Leveraging e-payments, digital innovation for trade, financial inclusion

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FAYETTEVILLE, NC - AUGUST 03: A man puts a card into an ATM August 3, 2010 in Fayetteville, North Carolina. A US government report issued August 3 gave evidence that the economic recovery is being stalled by sluggish consumer spending and weak personal incomes. (Photo by Chris Hondros/Getty Images)

By Oluwafunke Ishola

There is no doubt that technology has revolutionised the banking industry, particularly mobile and the Internet, as bank customers continue to embrace electronic payment for financial transactions.

Indeed, individuals and businesses now crave e-payment platforms mainly due to the immense economic benefits they derive from them, which include convenience, affordability, availability, and customer retention.

For instance, a recent report of the National Bureau of Statistics (NBS) on “Selected Banking Sector Data: Sectoral Breakdown of Credit, ePayment Channels and Staff Strength” for first quarter, shows that a total of 557,083,712 electronic payment transactions valued at N34.02 trillion were recorded in selected banks across the country.

The e-payment channels include: the Nigeria Inter-Bank Settlement System Instant Payments (NIP), Automated Teller Machine (ATM), Point of Sale (PoS), electronic cheque truncation, mobile cash, electronic bills pay, web and mobile payment, among others.

Statistics indicate that cash and cheque use are declining as the world is swiftly becoming the age of digital payments, push payments and instant payments.

Analysts say the rise of different e-payment channels continues to have a direct impact on local economies, especially Nigeria.

In 2016, a report by Moody’s Analytics commissioned by Visa Incorporated showed that increased use of electronic payment products, including credit, debit and prepaid cards, added 296 billion dollars to the Gross Domestic Product (GDP), while raising household consumption of goods and services by an average of 0.18 per cent per year.

The report: “The Impact of Electronic Payments on Economic Growth” was conducted in 70 countries between 2011 and 2015.

The report also showed that e-payments added 640 million dollars to Nigeria’s GDP and an average of 16,880 jobs per year within the review period.

The benefits of e-payment to Nigeria’s economy are unquantifiable as it is evolving into a cashless society, deepening financial inclusion, reducing poverty and contributing to the effectiveness and stability of the financial system.

Sam Okojere, Director, Payments System Management, Central Bank of Nigeria (CBN), said the Nigerian Payments System had evolved over the years from primitive barter system to the use of cowries, metals, notes and to the present electronic payments system.

Okojere disclosed that CBN, as the regulator of the Payments System, had been implementing various policies and initiatives towards the development of the Nigerian Payments System.

According to Okojere, the strategic objective of the payments system is to migrate Nigeria from cash-based economy to an electronic payments inclined market. Thus, the bank’s strategic priorities have been to achieve a credible, reliable and efficient payments system.

Okojere disclosed this during a recent Joint Seminar for Banking and Telecom Regulators from the Sub-Saharan Africa Locations on Digital Products and Payment Systems in Lagos.

The seminar which had the theme: “Advancing ePayment and digital innovations in Africa – Evolution of Nigeria’s payment systems” was to promote financial inclusion through digital innovations in sub-Saharan Africa.

The seminar was organised to provide key officers of regulatory authorities in African Markets – notably locations with FirstBank subsidiaries; Ghana, Senegal, DRC, Gambia, Sierra Leone and Guinea – a platform to get familiar with developments in the Nigerian Payment Systems and Digital Products Industry.

Thereon replicating and adopting the knowledge from the seminar with a view to bolster the finance industry in their respective countries.

Speaking on how other countries can learn from the Nigerian experience, Okojere emphasised the need for strong collaboration, especially in the areas of intelligence gathering and information exchange to fight fraud.

“The Nigeria Electronic Fraud Forum is working on extending its partnership to other African countries.

“Also, periodic exchange of staff to learn on the job is very crucial to the development of competence,” Okojere said.

Notably, he stressed the need to start organising Intra-African Conferences with themes that reflected local challenges.

Specifically, he said the CBN continued to demonstrate its resolve to shape a more trusted and efficient payments landscape in Nigeria through its strong commitment to collaboration and stakeholder engagement.

Speaking on FirstBank’s leading role in promoting digital banking and financial inclusion across the country, Adesola Adeduntan, CEO, First Bank of Nigeria Ltd., said the bank had been a success story as far as digital banking was concerned.

“Today, we have more than 8.5 million people on our USSD *894# banking platform, more than three million people on our Firstmobile platform.

“We are the only Bank in Nigeria that has issued cards in excess of 10 million in Nigeria.

“When you are looking at that institution that has achieved a lot in terms of digital payment, it is First Bank. More than 80 per cent of our transactions are carried out on our digital channels,” Adeduntan said.

He restated that economic growth and development of host communities was important to the bank, and that assisting Nigeria and the continent at large address poverty was imperative and reason for financial inclusion being at the core of its business strategy.

He said First Bank was also committed to financial inclusion and would continue to improve the lives of Nigerians through the provision of innovative financial services.

Also, Mr Chuma Ezirim, Group Executive, e-Business & Retail Products, First Bank, noted that the bank was pursuing sustainable financial inclusion by leveraging its unparalleled experience in serving the low income segments.

“Our agent banking offering with focus on serving financially excluded individuals and small businesses in rural areas is experiencing exponential growth with significant revenue and social impact,” he said.

Ezirim disclosed that First Bank had over 28, 000 agent banking network located in 754 local government areas, processing N240 billion worth of transactions monthly.

“The agent banking asides creating employment has made banking easier and closer to people, and the testimony of the people is that their communities has been turned to city,” he said.

He highlighted the challenges faced by the agents as poor infrastructure, trust, lack of awareness, low income/literacy level and identity management, among others.

Corroborating the First Bank boss, Mr Mike Ogbalu, Chief Executive Officer, Verve International, said Nigeria’s payments system had evolved over the last 20 years with amazing impact on the economy, industries and the lives of Nigerians.

Ogbalu said the August 2005 banking sector recapitalisation redefined competition within the industry and set off a technology ‘arms race,’ which positively impacted the growth of the industry.

Also, Premier Oiwoh, Managing Director, Nigeria InterBank Settlement System (NIBSS), disclosed that Nigeria was one of the few countries in Africa and the world to have deployed an Instant Payment platform solution.

According to Oiwoh, the NIBSS Instant Payment (NIP) is the first and only point-to-point funds transfer service that guarantees instant value to the beneficiary.

He disclosed that the NIP experienced exponential growth value from N3.9 trillion in 2012 to N39.9 trillion as at June 2018.
Oiwoh noted that benefits of improved payment system would facilitate the entry of new players into the financial industry, faster turnaround time with inter-bank transactions, convenient banking and improved innovations from mobile and internet banking.

Others include: next day settlement of merchants for Point of Sale (POS) transactions, availability and uniform functionality of the terminals and uniformed card acceptability across the network.

However, he itemised fear of fraud and security issues, infrastructural challenges and low level of card usage on POS as some of the impediments to Nigeria’s electronic payment system.

Furthermore, Mr Agada Apochi, Managing Director, Unified Payment Services Ltd., urged operators in the payment system to evolve a scheme whereby various African currencies would be acceptable both as transaction, settlement and billing currencies.

“Otherwise, we would continue to depend on the dollars or pounds; because there is no national currency in African today that is allowed as a global currency for settlements or billing,” he said.

He also advised telecoms companies to reduce their roaming rates in Africa to deepen digitalisation, thus allow more businesses utilise their USSD for transactions during trips. He added that present roaming rates of telecoms companies in Africa was prohibitive.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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