Why QR code payment would never succeed in Africa

QR code payments, hailed for simplicity, might thrive in other countries but struggle in Africa due to factors like sparse smartphone ownership, poor network infrastructure, and usability issues in payment apps.

Paying with QR code is so cool. All you need to do is bring out your smartphone, take a snapshot, and voila, payment is made. The simplicity and versatility are simply unparalleled. QR code payments have been adapted from in-store shopping; to online payments; to even paying for cable subscription on TV.

As much as you would love QR code, it’s not really a global phenomenon. While QR code is in use almost everywhere in the world, it’s more prevalent in China. It’s so popular in China that is regarded as a currency — it’s practically the only way to pay for anything. This is even more evident in that kids as young as four years may never have seen cash. Remember, if you carry cash around in China, people will probably think you have lost your mind.

QR, which means Quick Response, code has a fascinating background. It was invented by a Japanese company called Denso Wave in 1994 as a means of tracking vehicles during manufacturing. Just imagine robots bringing out their smartphones to snap pictures of cars. That may not have been how it worked, but you get the drift. After a while, people figured that if QR codes could be used to identify car parts then it could also be used to identify things to be paid for. Before long, it was adapted to various situations. Considering that QR code is similar to a fancy barcode, it could now be put or printed on practically any surface with a display.

However, Tencent popularized the use of QR code for payments when it started embedding it into its WeChat platform. The accessibility and ease of use made for a viral adoption and the rest, as they say, is history.

So, if QR code is versatile, cheap, and cheerful, why hasn’t it been used to transform payments in Africa? I guess it’s easier said than done.

Seeing how successful QR code has been in Asia, many attempts have been made to bring this magic to Africa. But practically each of these has failed woefully. I recall a meeting I had with one of the global payments giants in Tanzania in 2016; they wanted to use QR code to make payments in the country but failed to read the tea leaves; the Telco they were pitching put them on the next plane out of Darussalam.

It’s not rocket science to figure out why QR codes schemes never work in Africa. Some are obvious while others require seeing beyond technology into the realities of the African space.

The lack of network effect is one of the major killers of payment schemes in Africa, QR code included. Quite a number of supposedly smart fintechs naively believe their innovative products can be scaled without leveraging on others; instead of establishing a common standard, they go at it alone. And usually, watch the product die alone as well. Companies like Tencent and Alibaba who can define new ecosystems are a rarity. Majority of successful companies rely on common standards and collaborate actively with others to thrive. By the way, there is now an EMV standard for QR code, it’s too little too late.

While the sale and adoption of smartphones have been impressive for years, the reality is that Africa is still an impoverished continent where 41% of us live below the poverty line. Being poor means only 33% of Africans can afford a smartphone even if they barely made it through getting a feature phone. QR code payments depend 100% on smartphones, and where the majority can’t afford smartphones, the chance of QR scaling is zero.

The beauty and elegance of QR code payments come alive when you use it, but needs a working Internet. Unfortunately, telecoms services in Africa are shitty because of many reasons; poor investment, dilapidated infrastructure, fibre cables getting sabotaged, sometimes thieves making away with batteries and other telecoms equipment. With a patchy network, payments get stalled, and after a few failed attempts that must have taken many minutes into completing a transaction, little wonder QR codes get abandoned

And even for the few that have smartphones, they hardly leave the mobile data on. Also, though most Africans get their internet from their mobile phones, data is still costly in most parts of the continent. Consequently, savvy users turn off their data; the chore of turning it on for just payment is significant friction that has made QR code payments not habit-forming.

Lastly, payments apps in Africa have poor usability, which doesn’t exclude even the largest pan-African banks. In fact, you could almost say that app usability is inversely proportional to the size of the bank; the smaller fintechs have snazzier designs and more responsive interfaces. Poor customer experience means it takes just a little too long to bring out a smartphone, unlock it, spend minute logging in, finding the QR menu, and getting payments done. Imagine a scenario at a retail checkout where a paying customer is spending minutes fumbling with her phone when cash and cards are faster. Here comes the death of QR.

