By Adeniyi Ogunfowoke

The Nigerian financial sector has significantly grown in leaps and bounds; thanks largely to technology. Currently, the services of banks have been automated. Customers are no longer required to visit their brick and mortar branches to perform any transaction.

With their smartphones, they can process local and international transactions. These are exciting times for the Nigerian banking sector as the long hours spent at the bank has been greatly reduced.

It has even gotten more interesting since the entry of fintechs (financial technology) into the banking game in Nigeria.

As a result of technology, fintech platforms such as Jumia Pay and others are disrupting the way banking business is done, that it now seems like the banks are playing catch-up.

Fintech, according to Investopedia “is used to describe new technologies that seek to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilising specialised software and algorithms that are used on computers and, increasingly, smartphones.”

Although Nigerian banks are exploring and exploiting fintechs to improve their services, they are not taking advantage of it as quickly as the private firms whose services are entirely online.

Key Services Offered by Fintechs

The edge that fintechs like Jumia Pay and others have over the banks are in the services they both offer. Many Nigerians and businesses are trooping to fintechs because of the flexibility of their services. This does not necessarily mean that they have abandoned the banks.

There are some key services that make fintechs stand out or unique. They include (1) eCommerce payment: online retailers can now seamlessly pay for their orders, thanks to the payment gateway service offered by fintechs. To make payment easy for its millions of customers, Jumia, Nigeria’s no 1 shopping destination launched Jumia Pay. This has enabled every Jumia customer to pay for transactions across the Jumia ecosystem (flight, hotels, food, production services among others. It is secure, flexible and offers seamless checkout experience. And you will even get 5% off for using Jumia Pay. (2) Loans: When it comes to loans, the fintechs are far ahead of banks. Without a collateral, you can apply for a loan and receive it within 24 and 48 hours. They also have a flexible payment plan. As an entrepreneur, you may need a loan to shore up your business, you can apply for Jumia loan and you can go and sleep because the repayment plan is the best in the Nigerian fintech world. (3.) They also provide mobile money transfer and Unstructured Supplementary Service Data Services.

Collaboration or Competition?

The no love lost relationship between Fintechs and Banks can seemingly be compared with that of traditional media and internet (social media).

Many of the traditional media in Nigeria have evolved and now have an online version of their publication as well as social media accounts. This has ensured that they remain relevant and they are not entirely overshadowed by the online news media.

In fact, some of them have moved their entire publication online. And it is working for them. Hence, they do not see social media or the internet has a competition. Rather, they see it as a tool to enhance their services.

This is exactly what banks need to do. There is no competition between fintechs and banks. Fintechs are only utilising the tech machinery available to them faster than the banks. There is nothing wrong with a bank owning payment gateway as long as they get CBN’s approval.

Even though they are already collaborating, it needs to be taken a notch higher. For example, the fintechs still need banks to keep all payments made using the payment gateway and of course banks will charge interest for keeping the money. Therefore, it is better for them to collaborate rather than compete.

Collaboration is also important in fighting the challenges facing the banking industry. The foremost challenge among others is fraud. The CBN recently reported that there were 20,768 reported cases of fraud and forgery (attempted and successful), valued at N19.77bn in the review period, compared with 16,762 cases, involving N5.52bn and $ 0.12m in the corresponding period of 2017. It is not gainsaying that fintechs are disrupting the Nigerian banking industry. Regardless they need to work together and collaborate to take the industry to the next level.

By Adeniyi Ogunfowoke

Technology is forcing both developed and emerging economies to innovate. The cashless society is one such innovation.

Cashless society according to Wikipedia describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.

The Beginning of the Cashless Society Drive

In Nigeria, the cashless society drive began in 2012. In order to limit the liquidity in circulation, the Central Bank of Nigeria (CBN) says that cash-based transactions should not exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. The CBN added: “Our economy uses too much cash for transactions for goods and services, especially for buying and selling. This is not how it is done in other progressive countries of the world where there are other payment options such as, Debit and Credit Cards, Bank Transfers, Bank Direct Debits, Automated Teller Machines ( ATMs), and even Mobile Money. These achievements have been brought about by the changing needs of their people, competition among banks, and other companies, including changes in technology. Our major focus is to increase the volume of all available payments instruments in Nigeria.”

The Phase 1 of the scheme took off in Lagos on January 1, 2012, while additional states, namely Abia, Anambra, Kano, Ogun and Rivers States, as well as Abuja, were involved in Phase 2, which commenced on October 1, 2013. Phase 3 which is the final phase of the policy’s implementation commenced in the remaining 30 states of the federation on July 1st.

In other words, the cashless society has been managed and implemented for six years now. Six years down the line, is the Central Bank of Nigeria winning the cashless society war?

Is Nigeria Winning the Cashless Society War?

Despite the fact that Nigerians struggle to accept change, a good number of them, especially in the urban and semi-urban areas have wholeheartedly embraced the cashless society scheme. This is probably because they have no choice. You can say that the country is winning the cashless society war in urban areas.

Currently, you will find an average Nigerian or a market woman with an ATM card. To offer this more credence, data from an e-payment channel report in a series from the NBS, produced in collaboration with the CBN, reveal that 457 million transactions valued at N32trn were recorded on the channels in Q1 2018 and the NBS data also show that 54 million PoS transactions were recorded in Q1 2018, representing increases of 13% q/q and 101% y/y.

Furthermore, with a smartphone, you can use either Unstructured Supplementary Service Data (USSD) or mobile app to perform banking transactions at any time of the day. Again, the NBS report reveals that mobile payments recorded 15 million transactions valued at N329bn (US$1.07bn) in Q1. The value of the transactions grew by just 21% y/y and accounted for only 3.3% of total electronic transactions.

Off the cashless society policy, a notable achievement is the rise of digital payment gateways. Some of them include Jumia Pay, and others.

Owned by Jumia, Nigeria’s No.1 shopping destination, Jumia Pay enables Nigerians to make secure online payments while shopping on Jumia platforms. The payment gateway uses state-of-the-art technology and procedures to protect your online transactions. Interestingly, you get guaranteed 5% cashback for using Jumia Pay.

By the same token and in line with the cashless society policy, millions of customers who shop on Jumia, or book hotel and flights, or order food from their favourite restaurants now enjoy the services of Jumia Pay. This is because they can now pay for their transactions using Jumia Pay.

In addition to this, customers will enjoy 5% off all their orders on Jumia. If you combine this with the amazing Black Friday discounts Jumia is offering, customers will definitely save a lot of money whenever they shop on the ecommerce platform. The key reason for doing this is to encourage Nigerians to settle transactions through the use of digital payments rather than via cash.

Unequivocally, the painstaking efforts of the CBN in implementing the cashless policy are truly paying off. However, there is quite a lot to that still needs to be done. Many in the rural areas are yet to be reached.

They largely still use cash that is not even kept in the bank. This means there are still millions of unbanked Nigerians out there. The cashless society campaign needs to be taken to their doorsteps. Importantly, the cashless society message should be available in local languages. Ultimately, the CBN has to take a look again at the fees banks charge customers. Understandably, banks need to cover their costs and expenses but it should not be at the expense of their customers.

Sweden is the most cashless society on the planet, with barely 1% of the value of all payments made using coins or notes last year. Nigeria is nowhere near Sweden. But we are on the march towards a cashless society. The country only needs to integrate more inhabitants of rural areas into the scheme, effectively regulate banks and fintechs and continue to push the cashless society campaign.