10 Predictions for Digital Payments in 2020

2019 was an interesting year for payments globally, and our dear Nigeria wasn’t left out of the parte. But 2020 would be even much more exciting as many of the payments food that got on the fire last year would be served piping hot at the start of the new decade. 2020 would be lit!

As usual, I would be trying out my hands in seeing the future even if I desperately need a pair of glasses to see the tip of my pointy nose in the real world.

So, here’s the third annual prediction of the payments ecosystem in Nigeria. My predictions are always on point: most of them would never happen, and I’m no better than a new age Babalawo. But then who cares?

Let’s dive right in!

#1 Despite CBN’s push, commercial banks won’t crack retail credit

If you didn’t skip Economics 101, you would know that retail credit drives consumption within an economy. Our Nigerian bankers know as well, but maybe they just don’t give two flying horse legs. The CBN has been pushing them with stringent regulatory measures but you can’t give what you don’t have. Our bankers are mostly of the Shashe type and there isn’t a shred of retail DNA in their body. Come December 2020, the drive for retail credit would only have been marginal with banks turning their backside to collect the cane that the CBN would be using to whoop them for not expanding credits

#2 Account-based payments explode. Rapidly overtakes card payments online

Card payments suck in Nigeria, and it isn’t a secret and using accounts to make payments for services have been the mainstay of Instagram and Whatsapp commerce in Nigeria for almost 5 years. But automating and wrapping this around with some beautiful APIs would go mainstream this year. It would touch at least 50% of all card payments. How we will confirm if this prediction is accurate or not is anyone’s guess.

#3 MTN gets a PSB license. Trouble ensures for bankers

MTN has been dancing around financial services for as long as chicken lacked teeth. Last year they got the super agents license and they are already doing something with it but it seems their PSB license application has more dust on it than all the sands at Eleko Beach. But give it to MTN, they don’t give up easily, so expect that somewhere and somehow, they would meet the requirements and get their PSB license. Then trouble ensures for all bankers.

#4 Monthly interbank transfer hits 300m/month and it would be fueled by cheap low-value transfers

Last year, I predicted that interbank pricing would crash; the CBN didn’t disappoint. Now that you can now do transfers as low as N10 a pop, start seeing crazy emergent behavior where it’s now way cheaper to use your app or USSD to send N250 for bread and moin-moin than taking Keke Marwa to the nearest ATM. 

#5 Opay will be one of the top ten banks in Nigeria

Everyone seems to be screaming about how the Chinese African juggernaut has ridden roughshod over GoKada and Max.NG. What they haven’t paid attention to has been the massive growth of the payment infrastructure backing it. In 2017, the first thing Opay did was buy the derelict Paycom mobile money which has now grown from nothing to becoming the seventh-largest player on the interbank market. In 2020, Opay will push massive retail credit, offer better rates for investments, and their size means money stays within their ecosystem than move out. Expect them to get a seat at the Banker’s Committee soon. And if they ain’t invited, they would buy one of the commercial banks.

#6 CBN kickstarts Open Banking

APIs rule the world and the last walls erected by banks against the onslaught customers integrating their bank services into other apps are crashing down with open banking APIs. Nigeria has been slugging it since 2017 but this year, CBN will back it with a directive and possibly adopt the standards being done by Open Banking Nigeria (disclosure, I’m a trustee at Open Banking so this is as much as a prayer and as a prediction)

#7 Agency banking becomes successful as the number of agents hits 600K

My good friends at SANEF had an amazing 2019; they did multiples of what they started the year with. The growth of adoption would see agency banking exploding to over a million agent touchpoints. The vast agent banking network would drive the emergence of new payment products and business models from fintechs. But but but, don’t dance too fast, this would be dominated by MTN as they are pushing more infrastructure and agent recruitment spend that all other super agents, combined. Those guys don’t play around!

#8 A heavy hitter launches a digital bank, eclipses all the struggling existing small players

Many players have tried to crack the digital bank nuts, but it has been mostly eggs thrown at walls just to pull it down. If you call yourself a digital bank in Nigeria today, you are probably too small to be just a little over insignificant. But come this year, someone (probably not a Nigerian entity) puts money down to end this argument and launches the Monzo of Nigeria. But it wouldn’t be any of the players we have now.

#9 A prominent international player buys a major fintech (think Flutterwave, Paystack and not Interswitch)

Visa just plopped $200m to get 20% of Interswitch but doesn’t own it and would have to share the crumbs and strategies with other institutional investors. This year, however, a big hitter would come for any of Flutterwave, Paystack, or even some of the lesser-known but kicking-it fintechs.

#10 Whatsapp decides to launch the next payment play in Nigeria using Facebook Pay, trouble starts for all fintechs

Whatsapp would land forcefully in Nigeria as it’s first foray to own payments within the African ecosystem. After all, if the only massive growth potential left in the world is in the SSA, why not start from the palace of the king of Africa?

