mCash would change the future of payments in Nigeria

The Nigeria Inter-Bank Settlement System (NIBSS), along with numerous banks, have launched mCash as an alternative payment system in the populous country in Africa.
mCash rides on USSD and anyone can easily use the code to make payments at large stores, corner shops, etc. The mCash payment system, which is automatically available to over 28 million account holders in Nigeria, can be used with any smart or feature phone.
The Central Bank of Nigeria has been pushing electronic payments in Nigeria for years. The elaborate program, dubbed Cash-less Nigeria, was driven massively in partnership with banks, switches, schemes and other stakeholders. The results have been fantastic as electronic payments in Nigeria is on a tear.
Despite the massive success of the Cash-less Nigeria program, merchant payments using Point of Sales (POS) terminals have not been as successful. Payments at POS terminals have been bedeviled with a lot of issues: High cost of terminals, which has been exacerbated by the devalued Naira. Poor telco data/GPRS infrastructure. Overregulation of participation and fees, which has made the business to be highly unprofitable. The list of issues goes on.
It was no surprise that banks started pulling back. Many at times, merchants desirous of having terminals are not given because they may not have enough transactions to allow the banks breakeven.
Not deterred by these, NIBSS and some banks rallied around to design a new payment system which would latch on to the recent success of the USSD banking in Nigeria.
Rising from the ashes of mobile money in Nigeria, another failed experiment in the quest for a cashless society, banks quickly repurposed their USSD codes to connect directly to bank accounts instead of mobile wallets. As the average Nigerian is already used to using USSD codes to load airtime or select call back tunes, there was an immediate affinity. USSD banking in Nigeria now has more users than all other channels apart from payment cards.
The mCash payment system allows account holders to dial their bank codes or a special general purpose code and then pay any merchant. The paying customers and merchants do not need to be with the same bank. The transactions ride on the existing NIBSS Instant Payment infrastructure. Merchants get settled instantly instead of waiting until the next day as it would be for POS transactions. Banks do not need to create additional back office processes as the payment transactions are treated like regular NIP transfer payments.
Even the merchants love the new system as they would not need to pay interchange or MSC.
This is a new payment system and the jury is still out on how transformational it could be. It has all the potentials of a successful platform: reach, ease of use and cost to merchants.

Author: Adedeji Olowe

Adédèjì is the founder of Lendsqr, the loan infrastructure fintech powering lenders at scale. Before this, he led Trium Limited, the corporate VC of the Coronation Group, which invested in Woven Finance, Sparkle Bank, Clane, and L1ght, amongst others. He has almost two decades of banking experience, including stints as the Divisional Head of Electronic Banking at Fidelity Bank Plc. He drove the turnaround of the bank’s digital business. He was previously responsible for United Bank for Africa Group’s payment card business across 19 countries. Alongside other industry veterans, he founded Open Banking Nigeria, the nonprofit driving the development and adoption of a common API standard for the Nigerian financial industry. Beyond open APIs, Adédèjì works deeply within the fintech ecosystem; he’s the board chairman at Paystack. Adédèjì is a renowned fintech pundit and has been blogging on technology and payments at dejiolowe.com since 2001.

3 thoughts on “mCash would change the future of payments in Nigeria”

  1. No doubt mCash is a brilliant idea. However, don’t you think the payment charges ranging from 20 – 50 naira will put users off? I noticed the merits you highlighted were from the perspective of the merchants and not the users.

  2. Wow. I just learned about the minimum surchargeable transaction amount of 2000 naira here. I was wondering whether the surcharge has not been activated when I paid 700 last week and only 700 was charged to my account.
    With this new knowledge, the whole scheme now makes a lot more sense.

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