By Babajide Komolafe
REPORTS of the Nigerian Interbank Settlement System, NIBBS, have indicated that Nigeria’s electronic payment (e-payment) services recorded N38.5 trillion transactions in the first half of 2018, H1’18, about 38.4 percent higher than the N27.8 trillion in the corresponding period of 2017, H1’17.
This feat underlines the increasing wave of technology adoption by individuals and businesses in Nigeria amidst intensified efforts of the monetary authorities on cashless economy.
Consequently, electronic payment services providers are expressing optimism that the renewed push on financial inclusion and improved stability of the payment system, will produce a further growth in numbers by year end.
Financial Vanguard analysis of data provided by the NIBSS on volume and value of transactions through five channels, however, revealed that two channels recorded negative growth in value of transactions in H1’18. The five channels are NIBSS Instant Payment, NIP; Point of Sale, PoS; Mobile (Interscheme); Electronic Bills Payment, eBills pay; and Automated Direct Debit, ADD.
The analysis revealed that while NIP, PoS and Mobile recorded increases, year-on-year, YoY, in both volume and value of transactions in H1’18, eBills pay and ADD recorded decline in value of transactions during the period.
According to NIBSS, total volume transactions through the five channels rose YoY by 103 percent to 433.2 million in H1’18, from 212.9 million in H1’17, while the total value of transactions rose by 38.4 percent to N38.46 trillion in H1’18 from N27.79 trillion in H1’17.
Transactions through PoS recorded the highest growth in value but came second in terms of volume. In terms of volume, PoS transactions rose by 103 percent to 120.79 million in H1’18 from 59.42 million in H2’17, while the value of transactions rose by 67 percent to N1.02 trillion in H1’18 from N610.1 billion in H1’17.
Mobile transactions (Interscheme) came second in terms of growth in value but third in terms of volume growth. The volume of mobile transactions rose by 41 percent to 3.46 million in H1’18 from 2.46 million in H1’17. The value of transactions rose by 54 percent to N140.6 billion in H1’18 from N91.2 billion in H1’17.
NIP transactions recorded the second highest growth in volume and the third highest growth in value. The volume of transactions rose by 104 percent to 308.4 billion in H1’18 from 150.48 billion in H1’17 while the value of transactions rose by 39 percent to N36.9 trillion in H1’18 from N26.6 trillion in H1’17.
However, the volume and value of eBills pay transactions dropped by two percent and 12 percent respectively to 513,420 and N256.62 billion in H1’18 from 524,990 and N292.44 billion in H1’17. Though the volume of ADD transactions rose by 12 percent to 17,470 in H1’18 from 15,610 in H1’18, the value of transactions dropped by three percent to N159.94 billion in H1’18 from N164.3 billion in H1’17.
Commenting, Managing Director/Chief Executive, Financial Derivatives Company, Mr. Bismarck Rewane, said that the 38 percent increase in e-payment transactions implies increase in velocity of circulation, which is the rate at which money moves around in the economy, adding that this is good for the growth of the nation’s gross domestic product, GDP. He stated: “There is a correlation between velocity of circulation and increase in transactions. There is a correlation between that and output; you can imagine that is going to drive growth.
“In Kenya where they had Mpesa, when they had increase in velocity of circulation, it drove GDP growth, and GDP growth went as high as nine percent, because as I am settling my transactions I am getting my money and I am buying something else. So it drives the process, though it could be inflationary at times, but it is important to drive output growth.”
Speaking to Financial Vanguard on condition of anonymity, a top official of the Central Bank of Nigeria, CBN, said: “Though the 38 percent growth in H1’18 was not really in line with industry expectation, it is a good indication that we are making progress.”
Explaining the factors for the 38 percent growth in e-payment transactions in H1’18, Chairman, Committee of E-Business Industry Heads, CeBIH, Mr. Stanley Jacob, said, “I think the growth can be attributed to improved acceptance of digital channels in Nigeria, most especially the USSD channels being made available to low entry phones without data capabilities.”
Jacob, who is also the Head, Consumer Distribution, Ecobank Nigeria, stated further that “the stability of the systems both at NIBSS and the partner banks has also improved the trust level of the users as they are now assured of better dispute resolution, instant reversals in cases of8 failures and high uptime availability.”