#11 The one prediction 100% to come true

Most of these predictions are at best an educated guess at what could happen, which isn’t better than a bunch of bananas trying to eat a monkey.

Uber killed Lagos Yellow Cabs. GoKada may kill Okadas

Uber killed Lagos Yellow Cabs. GoKada may kill Okadas

Uber came to Lagos around 2014 and went straight for the middle-class crowd albeit, that market wasn’t fat enough. They soon found out that any businesses targeting recherché segments in Nigeria never last long. Uber pivoted as the recession gradually wore off as ride-hailing became the go-to for almost every middle-classer.

It didn’t take too long before a pricing war ensured. Boy oh boy, it was bloody! By the time the smoke cleared, it was you and your cousins, that had the last laugh. Go on soun!

Baba Simbiat, the yellow cab driver was the collateral damage.

As expected, ride-hailing became so successful in Lagos that it killed Yellow cabs in high-brow areas. After all, only the well-to-do were taking yellow cabs before, so they all just ditched loyalty for comfort and value. Or why would you prefer to stand in the sun to roast or in the rain to take a public bath when you can get Uber at your doorstep with just an app? With a zero-brain-needed simple app, you request your ride and a (sometimes) decent man or pretty lady (on your lucky day) pulls over in an air-conditioned Toyota Corolla after some 10 – 15 minutes. How easier and fulfilling could commuting be?

To make matters worse for Baba Simbiat, Uber charges 33% less and ensures that you get as comfortable as you could be because the driver knows how much a five-star rating on his feedback dashboard could do for him. Baba Simbiat doesn’t give two flying horse legs. Woe betide you if you are deemed to be dressed indecently, Baba will remind you that your mom failed parenting 101.

Putting that into perspective, you pay N1,000 as the Uber fare for a 9 km distance, but Baba Simbiat will charge your sorry ass nothing less than N1,500 for the same journey in his rickety cab. How cruel! It’s like being asked to choose between Shawarma and Agege bread.

Funnily enough, Uber was not the first guy on the block to try out technology on transportation, but they seem to have done their homework well to have their model scale. The first shot at the use of technology for transportation in Lagos dates back to 2009 when the “Red Cab” was launched. Unfortunately, Citrans Global Limited, operators of the “Red Cab” failed to leverage on its first-mover advantage.

Since Uber’s entrance into the Nigerian market, a flurry of other ride-hailing platforms has emerged, some of which include; Taxify, NaijaTaxi, CabMan, PamDrive, SmartCabs, Holy Cabs, Oga Taxi, GoMyWay, Alakowe, Smart Cab, Jekalo, Ridebliss amongst others.

But all that is history for those that care to know…

But then. traffic in Lagos has become so bad that a baby born at the start of one in the morning is old enough to enter JS 1 before it clears. Consequently, the utility of Uber is trending towards zero on bad days.

We are always in a hurry to get to our destinations and Okada is the next best thing. But then some of us can’t be found dead, alive, or even comatose at the back of an Okada and it’s not because of feeling fly; A trip to Igbobi will convince you. Nevertheless, Gokada and Max.ng have brought the Uber model to Okada business in Lagos.

The Gokada way makes a whole lot of sense if you don’t want to spend the rest of your eternity growing old inside the toxic Lagos traffic. And they are getting cheap enough to make a small dent on the regular Okada business; probably in the same high-brow areas.

Fortunately for the ingenuity of Chinedu Azodoh and Adetayo Bamiduro of Max.ng and Deji Oduntan of Gokada, Akinwunmi Ambode led administration has banned the movement of all 100 cc motorbikes which are mainly driven by the regular “Okada” riders, hence giving room for them to scale with their 200 cc motorbikes. So, asides from getting you quickly to my desired destination, these guys also ensure that you don’t go home with a new set of rashes and infections anytime you use their helmet. That makes you more comfortable to get the next ride and beat traffic with class, wearing a fine green helmet.

Well, the jury is still out if they would be successful but trust me, the demand far outstrips the supply. If this can remain for the next 5 years, then we’ll all have to trust the “Invisible” to do its thing and wipe out all the Okadas from the street of Lagos

Now back to the Yellow Cabs. They have virtually disappeared from Lekki, Ikoyi, Victoria Island, and Ikeja areas, and I bet you, in 5 years, they could be 100% gone. Why? Because they would never be cheap enough to become a replacement for buses and never convenient enough to match Uber and Bolt.

That’s checkmate for Baba, he had better start thinking of how best he could make money off his car. Well, maybe he’ll run to Ibadan and repaint his vehicle, but I heard Taxify is doing stuff there already.

