10 Predictions for Digital Payments in 2021

Now for the fourth year, here are my predictions for digital payments in 2021 with the hope that it offers a better time for everyone than 2020. You probably have heard it a thousand times; 2020 was a shitty year for almost everyone except for technology and especially payments.

Those worst hit by 2020, apart from the folks who lost their lives (may their soul rest in peace even if I don’t believe in the afterlife), are pundits like me whose predictions were thoroughly trashed.

But despite this, we all still look forward to these fintech predictions for 2021; who am I not to serve you a hot dose of fiction wrapped as facts?

Let’s do it!

#1 Visa buys Interswitch for $800m

Earlier last year, before Covid spanked everyone, I laid out an argument that Visa could buy Interswitch. Despite the global pandemic and its attendant economic fallouts in Nigeria, the thought has only become stronger in my head. The reason is that Interswitch has a knack for announcing its massive valuation, just as Naira wants to go bananas. Unlike what everyone believes, Mitchell Elegbe doesn’t own Interswitch; the real owners, knowing that the Switch is hooked to a downward sliding Naira, would be hitching for a payday. Visa, forever married to Nigerian transactions, already owns 20% of the Switch; Naira is now so cheap (if you earn in USD). Plus, the fundamentals of Interswitch are still pretty strong, while not buy it on promo?

#2 Mastercard buys Etranzact

Only a fool would let its most significant competitor decide its fate. If Visa bought Interswitch, and Interswitch runs nearly 100% of Mastercard’s transactions in Nigeria. You can be sure the not-so-foolish humans of Mastercard would probably take their traffic somewhere else. Only Etranzact fits the profile of a replacement due to its basket of licenses.

Disclosure: I own a bunch of Etranzact shares. If this pans out, I’m gonna buy a Maserati.

#3 CBN caves in as MTN gets a PSB license

I made this call last year and I will make it again as part of my predictions for digital payments in 2021. This is a carryover prediction from last year. With Karl Toriola running MTN from March 1, 2021, you can be sure as hell that he will do something as he has a track record of performance, and banking has a track record of minting cash. Marry performance to sashe, and you can be sure as hell that MTN won’t give up until they get this license.

#4 Agent locations surpass 1m

I made the right call last year that agency banking will explode. Despite the Covid pandemic, agency banking grew like wildfire. Opay, which ran into a brick wall with all the other tech services, finally hit paydirt with agency banking doing $1.4b worth of transactions a month. Teamapt is almost pivoting to this as well; fancy fintech be damned. Unofficial numbers of locations hit 530K last year;. At the same time, SANEF seems a bit quiet about a target; I’m sure the market will drag this over to 1m locations before the end of the year.

#5 Interbank transactions cross half a billion a month

I made the call for our Nigerian faster payments to hit 300m per month. I don’t yet know (as of this writing) the number for December, but sweet November saw the industry moving N17t worth of cash over 224m transactions. The pace will continue, and it will cross the 500m transactions per month around August 2021.

#6 Free interbank transfers go mainstream

Kuda made noise about this (and it seems to be working), and Sparkle is now leading the charge. But guess what, a major bank (think Access, GTBank, or Sterling but not UBA) will decide that, hey, let’s blow this sh*t out of the water and make interbank transfers below a certain amount, say N5K, free. Such a move has excellent optics, and most importantly, it’s the singularly free feature nobody can abuse. Think!

#7 Agency banking becomes the last mile for fintechs

Agency banking is messy as hell; you don’t even find them on Twitter or the ‘gram. But who cares? Once the boys of Opay, Capricorn Digital, Teamapt, and others found success, the next is for them to layer a patina of APIs on these connections, and it becomes the real last mile for digital payments. If agents are fully KYCed and have constant location-aware devices, then the physical can meet online for loans, KYC verification-as-a-service, e-commerce deliveries, transfers-to-cash from banks, etc.