Also commenting, Divisional Head, E-Business, Heritage Bank, Mrs. Olusola Longe-Okenimkpe, said that the growth attained in H1’18 was possible due to some factors such as: Increased awareness by the spending public; Increased adoption by business owners; Increased loyalty and reward schemes by stakeholders to encourage usage; CBN policies for financial inclusion and awareness; and commitment by the banks to also stay competitive and drive growth through innovative alternate channels.
Why huge PoS growth
Speaking on the 67 percent growth of PoS transactions in H1’18, Longe-Okenimkpe stated: “The huge growth in PoS is due to a combination of factors such as increased adoption by SMEs, chain business owners etc; increased awareness as well by cardholders, who ask for the POS from business owners when making payments; and improved dispute resolution process for failed transactions.
Jacob on his part stated: “The growth in PoS usage cannot be separated from the behavioural change that was triggered by the implementation of the cashless initiative at some point. Though the cashless implementation is yet to be stable, the customers expect that this will happen anytime soon and they are bracing up for it. Also increase in the number of bank account holders with a card and the increased investments banks have made in PoS has given the channel a boost.”
The CBN official on his part said the impressive growth recorded in value of PoS transactions was due to the expansion in the number of agents, prompted by the Shared Agent Network Expansion Facilities, SANEF, initiated by the Bankers Committee in first quarter of the year.
He said: “You will know that so many agents, you know we are doing SANEF, and many of the agents are actually using PoS for their transactions. So the expansion in the number of agents will actually lead to higher transaction value in PoS, so that could be one of the reasons. Also is that fact that we also have other licensed Payment Terminal Service Operators, PTSOs, on ground, but the most significant is the expansion in agents.”
The decline in e-Bills
The CBN official however attributed the decline in the volume and value of e-Bills pay transactions in H1’18 to competition from other epayment products and solutions.
On her part, while stressing that Heritage Bank did not experience decline in eBills pay, Longe-Okenimkpe noted that there are other competing platforms by other service providers, such as Paydirect by InterSwitch, Payoutlet by E-Tranzact, e-Cashier by Xpresspayment Ltd, Remita by System Specs, etc. “They all provide the same service which are also available in all the banks. As such there may be a decline in the transaction volume and value of eBills”, Longe-Okenimkpe said.
According to Jacob, the decline can be addressed by making e-Bills pay solution more open to addressing daily payments needs of customers.“Despite the decline in eBills pay, some other lifestyle offerings and bill payments platforms recorded increase in volumes. I believe such declines speak to the fact that the solution needs to be opened up to address more everyday payment needs of the customer. To get the bottom of the pyramid to use these bill payment options, we must create use-cases for them and the environment they live in”, he said:
Outlook for H2’18
While Rewane noted that the huge volume of idle cash in the system poses a challenge to higher epayment growth in H2’18, the CeBIH Chairman, Jacob, and the Heritage Bank, Epayment Head, Longe-Okenimkpe, were, however, optimistic of higher growth.
According to Rewane, “The growth won’t be that high in H2’18. Idle money in this country is a big problem, people keeping money in their houses, here and there. So the less idle the money, the more it moves around, the higher the velocity, the more transactions and the higher the output.”
Jacob said: “As we move into 2019, we expect the market for merchants’ payment to move quickly towards USSD and Quick Response, QR, codes as this is a zero asset model for the banks and the merchants, thus addressing the collection needs of micro-merchants. We also expect the industry to come together and address the challenges of security and pricing for USSD usage. Overall, it must be about the customer – giving them convenience, security and affordable electronic payment services.”
Explaining the basis for expectation of higher growth in H2’18, Longe-Okenimkpe stated: “There is room for further growth with the financial inclusion drive by all stakeholders. The level of awareness will increase the e-payment transaction growth, as we expect more people will participate, especially with the increased adoption of USSD banking, where all types of phones (smartphones, feature or regular low-end mobile) can be used for transactions and more solutions are also being deployed by the Banks.
E-payment transaction growth
“There are also a lot of new developments of solutions/platforms by Fintechs and with the federal and state government’s recognition of these Fintechs it will further add to that growth. Also, there was a huge difference between the current growth in volume of e-payment in the country and the potentials available, if the number of unbanked Nigerians with access to mobile telephone services is anything to go by.
“Specifically for Heritage Bank, the outlook will be positive and robust. As a bank, Heritage Bank has always been driven on the path of continuous innovation, having been the first to transform the interior of banking halls in addition to being the first financial institution to set out deposit machines in all its branches nationwide. In summary, e-payment transaction growth should definitely be better in H2’ 2018″.