The Nigerian e-payment sector has risen with exponential growth over the past four years, reflecting a wider global trend towards online payment technologies. A report released by the Nigeria Inter-Bank Settlement System (NIBSS) in June 2021 recorded a staggering 391 per cent increased in mobile payments from May 2019 to April 2020, while Point Of Sale (POS) transactions reached a record-breaking total volume of 462.11 million transactions in the first half of 2021.
Elsewhere, regional payment providers such as TEMPO are one way businesses in Nigeria find ways to insert themselves into the global financial network. In creating the possibility for secure and affordable international payments, service providers like TEMPO, PayPal, Apple Pay, and others are illustrative of the thriving number of partnership and payment solutions on offer.
Private sector companies are, without a doubt, seeing the value of investing in and developing the payment infrastructure in Nigeria. While equally, the monumental rise in digital transactions is a testament to the increasing preference and opportunity for reliable and affordable cashless payment solutions. Together, they are suggestive of what the future operational landscape for Nigeria’s payment infrastructure may look like.
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The digital payment market: An overview
Factors such as the coronavirus COVID-19 global pandemic have undoubtedly spurred interest in cashless payments. Yet, the pandemic can be understood as only accelerating an already rising trend.
Since the beginning of 2017, the value of POS transactions has risen from N610.1 billion in value to a jaw-dropping N3.01 trillion. Similarly, in Europe, cashless payment options that have been rising in use over the past few years also saw a surge in use as an effect of the pandemic.
The digital payments industry in Europe was estimated in 2017 at $668 billion, according to one Statista report. Since then, the European Union (EU) has become the leading market for online transactions, expecting to reach nearly $2 trillion in value by 2025.
Record amounts of digital payment use across the EU and worldwide have driven innovative cashless payment solutions and suggest an international trend towards cashless economies. Examples such as real-time payments, P2P mobile payments, and mobile wallets with multi-currency and cross-border payment options are cashless solutions that are now shaping the future.
The importance of accessibility: emerging services and providers
In Nigeria, an advancing number of smartphone users amongst the youthful population, combined with more e-wallet and POS options, has acted as both catalyst and fuel for the sector’s popularity. This is reflected in the highest number being recorded in urban centres such as Lagos, Port Harcourt, and Abuja. However, the question remains of how to reach rural populations and the large number of Nigerian adults that do not have their own bank account.
The largest number of POS registered for use occurred in 2020 than ever before, suggesting merchants are keen to embrace new cashless systems. The increasing demand for POS systems is also proving to be a valuable source of income for the growing number of Nigerian youths reaching employment age.
Online payment solutions in Nigeria have come a long way since they first became available in the late 2010s. Despite an estimated 20 million Verve cards having been issued by December 2009, it was judged approximately 50% of those cards were inactive. Other digital payment services from global providers such as Visa, Mastercard, Flutterwave, and TEMPO have since emerged to facilitate low-cost cross-border and regional payments further.
For the government, banks, and businesses of Nigeria, cashless payment solutions offer the opportunity for sustained economic development and are seeing an undeniable rise in popularity. NIBSS Instant Payments (NIP) have been on offer to customers since 2011, yet the number of NIP payments being made reached the highest recorded at the beginning of 2021, when it also rose to over N100 trillion in value for the first time.
The fundamental impact on all sectors
The Central Bank of Nigeria (CBN) likewise cites the success and modernization of payment systems as a key enabler for the country’s economic development. With goals to reduce the cost of banking and improve the effectiveness of a monetary policy, the CBN identifies cash-less options as propelling all sectors of business growth.
Easier to track, cheaper, more efficient, and less subject to corruption and fraud, cashless payments are recognized by the CBN as a valuable tool in connecting Nigeria’s regional banking system into the global financial system.
The integration of blockchain technology to international payments from digital money transfer service providers such as TEMPO is another example of how online transactions are becoming potentially safer than cash alternatives.
For companies, investing in countries such as Nigeria that currently have low electronic penetration is beneficial to unlocking the vast potential from new markets. Correspondingly, the government is working on licensing Payment Service Solution Providers that can integrate with and help support the country’s banking infrastructure.
By facilitating growth in the sector through improved accessibility, more digital wealth can be unlocked and contribute to the overall development of Nigeria’s economy. Business partnerships networks facilitated through the private sector by companies like TEMPO are assisting businesses to get up to speed with new technologies and function competitively in the global marketplace.
With secure online payment options becoming easier to access, it seems like every sector is set to benefit from the new cashless solutions as they become more readily available.
Ayriyan is the Managing Partner & CEO at TEMPO Payments