#8 Virtual accounts come of age

Some people I know have been cooking virtual accounts for years, but Teamapt, ever the innovation and executioner, quickly brought Providus to the limelight. Now others like Rubies, Zenith, Sterling, Wema, and our Woven + Sparkle are now on the game. Virtual account (vNUBAN) is a little clunky but significantly superior and a more inclusive payment within the Nigerian context than cards. It’s the only payment method that works across all channels. I expect this to blow cards out of the water, although I said the same thing last year, and it didn’t happen.🙈

Disclosure: My company, Trium, owns Woven and a significant investor in Sparkle.

#9 Local investors step to the plate

With practically everyone I know beating themselves up for missing out on the Paystack investment train when it came calling years ago, those with some cash are now seeking out future Shola Akinlades to invests in. The percentage of investment by local investors will grow to be at least 30% this year. But please be warned, dear investor, angel investment is not for the impatient and the weak of heart. Dear founder, not every cash you see is good for your cap table.

Disclosure: I’m a director at Paystack, and nope, my call last year wasn’t a piece of insider information; and thanks, Shola, for making a good example of Nigerians

#10 WhatsApp makes a payment play in Nigeria

With Stripe leading the charge to dip a toe in Nigeria, and it counts Facebook as part of its customers, WhatsApp could expedite its move into payments in Nigeria. All it needs to do is slap a virtual account behind every WhatsApp profile, and the rest is history.

#11 The one prediction 100% to come true

I always say this, and I would say it again: All of these predictions for digital payments in 2021, are at best, educated guesses at what could happen, which isn’t better than a bunch of bananas trying to eat a monkey.

The futility of utility bills for address verifications

I was recently working with a traditional financial service provider to launch a product online. And they insisted on applicants providing utility bills. Then the trouble started! Even though argued strenuously against this, but they also brought valid arguments. So, I had to take a step back to ask; why the hell do we need utility bills to start with?

I’m sure you’ve all experienced this at different times – your bank tells you a sexy story about applying for something, and bam, they hit you with a request for a utility bill. To make it worse, the strident officer across the desk or on the phone doesn’t even know why a utility bill was required.

Before you start cursing at them or berating their bosses, let’s ask – why does anyone need utility bills? Forget about the fact that the officers that ask for these may not know their left hands from their right nostrils; the truth is, there are legal requirements for, not for utility bills, a verifiable address of every customer within the financial services industry.

Thou shalt know your customers

There is an arcane financial rule called Know Your Customer (KYC), which is the same thing your mum does when your sister drags in that funny looking boyfriend of hers. She goes, “Who is your dad? Where’s your family from?”. After taking loans sending her to school, she ain’t gonna risk that for some supposed slimeball.

OK, that’s a little bit over the top.

The rules of financial services require that banks, insurers, brokers, etc., should know their customers well enough. I have previously written a playbook for digital KYC here, so if you like to bore yourself to death, you can read more.

A critical element of KYC is verifying that the customer lives where they say they do. And how do you go about that? Require that they produce a utility bill, issue in their name against the address where they purportedly live.

Like everything Nigerian, we have forgotten the spirit and just tack ourselves to the letter. KYC never require that utility bill must be produced; the utility bill is a means to an end. If you get on the CBN rules for KYC and the SEC rules for the same, there is a gazillion way for a customer to prove the veracity of their address.

What the hell are utility bills?

And what are utility bills to start with? These are receipts from the likes of PHCN, water corporation, etc., that show they deliver some modicum of services to you.

And that’s where all the problems start.

Using utility bills to prove the veracity of addresses in Nigeria is just plain dumb. And there are a gazillion reasons for that:

Most people don’t have utility bills because they don’t even get served any services to start with. Only a few Nigerians have services from recognized billers: Over 100m Nigerians don’t have water delivered to them; 43% of those who have electricity don’t have meters which means no proper bills, And nobody has landlines anymore. After all, NITEL has gone to be with the lord. So, what then do they use?

Many people live in places they don’t have access to the PHCN bills. At best, they know the meter number and use that to buy electricity tokens. As long as the tokens power the meters, who cares if it’s the name of a dog that’s on the utility bill?

