There is an increase in the growth of e-commerce which has, in turn, necessitated the increasing use of payment solutions.
By Mayowa Owolabi
Technology is advancing, and one of the effects of technological advancement that we can see is the rise of e-commerce. The main factors responsible for this are the internet and Smartphones.
The internet has given access to a market segment and customer base that was inaccessible before now, eliminating distance and the need for a physical shop or outlet.
The Smartphone has now even literally brought that customer base to your fingertips. Platforms like Facebook, Twitter, Whatsapp, Instagram, Snapchat and Youtube have added a social factor to it and reduced the barriers to entry as you don’t need your website, just a camera or Smartphone and you can sell/advertise your goods and services.
Consequently, the rise of e-commerce has also necessitated the adoption of online payment solutions. Online Payments are catching on mainly because of the ease they provide the customers and merchants. The volumes of payments made via digital channels keep increasing on a daily basis (digital channels – web, POS, USSD, and transfers).
Also, more and more merchants are advising customers to make payments online or introducing online payment channels, thus pushing adoption rates, e.g. – Cable TV (DSTV, Netflix, Iroko TV) and even payments for local exams and certifications (JAMB, WAEC, IELTS) and visa applications.
Despite the apparent growth, there are challenges.
One of such challenges is online fraud. It is a major challenge with payments globally and more-so in Nigeria. This affects merchants and customers in several ways, from fake merchants who “sell” online and get payments and disappear after that or deliver poor services or substandard goods to customers who steal payments instruments and use them to pay genuine merchants.
Transaction charges are another challenge of payment solutions in Nigeria. Most merchants are price sensitive and at times don’t want to pay the transaction charges for accepting digital payments, and in some cases, they pass it on to the customer(s) or increase prices.
The two challenges mentioned above can be summarized as “Trust.”
The practitioners are, however, doing all they can to ensure Nigerians get more comfortable with online payments. They are handling this in several ways, from advertisement to supporting small businesses who in turn act as ambassadors for them. Companies like Quickteller, Flutterwave & Paystack are known to do this. They also organize regular workshops and seminars to showcase the benefits and advantages of online payments.
There are undeniable changes and innovations. For instance, in the area of data security which is pretty advanced and handled in several ways depending on the payment processor (also known as payment gateway or aggregator), all players are required to be PCIDSS compliant, and 2-factor authentication (2FA) is the order of the day. Transaction data gets encrypted both ways.
Financial inclusion and online payments are often connected but it depends on the way you look at it. On one hand, there isn’t much connection. However, only the financially-included use online payments or digital payment channels for that matter. So the more financially-included people, the more the chance that they would make online payments.
As we’ve seen over the years, there are lots of “next big things” in the online payment sector. Some have suffered from low adoption in Nigeria (e.g., QR code payments) and some have enjoyed massive success (Tokenization of cards/accounts). Market readiness determines what works. Things like multi-account or card payment channels like OnePipe (www.onepipe.io) and USSD payment aggregation like CoralPay’s CGATE are developments to look forward to.
Non-Bank led payment services on WhatsApp (P2P payments) is definitely going to be BIG and being easily accessible to people, will drive financial inclusion in the less urban markets.
Editor’s Note: This article was originally published in The Spark Magazine. Find the magazine here to read other articles.