The Nigerian payment system has been predominantly cash-based for both positive and negative reasons: positive because of its instant convertibility to other forms of value without intermediation of any financial institution and negative because of its anonymity and its inability to be un-traced in unethical transactions. Electronic payment was introduced because government was inundated with allegations of corruption in the Federal Civil Service (Asaolu et al, 2011). The Federal Government through its treasury circular reference to TRY/A8 and B8/2008 of 22nd October, 2008 directed that payments from all funds from it be made electronically as from 1st January, 2009. By so doing, they were one of the pioneer pushers of this great innovation. Cheques had been the sole alternative to cash in the Nigerian economy for many years. However cheques are not accepted everywhere in Nigeria, because of a lack of trust from merchants towards their customers.
In the Nigerian context, e-payment is making payments from one end to another, through the medium of electronic devices such as PoS, ATM, mobile phones and computers. It usually involves digital, automated processes, and the only manual functions required are – the user inputting the transaction data. Transaction data include – bank card number (Permanent Account Number), PIN, savings or current account number, customer ID and what have you. In Nigeria, it is a type of transaction used to pay vendors and suppliers of services, for goods and services rendered through the use of a gateway, which is powered by electronic data services.
Types of e-payment channels in Nigeria
Thanks to the CBN’s cashless policy, which was mandated in the turn of this decade by the Federal Government, electronic payment has begun to grow in leaps and bounds. The multifarious e-payment systems we have in Nigeria today is testament to a government which is consistent in digitizing the economy, towards reaching the financial standards of the 21st century. The common types of e-payment include –
- Web payments – This involves the integration of web-based payment gateways into the e-commerce platform of any given business enterprise. So, basically, Application Programme Interfaces (APIs) are generated for the B2B user to integrate with an e-business platform. Did you know that Global Accelerex currently offers this solution to businesses across Nigeria and Sub-Saharan Africa?
- Point of Sales Terminals – Over the years, we have built a reputation for ourselves in this area. Making payments with this channel requires the use of a software programmed PoS device, which is internet enabled. It mostly deals with bank card (credit and debit) transactions.
- Automated Teller Machines – Often commonly abbreviated as ATM, this channel also involves the use of bank cards. It is an electronic telecoms device that enables customers of financial institutions to perform financial transactions, such as cash withdrawals, deposits, transfer funds, or obtaining information at any time and without the need for direct interaction with bank staff.
- Mobile Money – This channel is a payment solution that enables you pay for goods and services with mobile phones. It has been introduced to the Nigerian economy to promote the CBN’s cashless policy. Mobile Money turns a mobile phone into an electronic wallet (e-wallet). A user can store electronic money in his mobile phone for use in settling bills, making transfers and subscribing for services et cetera.
Statistics pertaining to e-payment channels in Nigeria
Today, electronic payment has been extended to many services in the economy. The following can now implement electronic means towards serving their customers better and faster –
- Retail Outlets – they could integrate PoS terminals with their electronic cash registers (ECR). Nevertheless, e-means of transaction are quickly being adopted across Nigeria, due to the desire not to hold too much cash in the stores, and to minimize the time a customer spends at the point of sales.
- Government – several services are now at the doorstep of government agencies and service providers. These include and are not limited to – collections of taxes, payment for utility bills, fines, duties, license renewals and a whole lot more.
- Electronic commerce – the integration of payment gateways into websites, that are used for buying and selling, has become a standard these days. So, it saves the customer time, by not being at the physical shop. It also changes the perception of the business in the area of technological receptivity. In addition, e-commerce platforms which have implemented online payment solutions have cemented their reputation as those who have gone beyond the brick and mortar business model.
- Agent networks – today, thanks to PoS cashback and Mobile Money services, agents have begun to realise that, there is a need to bridge the gap between the financially underserved and those who have active access to financial services. Therefore Mobile money and cashback services can be used to save money and hold less cash, pay for projects, make transfers at the bureaux-des-changes or the parallel currency exchange markets, subscribe for services, open accounts, make deposits and withdrawals.
What the future holds for e-payment in Nigeria
- The impact of the Generation Z (that is the generation born after the millennials – from 2001 till date) is going to be great, because a whole lot them are tilting towards doing cashless transactions. They are the generation born in the new millenium, when the internet revolution had just reached Nigeria. They are going to need banks to digitize their monies and vendors and suppliers to accept digitized money – thus e-payment is going to cement its place in the Nigerian economy in the not-distant future.
- The level of customer experience demanded from service providers and vendors is rapidly rising to newer levels because of competition, improvement in tastes and preferences, and customers easily getting bored with monotonous methods of being served. Business outfits may have to dance to the tune of the next generation – they need to be able to encourage transaction convenience and e-payment product and service extensions which will bring about flexibility.
- Digital wallets are going to be a norm – PoS terminals are going to get smaller and smaller to enable ease in mobility. Vendors and service providers are going to accept mobile payments and savings as norm.
- Cards are likely to compete with codes – Payment devices are already being installed with capabilities such as barcode scanners and biometric scanners. With the introduction of EMV, each account will become the foundation for a code that changes with each transaction, for security purposes. Payments will thus become more virtual.
- Asaolu, T.O, Ayoola, T.J & Akinloye, E.Y. (2011): “Electronic payment pystem in Nigeria: implementation, constraints and solutions.” Journal of Management and Society. Vol. 1, No 2, pp. 16-21.
- Sourced online at ” https://nibss-plc.com.ng/mobile-interscheme-transfers/ “. On 25th July, 2018.
- Sourced online at ” https://nibss-plc.com.ng/pos2/ “. On On 25th July, 2018.
- Sourced online at ” https://thefinancialbrand.com/68528/top-payment-trends-banking-p2p-digital/ “. On 25th July, 2018.