With the advancement in technology and a shift towards a cashless society, digital payments have become a survival strategy for Small and Medium-sized Enterprises (SMEs) and startups. Innovations are reshaping the fast-growing electronic-payments landscape with solutions for businesses. DANIEL ESSIET reports.
If there is one thing that the COVID-19 pandemic has taught the President, Association of Micro Entrepreneurs of Nigeria(AMEN), Prince Saviour Iche and other micro entrepreneurs, it is about how to be resilient.
Like other countries, the pandemic acted as a catalyst for innovation in almost every sector.
Consequently, entrepreneurs such as Iche had to explore options to overcome the devastating financial impact of pandemic lockdowns and restrictions.
The pandemic showed the resiliency of small businesses and entrepreneurs. Since then, many consumers have moved to digital payments. Subsequently, Iche, also Chief Executive Officer, Bright Future Hope Enterprises, has learnt how important it is for small businesses to consider payment innovation as key to supporting their business.
In 2020, when the the pandemic put the world on hold. He said then businesses were encouraged to use multiple payment products, including credit cards, cheques and wire. This, he explained, made it easier for them to integrate with accounting software solutions with their payment products and banking platform.
Whatever the choice, he continued that SMEs had to leverage technology to boost their productivity, competitiveness and resilience.
To him, small businesses that don’t adapt to modern payment options risk their ability to attract and retain customers, while possibly missing out on key business opportunities.
When the economy faced currency crunch early this year, he explained that digital payments such as Opay offered a lot more opportunities for small businesses to improve relationships with suppliers.Though it was an excruciating experience, he added that it brought significant time and cost savings to businesses by reducing physical presence, offering them the ability to reconcile transactions and to streamline labour-intensive back-office processes.
Iche said small business owners need a full range of services and solutions to help them manage their business. Whether it’s the ability to invoice and receive money, send payments, manage cash flow, create custom reports or interact with a banker, they need to know their financial institution can serve their needs adequately.
One of the most significant challenges facing small and medium-sized enterprises (SMEs) in the adoption of digital payment systems is the risk of fraud and security breaches. Iche noted that it was critical the providers incorporate features to secure their products.
He, however, lamented that a few businesses encountered payment fraud and that operators saw the need to increase security, protection and convenience.
To this end, he said AMEN is exploring sources of support that can provide SMEs with access to funding, advice, training, networking, and market opportunities. Since the last five years, the eco system has witnessed new startups helping businesses bank, accept and make payments, including cards.There are platforms providing entrepreneurs everything they need to run their businesses. These are business registration, bank accounts, payments, cards, payroll, and insurance.
Following this, more electronic payments providers have emerged building infrastructure that will support contactless transactions, secure remote commerce, biometric authorisation, or EMV chips. This is also challenged by the pressure to adopt innovative, safe and secure ways to make purchases.
According to McKinsey, a global multi-practice firm, Africa’s domestic e-payments market is expected to see revenue grow by 20 per cent yearly, reaching about $40 billion by 2025.This follows banks and non-bank players innovating to deliver much-needed new solutions to businesses. It indicated that e-payments in Africa have been gaining momentum since 2000 and, as in the rest of the world, have taken a leap forward during the pandemic.
About 80 per cent of respondents to McKinsey’s survey of payments experts across Africa believe that the shift to e-payments not only will endure but will accelerate, with 84 per cent expecting e-payments to grow by at least 30 per cent yearly through 2025.
The study noted that about half of future electronic-payments revenue will come from these five countries, with the fastest growth in Nigeria, at 35 per cent per year.
Other countries that will see growth above 20 per cent yearly, it continued, include Ghana, Ivory Coast, Kenya, Senegal, and Uganda.
As other markets expand, the study stated that South Africa is likely to represent a smaller share while remaining the biggest e-payments market in Africa in 2025, with $5 billion in yearly revenue.
