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As the old cliché goes, “Cash is king in Nigeria.” This is a truism and remains a point of contention within the local financial services sector as digital payment systems across the continent evolve and Nigeria risks falling behind.
For many Nigerians, especially the less tech-savvy older generation, digital payments such as mobile money and e-wallets remain mysterious and even suspicious.
In January this year, credit bureau S&P Global Ratings released a report on this very topic, explaining that Nigeria’s mobile money market lags behind its closest peers, Ghana and Kenya. .
Both countries have widely embraced mobile money as a path to greater financial inclusion, providing payment systems to unbanked people who need access to simple and easy-to-use money transfer systems.
However, even though Nigeria is one of the most advanced countries in Africa in terms of internet infrastructure, only a few local residents are willing to trust these digital platforms. Interest is growing, with the number of registered mobile money accounts per 1,000 Nigerian adults increasing by 18.1% as of November 2023.
But what has become clear is that at least some of the new interest in mobile money is due to Nigeria’s informal economy. While cash is understandably still king in Nigeria, digital payments and remittances are reaching similar levels of popularity.
According to Moniepoint’s 2024 Unofficial Economic Report, faster transfer times for digital payments and the ongoing currency crisis are increasing the need for alternative payment systems that do not rely on hard currency.
However, the study suggested that most of the digital payments made still belong to the tried and true category, such as card payments and electronic bank transfers, rather than mobile money. And this is also consistent with PayU’s own understanding of spending and payment trends in the region.
As McKinsey analysis of Nigeria’s remittance landscape suggests, merchants and merchant acquirers, along with customers, will benefit greatly from digitization, accelerating the adoption of digital payment solutions in this cash-rich society. It is extremely important that we continue to do so.
Ideally, as a payment provider, we should offer both traditional payment methods while developing unique new services that address customer pain points. However, the most important aspects of a client-centric approach are reliability and cost-effectiveness.
There was a time not too long ago when bank transfers took hours, creating significant wait times for customers and merchants alike. However, many payment providers, including PayU GPO, have completely transformed these processes and instant transfers have become the norm.
Nigeria’s PayU GPO has a strong global footprint and advanced payment capabilities to meet the growth needs of merchants in the local market, while achieving a success rate of over 99% across all payment methods and eliminating failures. We are proud to have achieved customer testimonials. , compared to our peers.
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We believe this near-perfect success rate continues to build trust among everyone who uses our services and their customers, helping to drive the digital payments revolution.
This push towards digital was evident when the Nigerian Interbank Settlement System (NIBSS) announced a record high in 2023, with the number of transactions increasing by 55% for the year. According to NIBSS data, electronic payment transaction volume in March 2023 reached an unprecedented peak of 1.17 billion transactions, making it the second-highest payment traffic after 968 million payment traffic recorded in December. traffic volume.
These numbers are likely to decline in 2024 as consumers now have to adapt to the reality of an overall economic downturn and rising prices for goods and services. But despite these fluctuations, our team still highlights some spending habits that are driving digital payments.
First is the growth of e-commerce and mobility services, mainly because young people use online shopping. Smartphone penetration is expected to reach 60% by 2025, and the number of internet subscriptions is also increasing, meaning e-commerce is more accessible than ever.
Another trend among young Nigerians is their increased participation in sports betting. Sports betting is seen as an additional source of income for those struggling to make ends meet, but like any other form of gambling, it can have a devastating impact on household finances.
The second is recurring billing and subscription models. One of our core services is the ease with which you can pay for everything from streaming services to monthly bills to long-term investments. Regardless of the state of the economy, you’ll definitely still need to pay these monthly costs, and you don’t want to sacrifice your favorite entertainment platform.
Although our proprietary market research focuses on card payments and electronic funds transfers, which are our areas of expertise, mobile money platforms are not without PayU GPO’s attention.
With the rise of digital payments, and especially with the rise of local fintech, it won’t be long before innovative new platforms capture the imagination of young people.
The McKinsey study cited a more mainstream example of African payments giant OPay partnering with Mastercard to enable merchants and customers in Nigeria to buy from global companies through an e-wallet system. .
Driving the evolution of Nigeria’s payments landscape will be the financial services sector in collaboration with innovative start-ups.
In the meantime, it is our responsibility to maintain and support the development of reliable payment solutions as the foundation for future innovation.
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