five steps: size the payment flows, determine the drivers of cash, design the strategy, prioritize the initiatives, and propose an implementation plan built on public-private partnership that also advances financial inclusion.
Some of the PEDD initiatives that we’ve successfully carried out include:
• Digital immunization records with Gavi The Vaccine Alliance, a digital voucher program with the World Food Programme.
• A digital marketplace for farmers via the Mastercard Farmers Network (MFN), and
• A digitized school ecosystem through the Kupaa initiative in Africa that allows parents, schools and governments to make and track school payments.
• These initiatives are also starting blocks for future Smart Cities as they digitize the citizen journey within the payments value chain, thereby creating a seamless experience.
The growing reach of mobile technology creates a tremendous opportunity for the payments and technology industries to bring more people and businesses into the formal economy. Through partnerships, we can achieve a digital payments economy that includes everyone, mitigates the costs of cash, and achieves the sustainable economic growth and inclusive well-being that we want for Nigeria.