As technology has advanced, Iche indicated that SMEs will continue to benefit from an increase in the proliferation of alternative payment methods, offered by local and international fintech players. In Nigeria, there has been fintech-led acceleration in the adoption of digital payments. Lagos is leading the way in the mass adoption of fintech tools, thanks to the rapidly growing sector luring in more companies eager for a slice of the fintech action.
In Nigeria Indeed, Lagos is attracting most of the funding for fintech startups whether by private equity and strategic investors.
This follows the enabling environment that the government has provided to support incubation programmes. Lagos houses some of the best known top investors, accelerators, and partners and prominent startups in the application of block chain technology.
For the Director, SSE Angel Network, Uche Aniche, digital payments are driving a profound change and creating an innovative financial ecosystem that works for ordinary people.
He, however, believes the SMEs sector remains a significant untapped opportunity in the payments space.
He has seen e-commerce marketplaces such as Amazon, Jiji, and Jumia, enabling SMEs to go online.
According to Uche, the country’s digital-payments landscape has exploded with new players.
At the moment, digital payment systems allow Nigerians to pay for goods or services electronically, using a mobile phone, the internet, retail point of sales, and other broadly available access points instead of using cash or checks.
As SMEs continue to adopt digital payment systems, Uche expects to see new technologies and innovations that will enhance convenience, security, and overall user experience.
With the majority of consumers using smartphones, he sees mobile payments becoming popular.
In the last 10 years, financial inclusion has been a major priority to the Federal Government with many players coming in to provide access to financial services and resources to individuals and businesses.
In line with this, the Federal Government has established a regulatory environment and encouraged the foundation of fintechs.
Part of this is the boosting of the use of a Unified Payments Interface (UPI) system. However, to be allowed to operate, providers are expected to meet stringent requirements such as processes, procedures, and apply strict anti-money laundering practices and countering the financing of terrorism, as well as responding to standard requirements related to risk management, data and consumer protection, cybersecurity, among others.
Pursuant to this, the Central Bank of Nigeria (CBN) has developed draft Guidelines for Contactless Payments described as a system where buyer and seller can complete financial transactions without physical contact between the parties and the acquiring devices. It connotes a payment method which enables consumers to pay for goods and services by tapping a contactless payment-enabled Europay, Visa, and Mastercard (EMV) card over a contactless-enabled payment terminal.
EMV cards use an intelligent microprocessor chip technology which secures the cardholder’s credential and performs cryptographic computation to protect the cards’ communication with the POS terminal and the processing network.
The Draft Guidelines for Contactless Payments propose to allow the CBN to determine transactions and the daily thresholds on contactless payment channels.
Other measures are that payments below the daily thresholds would be completed without customer verification. However, contactless payments above certain thresholds will require customer authentication such as PIN, mobile code, or biometrics identifier.
The guidelines indicated that stakeholders who process and store customers’ information must ensure that terminals, applications and processing systems comply with these requirements.
Above all, it stipulated that participants in Contactless Payments must obtain CBN’s approval for contactless payments products and value-added services.
The financial technology sector is booming.The market has diversified to include peer-to-peer payments, fund transfers, money lending services, investment apps, crypto currency trading and crowdfunding platforms. Moreover, a growing demand for e-commerce promises to continue to push the market forward.
Buoyed by this, more investors are channelling funds into the sector. As digital payments continue to evolve and become more sophisticated, Iche believes SMEs can reap a host of benefits, which include faster payment processing times, which can help to improve customer satisfaction and loyalty.
While Nigeria is still at the forefront of fintech, it has become a leader in cryptos. The founder/Coordinator, Blockchain Nigeria User Group, Chimezie Chuta has been on the campaign to get block chain fully integrated as a critical component of the e-payments infrastructure.
Despite the skepticism around crypto currencies, Chuta believes as Nigeria’s payments mix evolves, digital currencies is one element that will spin tremendous growth, at the end boosting the future of e-payments.
He sees bigger growth of digital currencies across e-payment channels in Africa.
