Has Nigeria reached an inflection point for Digital payments?

The Central Bank of Nigeria (CBN) has been taking significant steps in recent years to reduce the use of physical cash in the country. As part of this initiative, the CBN introduced the Cashless Policy, which aims to promote electronic payment methods such as cards, USSD, bank apps, and mobile payments, among others.

The policy was effective January 2023, and the regulations include a daily physical cash withdrawal limit of NGN 20,000 (~$45) and increased costs for any physical cash withdrawals over the limit at bank branches. It has spurred the adoption of digital payments and reduced the dependence on physical cash, leading to increased financial inclusion and improved economic growth.

But has Nigeria really reached an inflection point for Digital payments? The answer isn’t so straightforward.

The informal market in Nigeria is responsible for the bulk of everyday transactions. MSMEs abound, and because of their size/scale, they’ve historically not been the locus of digitisation attempts and access to banking services. However, it is these small businesses that can drive increased digital payments across Nigeria.

Moniepoint’s pivot in 2022 to focus on these businesses, was informed by this realisation. Cash merchants, whom we initially served, had become the middlemen between these small businesses and their customers. People who wanted to make digital payments were immediately referred to the nearest agent. So what if these businesses were powered to receive these payments themselves?

This was the positive side of the Cashless Policy drive by the CBN, as it encouraged small businesses to find means of collecting payments directly. The withdrawal limits made depending on CICO merchants difficult or impossible, and these businesses had to receive these payments themselves digitally.

At Moniepoint, we saw an extensive adoption of payment collection tools like POS terminals, as well as a rise in business accounts opened. The policies served as a rapid accelerator of the broader macro shift towards digital payments. Both high-profile and, importantly, small business owners came on board as they sought a means to accept payments in the absence of cash. This led to a surge in demand for digital payment services.

However, this surge also presented a new set of challenges.

The sudden increase in reliance on digital payments tested the available infrastructure and its ability to support the volume of transactions that a fully, or mostly, digitised economy presented.

This meant more downtimes and transaction failures as industry players adjusted to this new reality. As a team, Moniepoint Group scaled our operations to ensure that our users could rely on us. With our site reliability team working hard, we reduced disputes due to processor failures to about 10% daily and reduced downtime by 60%. We achieved this by building multiple failover options into every step of the transaction process, and leveraging technology to enable seamless cashless transactions.

Determining whether Nigeria has indeed reached the inflection point for digital payments, has to take these two perspectives above into consideration. On the side of the merchants, there’s an increased awareness of the digital payments solutions available to them, and how important adoption is for ease of business.

For the players in the space, both regulators and payment solution providers alike, it’s important to understand the capacity of existing systems and continuously innovate to meet increasing demands.

It is undeniable that the dynamics in the payments space have changed in the months since the policy. Whatever reservations businesses had about switching to digital payments have been eased off, and it’s up to every platform offering digital payment solutions to maintain that trust.

The journey has been a learning experience with important lessons. For instance, collaboration and innovation are key in addressing the needs of customers. Agility and resilience are also valuable in responding to challenges in the business environment as things evolve.

At Moniepoint, we understand that technology is a critical enabler of our mission to empower businesses and drive financial inclusion in Nigeria. We remain committed to leveraging technology to deliver innovative solutions that address the needs of our customers and enhance their experience.

Whether or not Nigeria is at the inflection point for digital payments, a lot of change has happened in the past few months. We believe that the future is bright for digital payments in Nigeria, and we are excited to be a part of this transformation. As we continue to grow and evolve, we are focused on expanding our reach and delivering even more value to our customers. We remain dedicated to empowering entrepreneurs and supporting the growth of small and medium enterprises in Nigeria, and we are excited about the opportunities that lie ahead.