While cash remains king and the dominant form of payment, the expenses and burdens associated with its usage are becoming increasingly apparent.

From the production and distribution of physical currency to the costs of handling and securing cash, the financial burden is substantial.

Research has shown that cash-based economies like Nigeria face transaction costs that are 4-10 times higher than those reliant on digital payments.

This results in the loss of millions of dollars each year, funds that could be redirected to more productive uses or invested in vital sectors such as healthcare and education.

These complexities not only hinder the efficiency of transactions, but they also contribute to the growth of an informal economy.

Long queues and frustration at ATM terminals serve as reminders of the limitations of cash, while businesses struggle to manage large sums of money, leaving them vulnerable to theft and errors.

The necessity of transitioning to a cashless society has become increasingly apparent in recent times. Amidst a recent cash crunch accompanied by transaction failures, Verve cards emerged as a crucial lifeline for many Nigerians.

In supermarkets, where physical cash dwindled, Verve transactions facilitated the uninterrupted flow of essential supplies, staving off potential panic.

Street markets, typically bustling with cash exchanges, experienced a notable shift as contactless Verve payments, facilitated through its partnership with Moniepoint, Opay etc, supplanted the chaos brought on by cash scarcity.

The immediate impact on businesses was profound – operations streamlined, financial security ensured, and confidence fostered during uncertain times.

While the cash crunch underscored the limitations of a physical currency-based economy, Verve showcased the transformative potential of cashless transactions, providing a practical and resilient solution in the face of scarcity.

It’s no surprise that partners like Opay and Moniepoint have achieved significant milestones in a short period. While the Verve partnership isn’t the sole factor, its pivotal role cannot be undermined.

Verve cardholders now enjoy a myriad of services, with their Verve cards serving as the gateway to expanded opportunities.

In neighbouring Ghana has made significant progress in reducing its dependence on cash by embracing digital currency.

Nigeria, too, is at a crossroads, deciding whether to cling to the familiarity of cash or embrace the transformative potential of a cashless future.

While cashless alternatives are emerging, uneven ecosystems have hindered widespread adoption. However, Verve, a Nigerian payment card network, is playing a key role in driving the adoption of card-based transactions in the country.

The company’s commitment to providing convenient, secure, and efficient payment solutions has positioned it as a leader in the industry.

Verve offers a safe, affordable, and widely accepted platform that bridges the gap between cash and digital transactions.

The widespread use of Verve cards reflects a growing acceptance of digital transactions, marking a shift away from reliance on cash.

By empowering individuals and businesses to embrace cards, Verve is paving the way for a more inclusive and efficient financial landscape.

The benefits of a cashless society go beyond mere numbers. The enhanced security of digital transactions replaces the vulnerability of cash, which carries a higher risk of theft and fraud.

With each swipe of a card, these risks diminish, and businesses gain greater transparency and control over their finances, allowing for better financial planning and growth.

Transitioning to card-based transactions also has the potential to foster a more secure and transparent payment ecosystem. Cash transactions are often untraceable, contributing to tax evasion and hindering the government’s ability to regulate economic activities. By leaving a digital footprint, every Verve card transaction promotes transparency and accountability, pushing the informal economy into the fold and fostering greater financial inclusion.

While the transition to a cashless Nigeria may have its challenges, card-based transactions offer a transformative solution. Verve’s leadership in the industry, with over 50 million payment cards issued, demonstrates the increasing acceptance of digital payments in the country. By embracing the advantages of card-based transactions, Nigeria can navigate its economic landscape more efficiently, drawing inspiration from Ghana’s successes.

This shift provides a practical way to mitigate security concerns, reduce reliance on cash, and foster a more transparent and secure payment ecosystem.

Through collaborative efforts from the government, financial institutions, technology providers, and strategic partnerships with relevant stakeholders, Nigeria can unlock the vast potential of a cashless economy.

Verve, with its deep understanding of the Nigerian market and commitment to financial inclusion, stands ready to be a catalyst for change.

By embracing the transformative power of cards, not just as plastic rectangles and other forms of payment tokens, but as keys to a more secure, efficient, and prosperous payment ecosystem, Verve can lead Nigeria towards a brighter financial future.