While QR has stumbled across Sub-Saharan Africa, other payment methods, which are aware of the African realities, such as USSD and STK, have made significant progress. M-Pesa processes billions of transactions each year over STK. 35% of the over 700 million interbank transfers in Nigeria in 2018 were made on USSD.

Would QR code ever catch on in Africa as the infrastructure gets better and smartphones cheaper? Maybe. Maybe not. But for the time being, it has been certified dead on arrival, needing no post-mortem inquiry


Originally written for Trium Networks in August 2019

10 predictions for digital payments in 2019

2018 was an exciting year for payments in Nigeria. Tons of cash came in as international investments; interbank transfer crossed 700 million transactions, even mCash had a little showing. Of course, the bitcoin bubble made a loud burst with many licking their wounds.

As usual, the following are my 10 predictions for 2019. They are mostly influenced by my understanding of the industry, discussion with various stakeholders, and my penchant for foolery. While these 10 predictions could be a guide for you, rely on them at your own risk.

#1 Interbank transfers overtake ATM cash transactions
Come April 2019, for the first time ever and every month forever after, Nigerians will do more interbank transfers (using USSD, mobile, and online banking) than they collect money from ATM machines. Interbank has seen a steady 100% annual growth over the last few years and is poised to eclipse other payment methods as more bank customers gravitate towards USSD or can afford smartphones.

#2 Payment Service Banking flops
The euphoria around Payment Service Banks (PSB) is unfounded as it is more about financial inclusion than fancy mobile or digital banking. Nevertheless, the poison pill of 22% CRR and 75% deposit with CBN as Treasury Bills is marking this as dead-on-departure. While a lot have applied, only a few will launch. MTN will find that it’s a different kettle of fish and would struggle significantly.

#3 SANEF becomes a surprising success
Shared Agency Network Expansion Facility is a massive N32B undertaking by banks and NIBSS to haul in 30 million financially excluded Nigerians into the financial ecosystem. While it has been on for months with little to show apart from daily adverts by NIBSS, there appear to be unseen moves to make it a success. For example, the adoption of a common API standard for account opening would help the super agents get to the market faster. The appointment of Ronke Kuye, a veteran of payments and a co-founder of CeBIH, to run SANEF is a significant step in the right direction.

#4 A massive data breach or fraud hits some fintechs
Some months ago, someone found exposed data about Arik customers which included card details, phones, and emails. This discovery underscores how pervasive the security lapses have been for technology companies worldwide. When you hear about likes of Google, Facebook, and Yahoo having breaches, you know it’s a matter of time that a Nigerian bank, a fintech, or government agency is walloped. This time around, it would be a hit so hard they cannot sweep the stories under the carpet. By the way, some of these frauds would be done by internal teams.

#5 CBN clamps down on errant fintechs
After the embarrassing frauds and data breaches, CBN will go into a knee-jerk reaction and go after banks and/or fintechs who do not have licenses. A lot of apps will disappear with many investors dollars following the pipe into the drain.

#6 Interbank transfer becomes N20
CBN will update its rules to force banks to reduce their interbank transfer payments to N20 a pop. Bill payments and others will not change though.

#7 Micropayments become free
Part of the CBN rule would say that transfers below N1,000 should not be charged subject to a maximum of N2,000 per day to engender financial inclusion and cashless payments. Customers will rejoice, and I will throw a party (just make sure you RSVP). Before you think I am mad, just remember that CBN made ATM withdrawal free in 2013 and only put a cap of 3 free transactions when banks went begging with their grandmothers. With the cost of interbank transfer down to N20 or even zero for transactions of N1,000 and below, micropayments will explode. Now you can pay for Agege bread with N50, and you won’t get charged.

#8 International players go big
WhatsApp finally figures out how to connect your bank account (for some banks) to your app so you can now transfer funds instantly to anyone. And guess what, they will do it so well and so seamlessly that you wonder if our banks have been playing.

