10 Predictions for Digital Payments in 2022

It’s 5 years since I’ve been shilling my predictions, and here again, are my top 10 predictions for 2022. Although, if any of them comes through, I owe you a beer.

As always, even though nobody pays attention, these predictions are largely educated guesses being that I have an advantage of seeing a lot from the wobbly perch on which I sit. But then, my candid advice is to take them with a grain of salt.

Now let’s dive into what Oracle has predicted for the coming year.

#1 A global giant comes to play. I will pay you with WhatsApp

Stripe came in 2020 to buy Paystack but not to play. But in 2022, my blurry eyes see a global player coming to play big time. But then why would a global player come? The market is hot as hell; alternative payments methods such as virtual accounts have proven to be very successful; API players like OnePipe and Mono are doing very well and shipping data around like smugglers, and lastly, open banking would go live once the standards are approved by the CBN. There is simply no better time to be here. My bets are on WhatsApp to come back with payments within their chat app. WhatsApp isn’t a stranger to payments; they have started, albeit with limited success, in Brazil and India.

#2 MTN launches PSB. Only a few super agents are left standing. Top 5 banks on notice

I predicted that MTN would get its license and they did. Give me a round of applause! Karl, the CEO of MTN, is a ruthless executioner and following the spanking that banks gave him last year on USSD, he has more than enough incentives to do a good job. And he will; never keep Karl behind your back. MTN would drive its PSB so hard and super agents so amazingly, they would quickly suck the oxygen out of the market. The prediction here is that I expect a rapid decimation of the super agents when MTN’s PSB goes live. I’m super curious about who Karl would anoint as the CEO of the bank though; I smell some ex-orange colored EDs who know all the tricks of the traditional banks and where dead bodies can be buried.

Disclosure: I bought some MTN shares and I’m rooting for them.

#3 Transfers become free. Financial inclusion becomes a reality

I don’t know if this is a prediction or a wish list because even if it doesn’t want to come to pass by itself, I’m going to devote part of my energy to it in 2022 to make it a self-fulfilling prophecy. And the premise is simple – make transfers below a certain amount free for everyone and you have a good chance of bringing financial inclusion to every Nigerian. CBN did this for ATMs and it was a success (bankers hated it though) and they may be tempted to do it next year too. The last time the cost of transfer went down to N10, the market jumped like drops of water inside the hot oil.

#4 Open banking goes live. API players are shaken off the tree

CBN has been cooking this for so long it’s almost burning on the stove. Finally, the standards are approved, released, and banks are mandated to implement them in 10 days 😁. Now, open banking is significantly more comprehensive, faster, and safer than the APIs being sold by my friends. And because only licensed players would be allowed, the market may shake some old API providers out of the market the way mobile internet killed business centers (if you were born after I graduated, please ask your uncle).

Disclosure: I’m a Trustee at Open Banking Nigeria and deeply connected to the regulatory efforts to spin up open APIs in Nigeria.

#5 FX goes the crypto way. P2P FX transactions power investment apps. CBN is upset

CBN is like the financial Thor of Nigeria, its hammer can smash the densest head. It came after crypto earlier in the year, but they survived and went underground where no hammers can touch them. The hammer then came after FX jugglers; just ask what happened to abokifx.com. But we need FX or how do I pay my subscriptions or buy Tesla shares? As the need for FX has refused to go away, some players may borrow a leaf from the p2p play that saved crypto in Nigeria. Could that, in one move, be the end of CBN’s control of retail FX in Nigeria? While some investment apps may have gotten an injunction to prevent CBN from locking their accounts up, trust them to throw a party if p2p can save their business model.

#6 NIN dethrones BVN as the ID of choice. CBN’s fear about data comes true

CBN is super worried about how and what fintechs are doing with BVN; anyone with half a brain would be worried at how easy BVN data can be gotten and misused. So, they got NIBSS to clamp down on BVN; unfortunately, there are no better alternatives for fintechs. Well, NIN came along with fresher data and wider coverage. The only problem is NIN being government property means data security and privacy may be poor. Soon, a major breach happens and DSS is called to fish out fintech founders.

