Month: December 2017

10 predictions for digital payments in 2018

Here are my top 10 predictions for the digital payment industry in 2018.  These predictions are presented in no particular order and have been influenced by my interactions with the evolution of payments and other experts I work with. They are strictly limited to Nigeria because going beyond the border into the Benin Republic would quickly expose my foolery.

Yes, I know that prediction is a fool’s game especially when my metaphysical skills are zero. What stops me from throwing my hat into the prediction game for the year ahead? After all, seeing the future is not more accurate than a bunch of monkeys typing out a Shakespeare. Who cares?
On the serious side, though, it’s likely that any of these following could happen. But if the predictions don’t happen, please, don’t hold me accountable. I am warning you upfront!

#1 Alat gets a (bigger) challenger

Wema had a fantastic year with Alat; it’s digital bank that everyone loves or pretend not to love. When the news broke out that Wema would be launching a digital bank, many sniggered, but hey, they’ve a fantastic run. Sometimes before the middle of 2018, though, expect at least two banks to join in the digital banking fray. After all, Wema has done the homework for everyone and posted the result on the billboard. The new banks would dodge Alat’s missteps (very few) and amplify their successes (many). It could be bloody as they are all going for the same middle-class disloyal customer base. You can still join the survey.

#2 PSD2 instigates Open Banking

PSD2 will go live by January 13 and it would have hiccups for months. Nevertheless, expect waves of open banking initiatives to hit other countries. Nigeria already has one in the offing with https://openbanking.ng. The need for easier integration, the pain of which has been a major obstacle to Nigerian Fintechs and their rose-tinted world-changing ideas, would drive that openness.

#3 Maturity comes to Fintech

The Fintech space would become more matured as local funds start to make plays. So far, it has been more of hype and hyperboles. Irrespective of the sexiness of Fintech stardoms, real problems exist to be solved by the challengers. The market would weed out the wannabes and lightweights. The Venture Capitals who got burned from letting their Fintech run riots would bring sanity and governance. That should attract new investors. Watch out for new seed funders such as Microtraction and Itanna.

#4 Smaller Fintechs instigates price war

The cost of electronic transactions dropped significantly this year, and that spurred a massive increase in transaction counts. Of course, you can’t disown the impressive improvements in success rates of POS, ATM and interbank transactions. Nevertheless, smaller players are still having a tough time enjoying part of this goodies. There would be more growth in 2018. However, as electronic transactions count gets higher, expect another wave of pricing reduction, triggered by the smaller Fintechs who are fighting for customers and eyeballs.

#5 Bitcoins bubble explodes, killing many

2017 has been a wild ride for Bitcoins and other cryptos. Many of those who asked me to mortgage my house but I didn’t listen to are already saying “Deji, you are a loser, we told you so.” I still think cryptocurrencies’ bubble (Bitcoin, Ethereum, etc.), will finally explode, making a loud splat sound, taking down many alongside with their savings. Enough said.

#6 International players come to lunch

International heavy-weights will follow the likes of Opera (who has reportedly bought Paycom PIDO) to make investments in Nigeria. And it’s not difficult to see the reason: our payment and digital transaction space smoked hot all through the 12 months of 2017. Many learned the hard lesson of not staking out Nigeria when there is a chance to do so. Now that the FX has been stable getting in and out is easier. Still, should likes of  Alibaba, Tencent, and other Chinese super Fintechs show up, our digital space would never be the same again.

#7 Android supports pay with Paga

While Android phones have ruled the world and they are local chieftains in Nigeria, most phone users are stuck with free apps not because they are stingy (well, we are stingy, jo!) they can’t easily pay for apps. Cards get bounced, wallets are not available, PayPal is sketchy, but the good old bank accounts are not allowed to the party. In 2018, expect local payment methods (accounts, wallets, and mobile money) to become available within Android, Amazon (Longshot), Facebook, and Apple Pay (Longshot). Efforts from likes of WeCashUp could yield fruits to bring international payments to smaller payment schemes.

#8 Fraudsters get a beating

The increase in electronic frauds has been trending well with the explosion in digital payments. While there have been efforts to collaborate to suppress, 2018 would be the year this comes to a head and expect very serious and deliberate collaboration between banks and Fintechs. Already, CBN and banks have come up with the BVN Watchlist and other private initiatives, such as Stop Fraud Africa, are coming up with online real-time APIs to stop fraudsters at their games.

