The Life of Payments in Q4, 2018

I've always been curious about how we make payments in Nigeria. Here I talk about some of my observations on our payments patterns especially between October - December 2018 based on data available from the NBS.

ATM v POS - How did we prefer to pay? 

The average transaction values of ATM and POS transactions for the period were nearly the same, the lowest and highest being N7,291 and N8,518 across both categories. Also noteworthy is that the transaction count and value numbers for ATM transactions were around 2.5X and 2.0X those of POS transactions respectively. This could count as progress as data from H1 2017 shows that ATM transaction count was usually 6X to 8X that of POS transactions. 

Reasons for lower POS transactions aren’t far fetched and there are 2 primary architects in my opinion - the merchants and of course, “network” 

Case in point, the last time I was at The Place in Phase 1, they had a notice at the door saying that there was a POS downtime and so customers needed to withdraw cash at the ATM outside —better than Hubmart that allows me get out my card to pay at the till before telling me the POS isn’t working. There are also times the POS displays error codes - 91, 06 etc but the customer is able to withdraw without incident at the ATM outside. Sometimes I catch myself withdrawing the cash I expect to spend in a store before walking in. Essentially, customers trust that cash will make the check-out process less painful. 

Let’s not talk about the merchants that tell you to pay extra if your goods are lower than a certain amount. The store I get frozen meat from in Mende expects me to pay an extra N500 or so when my total purchase is less than N5,000. 1kg of Turkey is maybe N1,500 giving me 3 choices: buy more than 3kgs of turkey, pay N2,000 for 1kg or just have my N1,500 cash available. Oh, if I try to suggest a transfer, they have to get out the account number, call their madam to confirm receipt of funds and that's if my mobile banking apps decide to be on their best behaviour - see where I'm going with this?

On WEB

Transaction value for this category practically exploded in November 2018 - with an amount that was nearly the sum of the previous 8 months, does anyone know why? Data going as far back as January 2017 shows that this has never happened. If anything, the transaction value average has been on a decline while the transaction count has steadily risen - to 6,257,553 as at December 2018. Also, there was no corresponding spike in transaction count in November 2018.

CHEQUES vs NIP 

I find it interesting that the Cheques transaction data hasn’t changed much in the last 2 years. It’s almost like the same people have refused to let go of this payment method. The bottom line is that Nigerians prefer to trust cheques when it comes to the heavy lifting - this is reflected in the data that puts the transaction average around N500,000+. Infact the only time the average went below N500,000 was in the period May-November 2017. In my opinion, people prefer cheques because: 

• there's a paper trail for when things go awry. It helps them keep better records (or so they think). Internet and mobile banking platforms enable you generate transaction receipts these days. Admittedly, the receipts are not immediately available to both parties.
• it’s not affected by implemented limits on e-banking platforms.
• it's less likely to get reversed or liened. It is not uncommon for the transferring party to call their bank claiming an erroneous or even fraudulent transfer after receiving value for goods or services - in the case of NIP. 

Rather unfortunately though, the transaction value average for NIP transactions in December 2018 (N100,038) was less than 50% of what it was in January 2017 (N203,766) even though the transaction count grew 4X in the same period. 

On Mobile Payments 

Mobile Payments sank to 5.8M in December 2018 from its November figure of 10.9M - nearly 50%. This in addition to Web’s transaction value spike in November 2018 I find interesting. Could there be a correlation? 

Growth across all e-payment channels

I'ld say we are making progress. Transaction count and value as at Q4 2018 show that we are running at nearly 2X the numbers we were working with in Q1 2017. I wonder though, how can we effectively incentivise customers and merchants to drive an increase in POS transactions?