Worse still, utility bills can’t be validated, and nobody validates them. Any idiot can just clone a bill, and that’s it. That part is what pains me; why go through the hassles of asking for a utility bill, creating a donnybrook in the process, and you can’t even confirm if that important utility bill is legit or not?

But but but, dearest fintech, before you join me on a foolish quest to bash utility bills, watch your back; you could find out the expensive way when fraud happens on your platform, and the Government asks for your KYC. Kirikiri doesn’t have Gucci uniforms!

How then can one solve the problems of address verifications to meet the requirements of verifiable addresses for customers?

KYC as a service

Over the last few years, a flurry of digital KYC companies, such as VerifyMe and YouVerify, has cropped up in Nigeria. They have pretty solved a few of the problems, but gaps and challenges exist.

First, they are not cheap to start with; the cost ranges from N750 per check and above. Scale that on thousands of customers, and your cost of customer acquisition starts to look like a nightmare. Attempts by a few brave fintechs to have customers to pay for this haven’t gone well. Customers don’t find that cost funny at all!

Secondly, these guys have also not put in the best of names to do the verification for them. I’ve personally seen these guys not able to verify clear addresses that Google, far away in the US, can find with a single click. Addresses that the likes of DHL and UPS can deliver to become impossible unless someone adds “Nearest bus stop or landmark.” Obviously, they use poorly trained officers who can’t find their own names on large billboards.

Thirdly, verifying addresses within gated estates is a challenge. They require that your customers are around or call the gates ahead. And if they can’t get them on the phone (most people don’t pick unknown numbers), then they mark the addresses as unverified, and there goes the N750 verification cost. That’s it!

Lastly, they also save previous addresses, which means even when the addresses ain’t valid anymore, they still validate it, giving those who rely on this feedback a false sense of hope.

Paper OTP as an alternative

Interestingly, while I haven’t tried this directly, I find the methods that Google for Business use for address verification ingenious. They simply post a paper OTP to you, and then if, and a big if, you receive it, you come to enter the code into your app, and we can all rest assured that someone got to your house.

While this sounds nice and interesting, the jury is out on first, the cost-effectiveness of this and the ability to scale it out.

Digital customer onboarding and engagement

A white paper on a modern approach to KYC for financial services in a digital world. Written with Unyime Sarah Tommy and Ayowole Popoola.

Knowing the identity of your counterparty has been fundamental to doing business for as long as time itself. With the nature of interactions and transactions in banking and financial services, it becomes imperative to know more than just the identity. However, determining whom you can and should do business with has a significant cost, time, and resource implications for financial institutions. According to a recent KYC compliance survey, the average annual spend on global KYC is reported as US$48 million, and onboarding times remain lengthy, with banks reporting an average time of 30 days.

Relying on a patchwork of resources may leave potential gaps in coverage where bad players can hide while putting your revenue and reputation at risk from regulators.

Know Your Customer, sometimes referred to as Customer Due Diligence, is meant to verify the identity of customers and assess their suitability to be a customer. While customers universally consider KYC to be burdensome, it is crucial for businesses.

Throughout this document, Know Your Customer and/or Customer Due Diligence will be referred to as KYC.

The three main drivers for KYC are money laundering, tax evasion, and the financing of terrorism.”

Due to these, KYC policies have now evolved into an important tool to combat illegal transactions in national and international finance arenas. KYC allows businesses to protect themselves by ensuring that they are conducting business legally and with legitimate entities. Furthermore, it protects individuals who might otherwise be harmed by financial crime.

How customers have evolved in the digital world

Due to the advent of digital technologies, customers have evolved from interacting with businesses on only traditional channels to digital channels. Customers are now used to convenience in onboarding and transacting with service providers. This change in customer behavior has led to KYC also evolving.

KYC has evolved from customers’ physical verification by reviewing documentary pieces of evidence to validate customers across digital platforms using real-life images, scanned or uploaded identity documents, etc. API services are integrated to validate images, liveliness, and credentials provided by the customer, etc.

You can download to read the rest of the white paper here.

We don’t want to go back to the office again!

