Nigeria's Journey Towards A Cashless Society
Nigeria's payment landscape has undergone drastic changes in the last 10 years.
In 2002 formal banks cards in Nigeria were uncommon, ATMs were a rarity, and banks were unable to effectively communicate with one another, as reported by The Financial Times. Yet a decade of innovation and technological advancements has allowed for significant change, and Nigeria is now cited as a model example in the payments space. At present, Nigeria has nearly 25 million bankcards in circulation, 12,000 ATMS, and numerous online payment alternatives. There has been great progress towards a cashless economy and reducing financial exclusion, yet Nigeria still has financial challenges to overcome.
According to The Financial Times, as was the case in many other African economies, traditional financial services in Nigeria were historically only available to affluent consumers. In the last few years, banks and financial institutions have been tapping into other target markets, and have started offering services that meet the needs of lower-income people. The Enhancing Financial Innovation and Access, a company that encourages financial inclusion in Nigeria, reported that the number of banked Nigerians increased from 18.3 million in 2008 to 28.6 million by 2012.
Yet, these statistics still mean that only one-in-three Nigerian adults have banking services, compared to the two-in-three South African consumers who have formal banking. Sixty million Nigerians (out of 160 million) still remained unbanked.
“We have this massive market, and that gives us a natural advantage over other countries,” Mitchell Elegbe, managing director of Interswitch, said to The Financial Times. “There’s still a huge opportunity to bring more people into the banking system.”
In addition to the high percentage of underbanked consumers, the country also suffers from fraud attacks that instill a certain level of uncertainty. Nigeria also suffers from several technical problems such as incessant power outages that delay standalone cash machines that depend on generators to function.
Despite Nigeria's emerging market status, the article reports that there are perks to being a late bloomer.
"By coming in later we have not repeated the mistakes made in other markets, Elegbe said. "Fraud on our cards issued in Nigeria is significantly lower than global averages."
The emergence of chip & PIN EMV solutions has helped to combat scamming. The Central Bank of Nigeria enforced the EMV adoption, which greatly helped decrease fraud in the country (by 90 percent). Since security has been improved card payments amongst consumers continue to rise. The Central Bank of Nigeria indicated that card payments and ATM withdrawals have significantly increased in the last years, tripling between 2009 and 2011. Additionally, Nigeria was once an economy that was ruled by cash, but its growth towards electronic payments and card payments has been rapid.
Companies such as Visa, Interswitch and MasterCard are working on developing Nigeria's payments ecosystem further, collaborating with global vendors to enhance card acceptance across the country. Nigeria has come a long way since 2002, and with this momentum the market may be well poised to progress.
To read the full story at The Financial Times click here.