The past one month that Nigerians have spent under lockdown ordered by the government to protect people from the coronavirus, has highlighted a few lapses in the country’s payment space that needs addressing.
There is also some positive news from the crisis for players in the sector. For one, the lockdown has established the importance of the payment space.
Sydney Aigbogun, the founder of CashBox, a fintech platform in Nigeria, says COVID-19 has shown that the world is going online and companies have realized working from home is not as bad as they thought.
“At Kuda, we are seeing a significant increase in the adoption of our digital-only banking product,” said Babatunde Babs Ogundeyi, founder and CEO of Kudabank. “As a cloud-based bank, we are technologically positioned to accommodate this sudden increase in traffic. We also operate a multi-digital channel strategy for our customer support, which runs 24/4, an important factor under ‘normalcy’ but a huge deal during a lockdown.”
The lockdown also highlights a few areas that need better attention. This is despite efforts made by authorities to fix them.
The Central Bank of Nigeria had released a statement on 30 March – the same day President Buhari ordered a lockdown in Lagos, Ogun, and FCT – urging the banking public to limit the use of cash and rather utilise alternative payment channels such as mobile banking, internet banking, mobile money, Point of Sale (POS), and USSD.
Read more Tech startups reel from impact of COVID-19 NITDEF to the rescue?
The apex bank also assured that financial institutions will remain operational during this period and therefore should guard against panic withdrawals from their banks. Despite the assurances, consumers’ experience throughout the lockdown is anything but satisfactory.
We identified four lessons that can be learnt.
Financial service needs a collective response
One thing everyone agrees with is the coronavirus pandemic caught all sectors, including financial services, unawares.
“For Financial Service Providers, we are reminded that we play a critical role in society. We need to do more to be ready for all that life and nature will bring. We weren’t prepared enough this time,” said Salami Abolore, founder and CEO of Riby Finance, a digital Banking platform for Cooperatives
Globally, payment systems – including the most sophisticated – in different countries have also struggled to keep pace with the impact of the virus.
The difference, however, was the financial regulator in those countries had a robust and well engaged financial system to fall back on. By tapping into the strengths of the various stakeholders, banks, MFBs, and fintech firms, and building a reliable electronic payment system these countries – for example the US – have been able to reduce the impact on the sector and consumers.
In Nigeria, the CBN tried to collaborate but while it practically dragged the banks along, the fintech firms were not given equal attention.
Left to fend for themselves, the fintech firms introduced all manner of self-help measures which ultimately affected the quality of service they provided.
The government needs to use more fintech services
This much was evident with the distribution of the palliative. Instead of using the existing electronic payment channels, the government at different levels preferred to hand out cash to beneficiaries in the different states.
“Efforts at boosting financial inclusion will be undermined if the government goes the way of handing cash to the bottom of the pyramid during this pandemic rather than find a way to leverage electronic transfers,” said Toyin Sanni, CEO Emerging Africa Capital Group.
It is through government patronage of fintech services that the businesses achieve scale.
“As an extension of the overall government, the regulators have done a great job in encouraging digital payments, and we envisage that the wider arm of government will continue to leverage on digital payments to carry out its socio-economic activities.”
Payment infrastructure needs urgent investment
The deficiency of Nigeria’s payment infrastructure shot out like a sore thumb, days after the CBN had assured consumers of smooth digital banking experience. On 3 April, the financial regulator issued a new statement directing Interswitch to suspend refund activities for failed Visa and Verve card transactions, pending the duration of the lockdown.
The result was that refunds for failed Visa and Verve card transactions on POS terminals, for instance, would not be processed until the lockdown is lifted.
The Federal Competition and Consumer Protection Commission (FCCPC) in a statement it issued on 22 April, said it has received a lot of complaints from consumers on issues bordering on failed electronic banking transactions within the period of lockdown.
Investors seem eager to invest in payment infrastructure as shown by TLcom which invested $1 million in Okra, a Nigerian-based payment infrastructure provider that is looking to scale its operations. But the financial services could also benefit from players like MTN and Airtel which are waiting for a Payment Service Bank license to get into mobile money services.
Scaling training in consumer experience
It was a missed experience for many consumers of financial services. Most banks that run skeletal services had many customers frustrated from not picking or returning dropped calls to not providing any solutions to complaints made about products and services.
“User experience in any product being developed should be emphasized on, ease of use, and all that. Because a cumbersome product will only drive users away,” said Aigbogun of CashBox.
Nevertheless, some financial services providers in Nigeria have reacted positively and in many cases with empathy during the crisis. Some have reduced their fees, creditors are adjusting debt repayments and many have donated and raised money for the vulnerable.
“In order to support our borrowers during this difficult period, we’ve reached out with phone calls and surveys to understand their challenges,” Stephanie Peter-Omale, marketing specialist, Quickcheck. “Like everyone in the world, we are coping with not knowing when we can return to normalcy, but we are working round the clock to implement possible relief measures that will help them maintain their creditworthiness.”