#7 Lending becomes hot. Bigger banks jump in. Bigger banks get shocked.

Nigeria has a N74 trillion credit gap which is flashing eyes at prospective lenders. Even though many lenders have taken bad advantage of borrowers so much that even regulators have to weigh in, the demand for consumer and SME credit continues to surge. At least 5 top 10 banks, being the jealous type, would jump in without looking, but with disastrous consequences. They will fail because their loans would be packed like corporate bank credits.

Disclosure: I’m deeper into lending tech than the Marianna trench. And Sterling (Spectra), Access (QuickBucks), and FCMB (Credit Direct) have been doing consumer credit at scale before my last child was born.

#8 Market goes super-hot. New unicorns are born. Old players die

2021 was a year of growth for the fintech market and the conditions for a hot 2022 have been laid down – #1 the API business model gets proven (Mono and OnePipe raised $19m between themselves); #2 CBN released tons of licenses for new payments providers; #3 virtual account became a prime payments method, and #4 the folks that raised cash must show investors growth. What do you think the torrid combination of this means for next year? The market becomes competitive like crazy; fintechs would use dollars as weapons to snap talents and do marketing; larger and ballsy fintechs may start doing their APIs directly, bypassing Mono and others. When the smoke clears, the battlefield would be full of dead bodies. But I see the new players being victorious and crowned as unicorns. And the older players? Any of them born before 2015 is likely to slink into oblivion.

#9 Visa buys Interswitch

I’m predicting this for the third year in a row; maybe if I say it enough it would happen. Why do I think so? It just makes sense for various reasons; Naira is at all-time cheap and Interswitch fundamentals is anchored on Naira which makes them cheaper and because they are a grown-ass fintech, they can’t enjoy the 20x EBITDA multiple that smaller and younger fintechs use for their valuation. But then, they are a behemoth, they control 90%+ of ISO card traffic in Nigeria. And sweet old Ms. Visa owns 20% of them to start with. Meanwhile, Mastercard continues to kick Visa’s teeth with their Nigerian market dominance and even the previously smacked Verve is having a resurgence. Therefore, it makes sense for Visa to buy the Switch and just make Verve become Verve by Visa (Ve by Vi, how does that even sound?) But the kicker? Some of the long-term investors are itching to return funds to their limited partners so they would be more than happy to sell to Visa and bid goodbye.

#10 Mastercard buys Etranzact

This prediction is tied to number 9 like the way my daughters are tied to my surname. Once Visa buys the Switch, Mastercard would have to find their way out of there faster than a cat would slink off a hot plate. Of the bunch of payments processors hanging around Nigeria, only Etranzact remains a viable option for Mastercard as they have their servers in every place that’s called a bank. Most of the institutional owners would gladly receive a 3x premium.

Wondering what happened the previous years and the predictions? Read about my takes for 2018, 2019, 2020, and 2021.

Disclosure: I own some bits of Etranzact but if the multiple isn’t at least 5x, nobody should talk to me.

Is Financial Inclusion a Myth?