#9 Retail digital lending become prevalent

Retail credit has been a tricky game for Nigerian banks. Everyone complains that banks don’t give loans except you have an account with them, spend months and even years tending the account and then when that time comes, it takes forever to process the loan after you must have submitted tons of documents including your DNA test result. That is changing with likes of Access Bank PayDay Loan which gives instant credit just by dialing USSD code * 901 * 11 #. Expect more banks and lenders to join the instant credit bandwagon, after all, Access Bank didn’t die from doing it.

#10 AI to the customer service’ rescue

The banality of customer service can drive the most patient human to madness and as such many are experimenting with AIs to help customers faster. The proliferation of simple to start, free to use, and easy to deploy AI platforms, such as DialogFlow, Flow.ai, engati.com, etc. means this could become an easy game for everyone. Access Bank has Tamara, expect other big players to go live with an AI system before the middle of the year. In fact, if you are a bank or Fintech but don’t have an AI system by December 2018, you are probably not in the game.

Fraudsters count on banks and FinTechs not talking. It’s killing digital payments!

Electronic fraud is a significant reason why many Africans especially Nigerians, including highly educated middle-class, don’t want to do transactions online or use digital products. While a lot is being done with efforts such as Two Factor Authentication, customer opt-ins, etc., frauds still go on because banks and payment providers don’t share information with each other.
Fraudsters are still having a field day because of one thing – evil thrives in darkness.
Recently one of my friends running a payment company called to find out what we could do to some people who did fraud on his platform. As a matter of practicality, I told him nothing.
Think about it, what if he went to the police? Unless the fraudsters were so brazenly sloppy, the Police probably can’t investigate to catch them. He will spend the next few months going back and forth like a poorly installed pendulum, some random arrests could be made, but in the end, just like others, nothing would happen.
So, he did what every payment company or bank has been doing since – improved his systems, licked his wounds clean and moved on with life. I’m dead sure he’s silently cursing them under his breath.
But my gut feelings told me these bad guys didn’t just start with him – they have been on this less than illusory career for long. And that is the crux of the matter.
In South Africa, the banks, payment providers, and just everyone came around to form the SAFPS (Southern African Fraud Prevention Service). If you did a bad thing and your name strolls into their list, trust me, your transactions will continue to fail, but you will know why.
International internet service providers also use large crowd-sourced databases of spammers (SPAMHAUS) where source IP addresses and domain names of spammers are logged. If you spam and your name goes there, your emails will never be delivered again (to those who use the database for filtering spams). Major companies in Nigeria, including almost all banks, use SPAMHAUS to protect their email infrastructure.
So why don’t we have the same thing in Nigeria? I am very sure if my friend had a service he could check transactions against, the boys who scalped him may have been stopped from getting their loot. And let’s say he was their first port of call, if he reports them, they won’t be able to hurt anyone again.
The Central Bank of Nigeria (CBN) and Nigeria Electronic Fraud Forum (NeFF) did the right thing recently when the CBN watchlist was inaugurated. My banks have been sending me warning messages not to misbehave because if my name should enter that list, my own don do.
This list is limited to only banks and BVNs alone. However, we know that fraud surface area covers extend to emails, phones (those spammy BVN update alerts), IP addresses, etc. Another challenge is that many frauds happen on platforms beyond banks. For example, fraudsters routinely log into wallet systems to defraud hapless customers.
A centralized global repository of fraud information, accessible and non-partisan would go a long way to instill confidence, and just allow everyone to snore longer at night. The cost of transaction also goes down as cost attributable to fraud losses would not be overlaid on transaction fees anymore. However, without this repository and other means of squelching fraud, innovations from smart Fintechs may never reach that critical level as payers will always be frightened to go online.
If they could pull this off in South Africa, why not Nigeria? It would be to everyone’s benefit to collaborate and crowdsource information.
Nevertheless, crowdsourced fraud information comes with risks as well. What do I do if a payment provider maliciously put my name on that list and my transactions get flagged? What if someone takes them to court and asks for $1B damages for failed transactions?
A shared repository of fraud information doesn’t remove the requirements for proper risk management – which much FinTechs lack. I mean, risk management is as boring as hell, no place in the awesome sexiness of a startup. True? False! Adhering to regulations, PCI-DSS, ensuring that changes follow maker/checker processes, logging everything that moves, encryption, hashing before and after changes, etc. guarantees your neurons are used for product development, not recovery efforts.
You can’t underestimate the need for testing. Quality assurance is another major area of lack for Fintechs and this is probably responsible for 70% of the holes that the fraud lizards crawl through. Beyond normal happy path, regression, a double-blind ethical hacking can pinpoint gaps that need plugging.
Beyond all these, collaboration and information sharing will go a long way to keep the bad boys at bay; Christmas is around the corner, and everyone wants to hammer.