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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.

I didn't do too bad predicting digital payments for 2018

Last year, I wrote about 10 predictions for digital payments in 2018 (better to read this first). Looking back, I can assure you, my career as a seer hasn’t been as illustrious as I planned it to be. So how bad am I? Let’s take a look at how I scored myself.

Alat gets a (bigger) challenger (Score = 1)
Every bank looked at Alat and moved on. Not a single initiative came out to challenge the dominant digital bank which continues to garner critical acclaims world-wide. Likes of dot.bank and Wallet.ng are snipping at its heels though.

PSD2 instigates Open Banking (Score = 5)
Open Banking is no longer a swear word in the UK, and it has been primarily replaced by enthusiasm. Quite some countries are now on the open API bandwagon. Bahrain is a new country that published specific guidelines. Despite the excitement, the fire is like a table-warmer and not a bonfire.

Maturity comes to Fintech (Score = 8)
The Nigerian fintech ecosystem has grown significantly over the last 12 months. The growth is best represented by about 5 international fintech conferences done in Lagos to showcase opportunities. Additionally, some odd 5 Nigerian fintechs firms got into YC over the year. Likes of Paystack attracted top international investors like Stripe, Visa, and Tencent. Mines.io and Cellulant raised a ton of cash. What else can we ask for?

Smaller Fintechs instigates price war (Score = 0)
No price war happened. Prices are same. Everyone is cranky.

Bitcoins bubble explodes, killing many (Score = 10)
Last year, BTC was dancing around $20K with investors (real and Babalawos) predicting $100K per coin. Of course, the bubble made a loud splat with values dropping 80% over the last 1 year. Many of my friends who were coin fanatics then have lost their voices. Can’t gloat but don’t equate greed with tech

International players come to lunch (Score = 7)
Opera made a serious inroad into Nigeria with the launch of Opera news that now has 28m active users. The company will also start to lend to all my cousins soon. Stripe and Tencent are also putting a tiny toe via Paystack. Please come! We will take care of you.

Android supports pay with Paga (Score = 0)
Nothing happened. Sorry, come back later.

Fraudsters get a beating (Score = 0)
Nothing changed. Stop Fraud Africa floundered and never launched. People are still getting scalped day-in-day-out.

Retail digital lending become prevalent (Score = 7)
Digital lending is on a tear with likes of Mines.io getting $13m to play. But with just 0.77% of all loans going to individuals, the journey is still very far!

AI to the customer service’ rescue (Score = 0)
You would have thought that the opening of Whatsapp APIs for banking would bring decent AIs to help customers? Fat chance. Practically every implementation has been sub-par. Just someone copying and pasting USSD menu into a chat. Disappointing.

I scored a measly 38 out of 100; which is even less impressive when you considered that I marked myself. Next year, take my predictions with a pinch of salt, but then 38% accuracy about the future is better than most prophets can handle. Maybe I am not so bad after all.

Read the original predictions here: https://dejiolowe.com/2017/12/10-predictions-for-digital-payments-in-2018/ and subscribe to my blog to get other posts whenever I can summon enough energy to write them.

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.

Genome on demand

The human genome was cracked some years ago by some mad hat scientists. That adventure took about 10 years although the completed map took another 3 years to show up. Guess what, same hack would take just a week if we are doing it today.

That was in 2000. Using the same extrapolation, your genome could be hacked and analyzed (and probably backed up on a USB drive, Lord helps you if it gets virus infected) in 19 minutes by year 2022 and 2 seconds in 2032.

Actually, those figures are wrong. I think at the rate at which we are going, our genomes could be analyzed online real time in 7 years. And with human models being simulated by some smart folks, vaccine and drug development would leave the realm of the lab into pure algorithms.

Maybe we would finally conquer cancer, engineer immortality, figure out teleportation and finally do away with work. My vacation ends in 24 hours and I wonder why anyone hasn’t figured this out. Sad.

The voodoo of informed predictions

This morning I got a mail from a well-regarded source about the likely outcome of the bi-monthly Monetary Policy Committee (The MPC is a committee of the Central Bank of Nigeria) meeting coming up later in the day. The source argued that the MPR, LR and CRR would probably be left at 7.5%, 30% and 2% respectively. With a caveat that the prediction should be taken with a pinch of salt and she’s not liable for any calamity that hits anyone who uses the prediction to make decisions. Come on! Even Jim Jones was better than this.

By the way, if you don’t know what these acronyms stand for, don’t bother; they mean absolute nothing, especially to the man on the street. They are some of the jargons we bankers put up to feel very self-important.

It would have been a story if the ratios weren’t changed: I can’t remember if any of the predictions ever made by my source came true. But I’m sure if Harold Camping’s rapture hasn’t taken place before the next MPC, my impeccable source would make another prediction and guess what, my own prediction is that she’s going to be wrong, as usual.

The business world is replete with loads of analysts and self-styled experts but empirical evidence has shown we (too bad, seems I’m one of them) are not better than an army of random monkeys hitting away at the keyboards and a chance Shakespeare classic coming out. The publishing editors are thrilled and the monkeys have been given an advance for 4 more classics. You see, if you deal with a very large solution space (another jargon, another narcissistic comment) like I’m working on for my current project, anyone can get lucky.

The real disaster, of course, is confusing luck with expertise.

If you think I’m joking, read about what McKinsey and Company told AT&T in 1982.