Data from the Nigerian Bureau of Statistics (NBS) report, produced in collaboration with the Central Bank of Nigeria (CBN), on electronic payments in Q4 2017 revealed that mobile payments recorded 12 million transactions valued at N307bn (US$1bn) in the quarter. According to the report, though the value of transactions grew by 30% year-on-year, nonetheless, that value only accounts for only about 1.1% of the total electronic transactions.
Kenya and Ghana remain far ahead of Nigeria in mobile payment usage. In 2017, Kenya and Ghana processed US$45.3bn and US$35.9bn respectively, which led Proshare, a financial news analysis service, to conclude in its reporting on the same dataset that “mobile banking [in Nigeria] remains hugely untapped. Indeed, better synergy between telecommunication operators and banks would boost e-transactions.”
However, the Nigerian electronic payment landscape has never been short of synergies between Telcos and Banks. In 2014 Diamond Bank partnered with MTN Nigeria to launch Diamond Y’ello account. This was stated to “offer MTN subscribers a fusion of financial services and telecoms incentives such as money transfer and withdrawal, account statements confirmation and airtime purchase amongst a host of available features and benefits. Other examples include: Globacom Mobile Money and Xchange; a partnership with FirstBank, Ecobank and StanbicIBTC.
More recently are partnerships between Banks and a key industry body, Nigeria Inter-Bank Settlement System, (NIBSS) with mCash; and partnerships with global payment processors like Mastercard and Visa, with Masterpass and mVisa respectively.
Despite media report of users of some of these services reaching millions, the data from Nigerian Bureau of Statistics (NBS) on mobile payments has not been impressive. This then points towards two likely directions; the first being that most of the subscribers for these services are just activations — not core user-base, the other being that if most of these subscribers are core users, the value of each unit of transaction done by the users are low, which may indicate a lack of trust. Either way it reiterates the fact that mobile payment in Nigeria still has a long way to go.
A look into the global trends in e-payments, and the success of mobile payments in other developing Nations points to the fact that mobile payment would most likely be the dominant electronic payment channel in the near future, not only in Nigeria, but globally. However, some catalysts are still needed to speed up its growth in the country.
Looking beyond partnerships and the provision of supporting infrastructure by the providers, the following lessons are key issues from the side of the users that need to be taken care of in order to guarantee the success of mobile payment solutions in Nigeria:
- Awareness and Consumer Education
- Building Confidence and Trust
- Going beyond payments to engagement
- Targeting the informal sector
Awareness and Consumer Education Remains Key
Paying with cash and card is quite habitual of many customers — both are far more familiar alternatives to mobile payment solutions without a new learning curve to surmount.
Many Nigerians don’t mind spending on the latest smartphones, yet, some express surprise when told the capabilities their devices possess, not just for payments, but in general. This is most common among older customers, whose spending power makes it impossible to ignore them.
Beyond just rolling out mobile payment solutions, providers must invest in making consumers aware of these solutions, providing cases of how the solution adds value to the consumer. It should also be expected that most new users will encounter challenges for which support will be needed. The ability and speed at which this support can be accessed will go a long way in the retention of these users.
Convenience Still Reigns
The familiarity of the usage of mobile devices among users offers a degree of convenience that makes them a compelling alternative to cash and card payment. However, the expectation of “frictionless” payment still remains far-fetched.
One of the complaints against the adoption of mobile wallet solutions is the need to fund wallets from a bank account, sometimes at a cost, before payments can be made from the wallet. In the case of Near Field Communication (NFC) based mobile payment solutions, if the NFC chip is not embedded with the device, users find it burdensome to have an external chip attached. For those with Near Field Communication (NFC) chips embedded, there is a need to unlock the phone to access the mobile wallet, select the card to use (if multiple cards are available), and hold their devices close to payment terminals. After transactions are made, consumers must usually still type their Personal Identification Number (PIN) or provide an approval. Paying with a card that requires just inserting a PIN provides a far more convenient experience.
Today, most mobile payment solutions makes it easy to directly pay from a bank account, scan a Quick Response (QR) code and type in a PIN to authorize payment. However, the more seamless it is the more vulnerable or less secure a mobile payment solution can be. This then poses a challenge to mobile payment solutions providers who need to strike a balance between convenience and security. One of the common approaches to this challenge is to offer a different level of authorization for payment sizes or transaction limit per channel.
Build Confidence and Trust to Address Security Concerns
As news coverage of internet fraud and scams dominate the press, consumer confidence in the security of digital payment solutions remain low. Promotional media of mobile payment solutions put more emphasis on a smiling user and merchants, without addressing the security concerns of potential customers.
Provisions for security should be communicated in the promotional materials of mobile payment solutions, and should be expressed in simple and clear language that can be understood by customers. “2-factor authentication” and other related terminologies make no meaning to most end-users.
Go Beyond Payments to Engagement
Beyond just making transactions possible, mobile payments should provide an opportunity to engage customers. This could be as simple as providing analytics on their spending and offering rewards or loyalty programs. This also provides incentives for retailers to adopt mobile payment solutions and drive their usage with their customers.
This has given Starbucks Coffee — one of the world’s largest coffee chain— a big advantage in the mobile payment landscape. Starbucks mobile payment’s reward system has grown far beyond Apple, Google and Samsung as a mobile payment service provider.
Nigeria may not have large retailers like Starbucks and Walmart. But the growing presence of large retail chains like Shoprite being highly patronized by Nigerians may offer a clue to a new dimension of partnerships. Incentivizing customers who choose mobile payments over cash and cards with rewards is proven way to driving the usage of mobile payment solutions.
The Informal Sector May Be the Final Piece in the Puzzle
A huge part of the Nigerian economy is driven by the informal sector. Some refer to this as the fortune at the bottom of the economic pyramid. Local service providers such as Artisans, “Bukas” and transporters collectively process a lot of transactions in cash, making them a perfect fit for mobile payment solutions.
However, a lack of awareness, trust and infrastructural challenges makes this space a difficult one to play in. This has seen several providers roll out Unstructured Supplementary Service Data (USSD) based mobile payment solutions to cover the infrastructural deficit and spend heavily on marketing for awareness.
Finding success in this segment, may be the Holy Grail to the explosive growth of mobile payment solutions in Nigeria. In comparison to Q4 of 2017, the latest data from Nigerian Bureau of Statistics (NBS) for Q1 of 2018 shows a growth in transaction value by approximately 7% and 19.5% in transaction volume. But with mobile payment still accounting for slightly more than 1% of total electronic transactions, there is still more to be done to harness the potentials of mobile payment in Nigeria.