We do realize that this statement may be a bit too dramatic but stay with us as we try to explain why we made such an unequivocal statement.

Work-from-home and it’s an almost not-safe-for-work acronym, WFH, is the new normal. WFH has been a great addition to everyone’s vocabularies but the application and implementation of this phrase into our day-to-day has seen varying degrees of either ease or difficulty.

Trium being a cloud-first company, we found it easy to navigate the WFH conundrum. As some point, we started questioning why we had an office in the first space and if we could use the rent to fund some posh party. However, it isn’t all black and white; there were varying shades of silver and grey.

We started with the physical phase of the changes, we decided to optimize the cost that we were incurring as an organization, we engaged with our landlord and facility manager on how to get rebates on facility management fees since we were not using the facilities. We also engaged with our internet service provider and reduced the bandwidth on our internet connectivity since we’ve all gone remote.

Next was the work efficiencies. We reiterated the need to be cyber-security conscious, so we provided additional security layers. We inculcated more work tools in our workflows — Slack, Confluence, Jira, DocuSign (all documents are signed electronically, no exceptions). We encouraged and now fully implement real-time collaboration on documents using Microsoft Office 365. We relied heavily on Zoom and sparingly on Teams — the choice of use was a result of ease and adaptability. It made us; we didn’t make it. We also provided weekly data stipend for every member of the team.

Surprisingly, we found out that we’re still humans. The hard truth is some of us may not need to work while we were remote (like our office assistants) so we made adequate arrangements for them. We continued with our morning standup meetings with the whole team on the status of work, blockers, and overall progress.

Our daily virtual water-cooler; tatafo has its usefulness.

Every evening at 4:45 pm, we dragged our ragged selves to Zoom for a video water-cooler. The rule is that in those golden 15 minutes, we will talk about everything and anything but work. We’ve had conversations that have ranged from treatment of afro hair to growing out a beard/moustache to semi-cooking competitions to spelling bees and word games. We’ve also shared in personal joys, victories and even losses.

This evening events may have proven to be the most strengthening part of our WFH adventure. Let’s explain a bit more. While we were working physically in the office, we worked in an open plan office and shared lunch every day with each other so there were lots of bants, candid conversation, honest and open talks with each other; long story short we created memories. This allowed us better to understand each other, foster a familial, open and honest culture which invariably allowed us better to complement each other while working effectively as a team. These evening sessions, even though they may not compare to these physical interactions, gave us some of it back.

August 15, 2020 is 5 clear months since we went remote and it has individually and as a group shown us how best we worked (having sampled both work options) and taught us a couple of lessons. At this 5 months’ mark review, we can see that:

– Performance on the job has increased as we’ve now harnessed the efficiencies that come with a properly managed remote team.

– Most people detest routine — when the evening meetings started getting boring, we had to switch it up a bit and add things that made it more exciting. We’re now committed to continue doing this to ensure that everyone stays engaged and connected.

– Connection is important and mental health is inviolable. We noticed that the way people feel about each other and themselves has a direct effect on how they work. We’ve included one-on-one sessions with management and have actively encouraged boundaries, personal fun times, and most importantly adequate rest.

– No one is superhuman, whether working from home or physically, mistakes are part of the learning process. Having understandable, albeit unrealistic, expectations because one is working from home does more harm than good. When these mistakes, which are bound to happen, do happen, we acknowledge how they happened and work towards ensuring they don’t happen again.

– Remote hiring is here to stay, and one has to be skilled in this fine art. Before now, we de-emphasized the commute time to the office and remote work requests were denied; now, the ability to work remotely is sacrosanct. We’ve gone through several hiring since March and we learned a lot during that process.

Do we miss the office? Yes and no. For most of us, the flexibility of work, the disappearance of the blues of commuting, and cost savings have made us start asking that question, do we ever want to go back to the office? While for a few of us, the ability to pop our heads into another’s desk/door and crack that joke, give that jab, affirm work done in real-time, share that smile that can only come from an inside joke, eat off another’s plate at lunchtime and share those random but sure to happen vent sessions (blink if you can relate) has sure been missed.