What if Financial Inclusion is a myth that we have created in our jaded view of what we feel is good for the world’s poor but, does not address their needs or that they do not even need? What if the real problem is that the worlds poor don’t trust these help and they see it as a means of control by the government who want information about everyone for taxation and further subjugation?
Financial Inclusion used to be a hot buzz word, and even years after, it’s still hot enough to warm a pot of coffee. Unfortunately, I haven’t been able to understand it from a viable business model.
Nevertheless, from an altruistic angle, it makes sense to me. It is not out of place for the haves to pay for the transactions of the have-nots so they could bring them to modern living. The World Bank says “Financial Inclusion is a key enabler to reducing poverty and boosting prosperity.”
CGAP believes that Financial Inclusion is about migrating the 2 Billion working-age adults that don’t have accounts with licensed financial institutions to the formal economy where, regardless of income levels, they can have access to savings accounts, insurance, and other financial services needed to transform their lives.
But recently even that understanding of mine has been shaken so profoundly I’m asking myself if Financial Inclusion isn’t a scam.
Before you lob a hand grenade at me, hear me out.
I recently had a conversation that underscored this new position of the possibility that Financial Inclusion could be a scam. Someone asked a poignant question in a group chat – do the financially excluded really want to be financially included? If yes, do they want to be financially included in the form that is being shoved down their throats? That question has been nagging me ever since. I took the liberty to ask a few “financially excluded” people around me and their responses were shocking. They didn’t care for digital payments, wallets, bank, Bitcoin, etc. All they want is real hard cash which they can spend and treasure.
Beyond receiving money from the cities, many of their friends in the villages don’t care about money transfers and other fancy digital thingamajigs.
It is possible I’m totally wrong in all these. It is also possible that this could be a beautiful scam that sounds pretty good to our helpful alter egos.
Financial Inclusion has many challenges – education, infrastructure, cost of transactions, KYC. But something that struck me is that when the need hits the sweet spot, some of these things do catch on. For example, despite some bit of literacy requirement, elitism and cost associated with mobile phones, the usage caught on to almost everyone that only those in the deepest rock caves in Nigeria don’t have them. The numbers on NCC website speak for themselves.
As much as the internet is a luxury in Nigeria, almost everyone is on Whatsapp (it cost money to have data), and there are more Facebook active monthly users than active monthly bank accounts.
Do you think Financial Inclusion is a scam?

What’s killing financial inclusion in Nigeria?

No scholar worth his salt would denigrate his study in the first line, or on any other line for that matter. However, listen carefully, take what I’m going to say below with a pinch of salt as it’s based on armchair projections. But then who cares?
We are quite a lot in Nigeria, or so says the official and derivative stats. I really don’t buy into the numbers but then nobody gives two flying horse legs about my opinions. With about 180 million hungry souls crammed within the national border, only about 30 million accounts are there in the 20+ odd banks. Considering that nobody in Nigeria is faithful to anything, especially their to their banks, I know finding unique bank customers could slash the numbers down to about 20M. Just a hunch, don’t quote this for your PhD!
The Central Bank of Nigeria, other NGOs and do-good money bags have tried all they could with financial inclusion but it ain’t just hitting that sweet spot. Banks were corralled into the deal and we came up with Prepaid Cards and Mobile Wallets. Both had as much success as the Zepellin.
On a quiet Sunday morning, after the rain has done about 3 rounds, much more than middle age men can cope with these days, I thought about what could have made all the efforts, the bankers, the CBN, flounder like a pricked balloon.
It was just simple. Financial inclusion designed by rich bankers and their friends in Brioni suits just don’t work.
Why? Because financial inclusion products should be accessible and affordable. Unfortunately they are not.
This is best underscored by a recent conversation I had with one of my banker friends designing a saving product where artisans and others can pay N100 a day to save about N1,000 using their phones. I was like, what the F? I wouldn’t even do that on a regular account!
Which brings us to why the fancy financial inclusion schemes never work. Most were designed with absolutely no idea of what poor people want. But then ain’t difficult to find out, they want basic and affordable financial products.
They want free cash in/cash out.
They want free balance inquiry.
They want free bill payments.
They really don’t give two rats’ legs about cost of transaction.
Oh my, they don’t keep money in balances because like we all know, you can only save when you can afford to. When you live off less than $1 a day, which 70% of us are anyway (who did the enumeration?) you can’t afford to save. When you earn less than N50K a month and you have mouths hungrier than young birds to feed, you can’t save.
So dear banker, if the poor can’t save, there isn’t going to be any float.
If you don’t get any of these above, you can’t design products for poor people, bottom of the pyramid or financial inclusion.
This isn’t Davos, so get off your high horse dude!