#9 CBN does an about-turn on the new licensing regime
The Central Bank of Nigeria recently threw some gasoline into the fintech fire when it proposed to create 3 licensing bands of up to N5B capital requirements. Since then, everyone has been snipping at CBN’s heels.

#10 Someone hacks AI for banking
A smart bank finally figures out what to do with the mess that WhatsApp banking. Instead of the rubbish flow, you will now be able to chat using natural language. I mean, if you can talk to Alexa in Ijesha accent with all the glory of “H factor” and it recognizes your voice, why can’t you chat with your bank WhatsApp and say “transfer N15,000 to Silifa” and it gets done?

Wondering what happened the previous years and the predictions? Read about my takes for 2018.

Mobile Money in Nigeria: Operators, Opportunities and Trends

Recently I started seeing a spike in the number of inquiries made by friends, fintechs, and random other people about Mobile Money in Nigeria. And it’s not because they are suddenly having altruistic ideas for financial inclusion. Something must be cooking!

Let’s get the basics right
Mobile money is a form of banking where your account number is your mobile number. It’s as simple as that. Any other definition is an oversabi.
After the successful debut of mPesa in Kenya, many countries tried to launch their copycat mobile money system.

Unfortunately, it has been a mostly miserable failure. Some stats said less than 3% of all mobile money implementation has been successful. In Nigeria, the number is worse: 0%.

At the start of the mobile money madness, CBN gave out 23 licenses, 10 of which were by banks.

After a flurry of activities, things chilled. Banks subsequently developed acute amnesia about their licenses went back to their bread and butter: Commercial Banking.

Why and how mobile money failed will always be contentious. I have written about it, others have different opinions. The one thing we ain’t arguing about though is the fact that mobile money failed to hit the sweet spot.

New interests in Mobile Money
The emergence of fintechs has thrown open new possibilities of what can be done with moribund mobile money licenses. Most fintechs within the payment space are having a lorry load of challenges connecting to banks.
For example, a common request would be funding of payment transactions from bank accounts for which banks haven’t provided any simple APIs to work with. Those doing savings and personal financial management want to keep money in a legal way and also allow topping off investments from bank accounts. That is another problem.

Just like the way banks repurposed USSD codes meant for mobile money in 2014, fintechs are circling around banks to see how mobile money can be repurposed for better things.
 
Now, the list
Getting the actual list of licensed mobile money operators in Nigeria should be simple, right? Nope! You can’t even find it on CBN website if you search for it but here’s the direct link.
So, I put together the list of those I know to aid anyone.

OperatorOwnerWebsite
*909# Mobile MoneyStanbic IBTC Plchttp://www.stanbicibtc.com/
Access mobile moneyAccess Bank Plchttps://www.accessbankplc.com/
TinggCellulant Limitedhttps://tingg.com.ng/
Diamond mobileDiamond Bank Plchttp://www.diamondbank.com/
EazyMoneyZenith Bankhttp://www.eazymoney.com.ng
Ecobank Mobile MoneyEcobankhttps://ecobank.com/
FETSFunds and Electronics Transfer Solution Limitedhttp://www.mywallet.fets.com.ng
Fidelity Mobile MoneyFidelity Bank Plchttps://www.fidelitybank.ng
FirstMonieFirst Bank Nigeria Plchttp://www.firstbankplc.com/
Fortis Mobile MoneyFortis MFBhttp://www.fortismobilemoney.com/
GTMobileMoneyGTBank Plchttps://www.gtbank.com/
Mimo
*Part of Vanso. Bought over by Interswitch in 2016
Interswitch Limited (formerly mKudi, a subsidiary of Vanso)https://www.mimo.com.ng/
Monitize
*Not operational. Site redirects to Fiserv
Monitizehttp://monitise.com/nigeria
NowNowContec Global Infotech Limitedhttp://nownow.ng/
PagaPagaTech Limitedhttp://www.pagatech.com/
PayAttitudeUnified Payments Services Limitedhttps://payattitude.com/
PIDO
*Bought by Opera from Telnet in 2017
Opera Softwarehttp://www.paycom-ng.com/
PocketMonieTranzact Plchttp://www.pocketmoni.com/
QikQik
*Inactive
Eartholeum Networks Limitedhttp://www.eartholeum.com
ReadyCashParkway Projects Limitedhttp://www.readycash.com.ng/
Sterling mobile moneySterling Bank Plchttps://www.sterlingbankng.com/
Teasy MobileTeasy Mobile Limitedhttp://teasymobile.com
U-Mo
*Shut down. License allegedly returned to CBN
Afripay Limited/United Bank for Africa Plchttp://www.umo.net/
Virtual Terminal NetworkVTNetwork Limitedhttps://www.virtualterminalnetwork.com/
Wari
*Senegalese company. Acquired license in 2016
Warihttps://www.wari.com/
Zoto
*Zoto app shut down
Hedonmarks Management Serviceshttps://zoto.com.ng