Nonetheless, we know that for the next few months, we will keep working fully remote. A hybrid option may very well be considered in the future. In the spirit of human connection and keeping the vibe alive, we’ve a virtual party planned for the last day of this month. Yes, there will be booze, and no, you aren’t invited!

Simple ways to prevent banks from taking your money

Hardly a day goes by without someone screaming on Twitter about their bank taking their money even while doing little or no transactions. Trust me, Nigerian banks are optimized for money making but hey, who said you can’t beat them at their games?

Here are simple steps you can take to take control of your money and minimize how nicely you get shaved by our Sashe bankers.

Get yourself a savings account because current accounts are for dummies

Banks can charge an account maintenance fee of up to N1 for every N1,000 that danced across your accounts. If you are the type doing well on your Instagram side hustle, banks will quickly strip you bare.

On the flip side, the ordinary savings account with any Nigerian bank is so optimized that it can do practically everything a current account will do save for getting an overdraft and being able to write cheques. Even then, these two features ain’t that important because banks don’t give loans that easy to start with; and nobody writes cheques again.

It really makes no sense to keep a current account except you are some form of dinosaur.

Cancel your debit cards 💳

Yes, you heard me. Debit cards are so yesterday. But hold up, I assume you are a typical Nigerian that has bank accounts with three different banks. So, cancel all your debit cards everywhere save the most reliable of them all (I wish you good luck deciding which that is). This saves you from the bank digging holes every other month to take card maintenance charges. And on top of that, they could charge you for the SMS sent to inform you that they just charged your sorry ass. Savage people!

Interestingly, card maintenance is free for current accounts, but the account maintenance will/could wipe you out.

Cancel your SMS alert

Yes, again, you can cancel your SMS alert. Any banker who said you must have an SMS is either dumb or lying. Either way, they ain’t supposed to be a banker. The Central Bank said if you are the type that hates the ding-dong of SMS notifications, you can cancel it if you have an email alert and sign an indemnity (Section 10.10 of The Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions, January 1, 2020). It’s right there in the regulation but hey, this is Nigeria, who reads when you can spread rumors?

Is there a downside to this? Not that I know of. Are emails very secure? F* nope! But then SMS messages are worse than emails. Why? Because they sit unencrypted and open all the telcos that they passed through. So that fancy OTP of yours is waiting and begging to be read.

One last thing on SMS, beware of banks that send you multiple SMS for a single transaction. The scam works this way; you want to transfer N50,000 to some random dude; you get an SMS for the amount you have sent, and another SMS for the N52.5 transfer charge as well.

Stamp duties

Too bad, nobody can help you out with this; every account gets charged once the transaction is over N10,000. At least, turn the SMS off so that they don’t make potholes in your bank accounts.

Open another savings account

Are you aware that your dead-ass savings account pays about a 3.75% interest rate? Never seen it before, I guess because you rock your account like a Twitter DM. And when banks are now offering 1.8% on fixed deposits, it’s mad not to rock this baby.

By a quirk of Nigerian banking regulation, bankers must give you 30% of the MPR, which is 12.5% as of May 28, 2020. But but but, if you make more than four withdrawals on your savings account within a month, irrespective of your balance, just kiss the interest on it goodbye (Section 1.2 of The Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions, January 1, 2020).

A simple way around it, open another savings account, which your bank would gladly oblige, put your excess funds in there, and spend the tashere in the main one. And don’t let the devil tempt you to go there more four times in a month.

Disclosures 🙊🙊

I still have three current accounts with Access, UBA, and Fidelity banks. I’m nowhere practicing what I just preached. But then I didn’t complain of banks taking charges off me because the money they make gets paid as bonus to my friends, and I force them to take me out for drinks where I ruin them by drinking more than all the charges they have taken from me for the year. Sweet revenge.

I used to be a banker where I made a truckload of cash from these same charges I just complained about for the banks I worked for; they paid my bonuses, and my friends who paid for SMS alerts, dragged me to different clubs to ruin me. Karma goes round.