The nation’s payment sub-sector has been turbulent and disruptive in the last few years, due to several challenges. The Area Business Head, West Africa at Mastercard, Ebehijie Momoh, in an interview with ADEYEMI ADEPETUN, speaks on the payment ecosystem, the importance of data regulation while advising the current administration to create a framework that would advance the industry.
What are the current challenges facing Nigeria’s e-payment system?
The payment sub-sector faces several challenges that impact its growth and development. One key challenge is infrastructure. Insufficient payment infrastructure, particularly in developing regions, hinders the adoption of digital payment systems. Limited access to reliable Internet connectivity, lack of payment terminals, and inadequate technological infrastructure poses challenges for expanding digital payment acceptance and reach.
Security and fraud are also significant concerns. With the increasing digitalisation of payments, cybersecurity threats, data breaches and fraud attempts pose risks to both consumers and businesses. Building robust security measures and ensuring compliance with security standards are ongoing challenges for the payment sub-sector. We have implemented robust security measures to protect transactions. Cybercrime is a growing threat and through RiskRecon, we are partnering with small business associations and issuers to offer free assessment services of cybersecurity readiness for online presence. RiskRecon is a web-based solution that requires no integration and can very quickly perform a scan of the cyber vulnerabilities of a business, together with key recommendations on how to solve them.
Financial inclusion is another challenge, particularly in developing economies. Limited access to formal financial services and banking facilities impedes the goal of providing affordable and accessible payment options to unbanked populations. Innovative solutions, partnerships, and regulatory frameworks are needed to address this challenge and promote financial inclusion.
The regulatory environment is complex and constantly evolving. Adapting regulations to keep pace with evolving payment technologies, ensuring consumer protection, and balancing innovation with risk management can be challenging for regulators. Harmonizing regulations across borders is also necessary to facilitate international payment transactions.
Interoperability is crucial for seamless transactions. Lack of interoperability among different payment systems and providers creates barriers and fragmentation in the payment ecosystem. Overcoming this challenge requires efforts to ensure interoperability, enabling the transfer of funds across platforms and networks.
Building consumer trust and driving the adoption of digital payment systems is essential. Addressing concerns related to data privacy, security and user experience is necessary to gain consumer confidence. Additionally, promoting financial literacy and conducting awareness campaigns are important to educate consumers and merchants about the benefits and safe practices of digital payments.
Cost and affordability pose challenges, especially for small businesses. High transaction fees, equipment costs, and maintenance expenses may deter some businesses from adopting digital payment solutions. Finding ways to make payment solutions more affordable for merchants is crucial for wider adoption.
In summary, the payment sub-sector faces challenges such as infrastructure limitations, security and fraud risks, financial inclusion barriers, regulatory complexities, interoperability issues, consumer trust and adoption hurdles, and cost and affordability concerns. Addressing these challenges requires collaborative efforts from stakeholders, including governments, financial institutions, payment service providers, and regulators, to foster an inclusive, secure, and efficient payment ecosystem.
What should be the focus of the current administration in transforming the sector?
To aid the transformation of the payment sub-sector in Nigeria, the government should consider several key strategies. Firstly, it is crucial to develop a supportive regulatory framework that encourages innovation, competition and consumer protection. By providing clear guidelines and standards while allowing for flexibility and adaptation to technological advancements specific to Nigeria, the government can create an environment conducive to the growth and development of the payment sub-sector.
Infrastructure investment is another essential aspect. Allocating resources to improve payment infrastructure across the country will significantly contribute to the advancement of digital payments. This includes improving reliable Internet connectivity and enhancing digital payment gateways. By addressing infrastructure gaps, the government could promote wider acceptance of digital payments, even in remote areas, and drive the growth of the payment sub-sector throughout Nigeria.
Financial inclusion initiatives play a vital role in transforming the payment landscape in Nigeria. The government should implement targeted policies and collaborate with financial institutions, fintech companies, and mobile network operators to provide affordable and accessible digital payment solutions to the unbanked population. Encouraging the use of mobile money and agent banking networks can extend financial services to underserved areas, promoting financial inclusion and empowering individuals and businesses with access to digital payments.
Collaboration with industry stakeholders is essential for driving the transformation of the payment sub-sector in Nigeria. Regular dialogue and cooperation between the government, regulatory bodies, payment service providers, financial institutions and industry associations will enable the identification of challenges. The development of innovative solutions, and the alignment of policies with the specific needs of the Nigerian payment landscape. By working together, stakeholders can drive progress and create a vibrant and competitive payment ecosystem.
Further, digital literacy and awareness campaigns are vital to drive the adoption of digital payments in Nigeria. The government should invest in educational programs and awareness campaigns to promote digital literacy and increase awareness about the benefits and safe usage of digital payment methods. Collaborations with educational institutions, industry associations, and media channels can effectively reach a wide audience, empowering Nigerian consumers and businesses with the knowledge and confidence to embrace digital payments.
Lastly, the government should prioritise cybersecurity and data protection measures in the payment sub-sector. Establishing and enforcing robust data privacy regulations and security standards is crucial to protect consumer information, mitigating the risk of fraud, and building trust in digital payment systems. By fostering a secure crypto environment, the government can instill confidence among users and foster the growth of digital payments in Nigeria.
By implementing these strategies, the Nigerian government can play a significant role in transforming the payment sub-sector, driving innovation, financial inclusion, and secure digital payments across the country.
The global payment ecosystem has been in disruption. Could you shed light on the latest happenings in the space?
In the payment space, several notable trends and developments are taking place. Firstly, there is a growing adoption of contactless payments, driven by advancements in technology and an increased focus on hygiene and convenience. Mobile wallets and payment apps are also gaining popularity, enabling consumers to make seamless transactions using their smartphones.