 
Other documents
The following are also critical documents for mobile money in Nigeria, especially from the regulatory perspective:

A rant about the evolution of telephony in Nigeria

A long time ago, when chicken had teeth, the whole of Nigeria (not half of it, the whole!) had 400,000 lines for 80 million people. Of course, only the rich had these phones. Everyone went to the business center to make calls and do Yahoo faxes. Or you climb a tree and shout yourself hoarse if you want to talk to someone near.

Then NITEL, the government parastatal, decided to do analog mobile telephones. It cost three arms and ten legs. Only the thieves, the politicians, and cocaine pushers got them. The first time I held an analog Motorola Startac in my hand, I felt like God’s nephew. It was a status symbol for the successful Ibo traders (naught-nine-naught).

Then, the private Telcos brought in their technology. Notwithstanding, Multilink, Intercellular, Starcomms, and others felt telephone was for the rich boys. They cost N150,000 to get one. A few senior executives got these lines to call their girlfriends on the phone (that was before we started calling them side-chicks). The rest of Nigerians were left to shout at each other just to talk.
At this time, just before Abacha bit the apple or kicked the bucket, he handed over GSM licenses to everyone except my uncle. Both Celia Motophone and Mr. Adenuga setup 30,000-line exchanges. Apparently, the target wasn’t the common man. The phone services never saw the light of the day.

Sometimes just after my sister was cleaning the plates used for the 2001 New Year party, the President of the Federal Republic of Nigeria got upset, instructed the technocrat leading the NCC, the nation’s watchdog guarding the national electromagnetic asset, to auction some frequencies for $285M a pop. MTN and Econet Wireless raised Benjamins from everyone and got themselves some licenses. Hey, something is gonna happen?

In August 2001, MTN and Econet Wireless launched their brand new but mightily creaky networks. SIM cards were sold for N20,000 a pop, and you can call a few friends for N50 per minute. Again, only the rich could buy SIMs and phones. Wait, won’t these guys learn some lessons from history?

Luckily, guys at MTN and Econet leased some wisdom and crashed the cost of getting a new SIM. MTN did BOGOF (not what you think it is) and it was buddie buddie time at Econet. At this incredible time, everyone had a phone, but calling was still an unforgivable N50 per minute. Someone discovered flashing, and madness ensues.

Everyone had a phone, the poor people flash the rich to call them back, just like “collect call” in the US. If you don’t know what flashing means, ask your uncle. If you have any, ask your “uncle.”

The whole country begged, rolled on the ground, threatened, even sacrificed goats so that MTN and Econet could charge per second, but they said it was technically impossible; God didn’t like it; heaven will crash; blah; blah and damn blah. After a while, they lost all excuses but N50 per minute calls remained.