The Myth Around Literacy and Financial Inclusion

According to EFInA (Enhancing Financial Innovation and Access), Financial Inclusion is “the provision of a broad range of high-quality financial products, such as savings, credit, insurance, payments, and pensions, which are relevant, appropriate and affordable for the entire adult population, especially the low-income segment” (EFInA, n.d., p1). It requires that financial services (bank accounts, credit, insurance, remunerative savings, and payments and remittance systems) be available and accessible to the underbanked and unbanked.

The Global Findex database showed that as of 2017, there were about 1.7 billion unbanked adults worldwide (Asli et al., 2017). The database also revealed that nearly 50% of these people lived in Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan (Asli, et al., 2017) as shown in figure 1 below.

Figure 1: Adults without a bank account in 2017
Source: Global Findex database
Note: Data not displayed for economies where the share of adults without an account is 5% or less.
Reproduced under the Creative Commons Attribution license

The map shows that Financial Exclusion is mainly confined to the developing world. Figure 2 below shows that 4% of the world’s unbanked adults live in Nigeria. Between 40–64% of adult Nigerians are excluded from any form of financial services, and ownership of Mobile Money accounts in Nigeria stayed at between 0% and 9% between 2014 and 2017 (Global Findex Database, 2017).

Figure 2: Distribution of Adults without a bank account in 2017
Source: Global Findex database
Reproduced under the Creative Commons Attribution license

A recent report dubbed Nigeria “the poverty capital of the world” (Kazim, 2018) and the World Bank’s 2018 atlas of development goals showed that Nigeria had 86.9 million people living in extreme poverty (The World Bank Group, 2018). Compared to the second runner up, the Democratic Republic of Congo at 60.9 million people, that is saying something. One just can’t help wondering if our leaders care even just a tiny bit that Nigeria has overtaken India (with a population seven times that of Nigeria) as the country with the most significant number of people living below $1.90 a day (World Poverty Clock, 2019). Well, that’s a rant for another day.

Figure 3: Top 10 African countries with extreme poverty (June 2018)
Source: The World Bank Group SDG Atlas 2018
Reproduced under the World Bank’s Open Data Initiative

Financial illiteracy has been blamed for the statistics in Nigeria. It is argued that the main reasons for financial exclusion in Nigeria are poverty and illiteracy (Martin, 2008). As of 2015, the adult (15 years and over) literacy rate for Nigeria was 59.6% (Knoema Database, 2015). It is the popular belief that most financially illiterate Nigerians are the uneducated and the under-educated. Illiteracy has been linked, consciously or unconsciously, to financial illiteracy. This conception is even somewhat backed by research and statistics. But, is this really the case? Is it true that the illiterate shy away from financial instruments and services mainly because they are unable to grasp the basic concepts of finance? Is this really the full picture?

Financial literacy can be defined as the ability to identify, acquire and utilize financial information and services independently. It is demonstrated by the ability to display the basic skills needed to function in the present economy. These basic skills include numeracy, problem-solving and general prose literacy (Robson, 2012), as well as the ability to figure out abstract things. The interesting thing is that the very same basic skills are required to get a grasp of mobile smartphone technology as well. In fact, it can be argued that mobile telephone technologies are much more complex than financial technologies. This, however, hasn’t stopped the developing world from taking up mobile technology. Sub-Saharan Africa is the fastest-growing mobile region in the world (Damian, 2018) with over 400 million mobile subscribers and an overall subscriber penetration rate of 44% (GSMA, 2018). About 250 million of these mobile subscribers own a smartphone (Damian, 2018) and this figure is expected to grow to 690 million by 2025 (GSMA, 2018). And believe me, not all those 690 million smartphone owners will be university graduates. Just ask the Bodaboda driver in Uganda or Bàba Làsìsì who sells beef in Sábó market.

Figure 4: Mobile subscription and penetration in Nigeria and Africa
Source: Jumia Mobile Report: Nigeria 2018

The big question now is: if digital inclusion is exploding across the continent, why then isn’t the same true for financial inclusion? When mobile phones first hit the scene in 1983 with the Motorola DynaTAC 800x, they seemed so advanced and brain-wracking, and they came with fat user manuals. The Motorola DynaTAC 800x cost almost $4,000, was about a foot long, and had a battery life of a half hour. IBM’s Simon was probably the world’s first commercially available smartphone. It cost about $1, 099 and was equipped with a calendar, address book, clock, notepad, PDA, email service, fax service, a QWERTY keyboard, and a touchscreen. In the 26 years since Simon’s debut, smartphones have come a long way. They have become more affordable and pretty easy to use. In order to stay competitive, phone makers have had to “dumb down” the previously complex technologies that run these devices by hiding these technologies behind easy to use interfaces. We went from having to tap like a million times just to get to the figure 9 to QWERTY phone pads with emojis. Even my three-year-old niece can pick out the camera and YouTube icons in a heartbeat and knows to swipe to unlock her mum’s phone. Now, Bàba Làsìsì, who didn’t go beyond primary 6 and who can’t speak a lick of English, has WhatsApp on his phone and can torment all his friends and kids with random broadcast messages that threaten doom and damnation if you don’t forward them to 20 people. He didn’t need a degree or the ability to speak Queen’s English to be able to take selfies on his phone or to send a message to Mama Put to let her know that her cuts of meat are ready. The figure below shows that a larger percentage of Nigerians can carry out several functions on a smartphone than are able to perform financial transactions.