Mobile payment systems such as Apple Pay, Samsung Pay and Google Pay have gained increasing popularity due to their convenience, security, and ease of use. With just a smartphone, consumers can now make payments on the go, eliminating the need for physical cash or cards. This shift has propelled us into an era of e-commerce, where transactions are quick and easy, transforming the way people engage in online commerce.
Alongside mobile payments, e-wallets, or digital wallets have emerged as a game-changer in the payment systems landscape. These wallets securely store payment information, including credit card details, bank account information, and loyalty cards. e-Wallets offer consumers a convenient and secure way to manage their payment information, enabling seamless transactions both online and in physical stores. They have bridged the gap between different payment methods, providing a unified solution for consumers.
The popularity of contactless payments has also surged in recent years. This payment method allows consumers to make transactions without physical contact with a payment terminal. Enabled through mobile devices or physical cards using radio frequency identification (RFID) technology, contactless payments offer a faster checkout experience and reduce the risk of germ or virus transmission through physical contact. The speed and convenience of contactless payments have transformed the way transactions are conducted. Mastercard has been leading the way in promoting the adoption of contactless payments for the past 15 years. In several countries across the Middle East and Africa (MEA), the company has increased the CVM limits, ultimately enhancing the purchase experience for people in the region.
In addition to mobile and contactless payments, it has also been investing in QR technology, which offers an affordable and accessible way for consumers to make push payments. QR technology addresses the issue of low acceptance rates, particularly for micro, small and medium enterprises (MSMEs), by providing an easy-to-implement, low-cost solution that levels the playing field. It also plays a vital role in transforming consumer behavior by promoting a shift away from cash towards electronic payments, offering benefits such as ease of access via mobile, convenience, safety, and seamlessness. Currently available in 18 markets across the Middle East and Africa, with over 100 million consumers and 1.5 million merchants already enabled on the platform, QR technology is set to become a major player in the world of payments.
Additionally, there is a rise in the use of biometric authentication methods, such as fingerprint or facial recognition, enhancing security and improving user experience. Furthermore, the integration of artificial intelligence and machine learning is revolutionizing fraud detection and prevention in payment systems. Overall, these ongoing advancements are shaping a more secure, convenient, and inclusive payment landscape.
Are these happenings peculiar to the Nigerian environment?
While many of the trends and developments in the payment space are global, there are a few specific aspects that can be considered more peculiar to the Nigerian environment. Nigeria has seen significant growth in mobile money services, with platforms like Paga, Quickteller, and OPay gaining popularity. These services cater to the large unbanked population by providing access to basic financial services through mobile phones. Mastercard has facilitated the adoption of digital payments in Nigeria by providing a secure and convenient payment infrastructure.
Unstructured Supplementary Service Data (USSD) payments have become prevalent in Nigeria. This technology allows users to make transactions by dialing a specific code on their mobile phones, enabling even those without smartphones or Internet access to participate in digital payments. USSD payments have contributed to financial inclusion by providing a simple and widely accessible payment method for a significant portion of the population.
The Central Bank of Nigeria has implemented a cashless policy to reduce the reliance on physical cash and promote electronic payments. This initiative has led to increased adoption of digital payment methods across the country. By encouraging businesses and individuals to embrace digital transactions, the cashless policy aims to improve efficiency, transparency, and security in Nigeria’s payment ecosystem.
What is the operational difference between mobile money and mobile payment?
Mobile money and mobile payment are related concepts but have distinct meanings. Mobile money refers to a financial service that enables individuals to store, send, and receive money using a mobile device, often associated with financial inclusion efforts. Africa is the world’s largest adopter of mobile money, comprising nearly half of the globe’s registered mobile money accounts with 621 million wallets (up 17 per cent from 2020), accounting for 70 per cent of the world’s $1 trillion mobile money value.
At Mastercard, we leverage our large global network, scale, and experience, combined with a deep understanding of the market to design solutions that are local and solve local needs. Partnerships and interoperability between different players such as MNOs and banks are needed to avoid the risk of creating islands. Interoperability is necessary to make it easier for consumers and businesses, not just to open an account, but to use one in simple ways. For example, we teamed up with MTN, a mobile network operator in Africa, to bring more digital services to MTN’s platform. We have also signed an exclusive deal to enable over 100 million Airtel consumers across 13 markets in MEA with Virtual card and QR Payment capability and onboarding over 100, 000 SMEs as merchants on QR. In Egypt, in coordination with the Central Bank of Nigeria (CBN), Mastercard partnered with Vodafone and Etisalat to launch the self-registration service for mobile wallets allowing Egyptians to digitally open a wallet while staying at home.
On the other hand, mobile payment is a broader term that encompasses various forms of payment transactions conducted through a mobile device, irrespective of the underlying payment method. Mobile payment includes transactions made through mobile banking apps, mobile wallets, contactless payments and other mobile-based payment technologies.
What are the emerging technologies revolutionising the payment space?
Emerging technologies are revolutionizing the payment space, bringing about significant changes in how transactions are conducted. Some key technologies include Mobile wallets and Near Field Communication (NFC): Mobile wallets on smartphones, combined with NFC technology, allow users to store payment credentials and make contactless payments with a simple tap or wave; Biometric Authentication: Biometric technologies such as fingerprint, facial, and iris recognition enhance security and simplify the payment process by using unique biological traits for authentication; Voice-Activated Payments: Voice-activated payment systems leverage voice recognition technology, allowing users to make purchases or send money through voice commands to virtual assistants.
Others are Artificial Intelligence (AI) and Machine Learning: AI and machine learning technologies improve fraud detection, risk assessment, personalized offers, and customer support in the payment space. These emerging technologies are driving convenience, security, and personalization in payment transactions, shaping the future of digital payments.