Somewhere on the horizon, sometimes in August 2003, a green bull galloped into the Nigerian China shop, and hell was let loose. Glo brought per second call billing and within a few days, MTN and Econet (they changed names more times than I have changed jobs) came out with per second billing as well.
Many Nigerians, including yours sincerely, swore for MTN and Econet (or was it Vmobile?).

For the first time, Nigerians found their voices, and since then, with calls getting cheaper by the day, nobody has had peace. Flashing died a withering slow and agonizing death. Even your Maiguards will call you and stay on the phone for 45 minutes at a time.

Now, it seems the end of the beginning has passed.

You see, the Internet has become so cheap and Whatsapp so pervasive that only psychopaths send SMS and nobody calls again. Everything is now done on Whatsapp. ARPU, the means by which finance guys in telecoms skewer themselves, have been steadily declining over the past five years.

17 years is a short time for what the country has done for telephony. I doff my hat. But will the same happen for power, payments, and financial inclusion?

I hate shopping online. But for a different reason

Just like every other man, shopping in store is the very worst punishment, just next after going to hell. In fact, it can be worse than going to hell if you must do that with a woman. Much worse if you have to do that with your daughter. It’s not hard to figure out: women love good things and must check them out; men want to save money so they need to get out of the store, ASAP!

Would you think shopping online should be a panacea? That would be correct as long as you ain’t a Nigerian. Shopping online in Nigeria is hard as it’s fraught with so many problems not limited to lack of trust (will they chop my money or will the items I ordered be the one that shows up?), delayed delivery (will my emergency items come after a year), or failed payments (damn, did I just get debited and it says transaction failed?).

But then, many times when the items are low risk, or I feel particularly adventurous, I still take the plunge to shop.

Searching for items to buy isn’t even that bad. Search for anything and Jumia or Konga probably have one. It’s when you want to shop that the wahala starts. You will need to create a user profile, add different addresses for delivery, etc. At these moments, I usually give up and say, darn it! Can’t be bothered.

Friction at the point of payment is a big problem for every ecommerce venture. Those who check their analytics know that the cliff is at this junction.
By the way, this isn’t a Nigerian problem but something that is plaguing merchants all over the world. However, with Amazon capturing about 44% of all ecommerce in the US in 2017, it means almost half of all shoppers have keyed in their details on Amazon once and for all and probably now have frictionless shopping. In fact, Amazon patented the 1-click shopping experience.

Different attempts have been made to simplify but this hasn’t helped anyone. So what could be done?

I have an idea but let’s come back to that later.
Years ago, every website needed to implement its own user credentials. This was painful for the websites and even much more arduous for the users. But at the same time, social media was growing like wild vines and even my mother’s grandmother was on it. Then Google and Facebook came up with social login which allows websites to authenticate users with their Google and Facebook ID. Of course, Twitter and LinkedIn did same, but it never had the type of traction that Google and Facebook had.

When your user base is over 2 billion, you are a planet to yourself. Darling, Let’s book a SpaceX ride to Planet Google (SpaceX doesn’t fly to Facebook anymore because of data breach asteroids).

What if a similar concept could be applied to shopping online? You would say that one could login to Jumia and Konga with your Google and Facebook ID but that only works for the authentication. The real pain is having to enter your addresses and card information over and over and over again.

Let’s think local for a moment. Imagine a service which Konga, Jumia, Gloo, Payporte, etc. could integrate but that allows shoppers to keep their profiles, addresses, cards, etc. so that once a customer registers once, the information is available for all ecommerce sites that support it. And supporting it could be as simple as one line of code for popular shopping engines such as Shopify, WordPress, Magento, etc.

It could be designed such that it doesn’t take away from the brand of the ecommerce company (they care about this a lot) but customers will have complete control on what is shared, who it is shared with and see the history of activities.

This would be a 1-click experience for hapless men like me.
Sitting comfortably in my armchair, I think this will significantly remove friction from shopping and should be very advantageous for smaller players who don’t have the clout of Jumia and Konga but unfortunately, experiences a steeper cliff than others.