The ease and speed of a payment method are directly proportional to its adoption. Although payment with cards has been growing at about 100 per cent CAGR over the last three years, all you need to do is stand behind that smug, self-entitled millennial stamping her feet while waiting for a purchase to finish to know that paying with debit cards at POS terminals would never be mainstream for everyday payments.
The UK was at the same junction a few years ago although using your card for payments was significantly faster. Then things changed when banks allowed regular debit and credit cards to be used to tap-in and out on buses, trains, and trams. Contactless transactions exploded. You only need to see contactless payments in action for you to be smitten.
You will ask yourself just one question: why have we suffered this long?
When properly configured, contactless payments go through in less than 1 second, just the same time it takes to touch the card to the reader, and that’s it.
How do contactless cards work?
Not so simple. On a contactless card, the plastic has a small antenna that allows it to wirelessly transmit payments information from the chip on the card to the card reader. When you touch your card against the reader, they both talk to each other. Contactless can work in both online mode (where transactions are sent to the bank for authorization) and offline mode (where the bank gives some leeway to allow payments to be approved by the chip on the card).
For security reasons, banks, governed by national standards, set certain limits. For example, the bank will determine the number of times you can do touch-and-go before you can use your card for online payments (where you have to input your PIN). Also, there is also a maximum amount you can do at a time. You can read about the limits for different countries here.
Despite the benefits of contactless, this is yet to catch on in Nigeria. Nevertheless, this has not stopped banks from taking the bull by the horn. Over the last three years, Nigerian banks have been giving out contactless cards by default to all customers. Despite the N30,000 limit, but with no places to use them, it has been an exercise in futility.
The challenges to using contactless in Nigeria are not as many as I previously thought though they are not trivial.
There are no playbooks for contactless payments in Nigeria. In other countries, the regulators always specify the rules that govern payments, including contactless. We have a myriad of regulations for payments in Nigeria, but none is looking at how contactless should work.
Risk acceptance in Nigeria is also a challenge. Abroad, banks trust that transactions done in offline mode will always be paid by the customers. And when cards are stolen, the banks will refund the customer the amount the thieves have done for offline payments. In Nigeria, banks don’t trust the customers to pay back, and the customers don’t trust their banks to make good of money stolen when contactless cards are lost. An impasse ensues.
There are hardly any shops in which you can use contactless cards. It’s one thing to have a contactless card; it’s another thing to have places you can use them. The millions of cardholders taking their contactless cards around use them as decorations since they are no places to tap and go. This, however, creates a chicken and egg problem. Apart from card issuance, no other bank is serious with contactless cards, so the market is small, so this makes banks not to invest in contactless reader POS. Why buy POS that nobody would use.
Irrespective of the challenges of contactless cards acceptance and issuance, the immense benefits and its ability to transform payments and make cashless real means it makes sense to pursue its usage. And the pressure on every bank, there are more cardholders than users of USSD and mobile apps.
Product managers can deal with this by getting customers to activate their contactless cards. And they could work this way. Cardholders need to be shown the ATMs, insert their cards, and press in the PIN; an action will be displayed on the screen that will show them a pop-up message from CBN that puts a card on the line in their accounts. Each customer will be responsible for his settings, and if the card gets lost, well, it’s like your wallet getting lost with the cash you just got from the ATM. The benefits are apparent; banks reduce their liability while customers can see what they are comfortable with to get the benefits of faster checkouts.
Banks should have a strategic partnership with high-traffic merchants such as tolls and major supermarkets. These would be anchor merchants that can help drive the adoption of the usage. After all, a picture is worth a thousand words – nothing will convince anyone to adopt contactless faster than seeing it in action. And by the way, the merchants also enjoy contactless as they can handle customers more quickly during peak shopping periods.
With those two things in place, the last logical piece of the tripod legs would be a massive campaign to let customers know about contactless. Nigerians are very aspirational so getting a few A-listers and Nollywood stars to be the face of this would quickly turn tap-and-go into a must do for everyone.
When the ease of payment with cards is not due to an actual counting of dirty Naira notes to make payments, we should be looking at annual transactions at least ten times more than the 2023 POS payments.