Figure 5: Phone user capability in Nigeria in 2017
Source: FII Nigeria 2017 Wave 5 Report

Why have people taken to mobile technology in a way that has seemed impossible with financial services and products? The truth is that people simply developed functional literacy around mobile phones — how to identify numbers, key in airtime tokens, read balances, etc. It helped that the mobile phone developers made the technology accessible and within reach of everyone, educated or not. The user interfaces on phones are very intuitive and make navigating the otherwise overwhelming world of technology pretty straight forward. It is easier for Bàba Làsìsì to recognize the phonebook icon and call button on his phone than for him to wrap his head around the notion of a revolving line of credit.

What then is this telling us about the so-called illiterate Nigerian? Illiteracy doesn’t necessarily mean that people are dumb or have low IQ. Illiteracy is mostly a function of access, or a lack of it, to formal education. Illiteracy cannot take all the blame for financial illiteracy and financial exclusion. In fact, a survey carried out amongst students from a large metropolitan university in South African revealed that 17% of the respondents were financially illiterate, and 68% moderately financially illiterate (Shambare & Rugimbana, 2012). This shows that education does not necessarily imply financial literacy and that even the educated still struggle with some aspects of their finances.

The world’s poor and un(der)educated don’t need to go to school or have a fancy degree to understand banking. The banks need to borrow a leaf out of Apple and Samsung’s book and present financial services and products in such a way that they can be understood using functional literacy. If undergrads, who are technically considered as literate if they could get to that level of education, don’t understand the concepts of compound interest or have any idea what a credit history is, how then is the man on the streets expected to do that? these banking concepts need to be simplified and made as easy to grasp as tapping an icon on a phone screen. If using an App required having to type in some code in C++, smartphones would have died out eons ago.

The simple truth is this: having a bank account should be as simple as using a mobile phone; having insurance should be as simple as an understanding risk; services should be cheap enough to be within the grasps of the poor — the poor are very sensitive to pricing. In my opinion, banking for the poor should be free, and the banks should figure out how to make money off their larger customer base; understanding how your savings are performing should be as easy as saying “Ok Google.”

I’ve been blogging for 18 years; Here are a few things I discovered

I started blogging at dejiolowe.com in April 2001, 2 years after blog became a noun and a verb. I didn’t even know it was called blogging; I just wanted to be the cool dude. I mean, companies didn’t even have websites in 2001 abosi abosi a recent graduate?

Since that time, over 100 million Nigerians have been born, 160 million + phone lines have been sold, and banks have reduced from 89 to 21 + Five.

It has been a fun and fulfilling ride. Done a few tech changes since I went live in April 2001 but dumb me lost all my postings between April 2001 and July 2005. Very sad but I’m probably also grateful as most of what I wrote before they weren’t better than chicken shit.

I learned a few things

  1. Writing is hard; so hard that I know only psychopaths enjoy doing it. Procrastination and writer’s block are the biggest enemies
  2. Only a few bloggers will get to super-stardom and nobody really cares about your writing anyway. But if you are driven by passion instead of applause, Hallelujah!
  3. The traffic doesn’t come unless you are hosting that sex video of Kim Kardashian
  4. Consistency is key
  5. If you don’t love blogging, you can still start. Nobody would beat you up if you fail at it.
  6. My grammar improved significantly over the years. When I look at some of the sloppy writing I did, I cringe so badly my teeth rattle
  7. I managed to stay out of trouble by focusing on the few things I love to write about
  8. I finally discovered that I really do enjoy writing even if it’s a difficult thing. Does that make me a psychopath?

What do I love to write about?

Science fiction, personal development, payments, and technology. At one time I posted a few jokes, but they were just too crummy for me.

Greatest Joys

  1. Someone used my article as a reference for his Masters abroad. It was gratifying
  2. I get the most traffic for the Nigerian constitution as I have managed to collate all of them

My top 5 favorite articles

  1. In 100 years, 9 women will deliver a child in a month
  2. The end is nigh. artificial intelligence
  3. Certifications broke your heart
  4. Ladies, please stand up
  5. 10 predictions for digital payments in 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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?