This despite the Central Bank of Nigeria (CBN’s) directives to the banks to continue to issue, accept old and redesigned naira banknotes.

Old N100, N200, N500, N1000 Banknotes Remain Legal Tender Indefinitely, says CBN

Investigations show that banks are still rationing the naira notes to customers in the banking halls, while Automated Teller Machines were programmed to dispense limited cash.

Recall that the country faced massive cash scarcity between February and March this year which resulted to the crumbling of some small businesses.

According to a Punch report, it was that ATMs at FCMB, Gate, Ejigbo, customers who went to withdraw cash were disappointed as they were not dispensing cash.

When some officials of the bank were asked why there was no cash for withdrawal, they said the bank did not load cash into the machine.

At GTBank, Gate Ejigbo, ATM’s were dispensing maximum of N5,000 to non-bank customers, while customers of the bank could withdraw up to N20,000.

Ecobank at Gate, Ejigbo paid non-bank customers up to N10,000, while bank customers could withraw as high as N20,000.

Operators had linked the cash scarcity which commenced in recent weeks to fear that the banking regulator may ban some old denominations by year end.

However, to alleviate the fear, the acting Director, Corporate Communications, CBN, Mrs Sidi Hakama, in a statement, said, “Following the order of the Supreme Court on Wednesday, November 29, 2023, granting the prayer of the Minister of Justice and Attorney-General of the Federation to extend the use of old naira banknotes ad infinitum, the CBN has directed all its branches to continue to issue and accept all denominations of Nigerian banknotes, old and re-designed, to  and from Deposit Money Banks.

“For the avoidance of doubt, the Supreme Court ordered that the old versions of N200, N500 and N1,000 banknotes shall continue to be legal tender, alongside the re-designed versions.”

Some of the spokespersons of the banks who would not want to be quoted said there was no new directive from the CBN to limit the cash transactions to customers.

“The scarcity could be due to some cash hoarded that have not been returned back into the economy,” a bank source said.

[Story Source – Image Source]

Sofri recently trended on Twitter for its uptime and optimal services to the customers. Well, could it be because the player is relatively new in the block with fewer customer base since it was launched only about a year ago?

In this interview, Barnabas Okwudibie, the Chief Operating Officer of Sofri powered by Links Microfinance Bank, a subsidiary of DLM Capital Group, expatiate on how they did it and the plans for the future after hitting 60,000 customer base in just seven months; insisting that Sofri as a Lifestyle Digital Bank is prepared for Africa-wide expansion.

Barnabas spoke to Peter Oluka:

For the sake of our reader, kindly, tell us a brief of your background

My name is Barnabas Okwudibie, the Chief Operating Officer of Sofri powered by Links Microfinance Bank, a subsidiary of DLM Capital Group.

Links Microfinance Bank launched Sofri Bank a few months back; What has been the penetration rate (in the market)?

Thank you for this question. It has been a great journey actually. Like you rightly said, Links Microfinance Bank was acquired by DLM Capital Group about two years ago and we went ahead to launch Sofri Digital Bank last year. Since then, we have been able to prove to the markets our intentions; today, our customers trust us. We’ve been able to come up with innovation around the digital banking lending space. We built a one stop shop for our customers to bring banking closer to them. Despite that glorious journey we believe there’s too much to do when we look at the Nigerian market.

What are the unique offerings of Sofri digital Bank?

Sofri offers bespoke digital banking experience. We do both online and offline lending. By online lending, we lend via our digital mobile app.

We also loan to customers in the public service and the private organisations. Our customers have access to transfer money with ease. They can make multiple transfers at the click of a button. We are one of the few banks in our space that offer this service.

Aside from that, you can make payment with Sofri via a card which is our ATM card. It is very effective. The downtime is about zero. So you can enjoy prominent banking with ease; top up data or recharge, pay utility bills on the Sofri app.

Looking at the elephant in the room: The cashless policy implementation by the CBN/banks was greeted by cries by many Nigerians. Is it that the people are not prepared or the technology is not robust enough. What do you think led to the transactions’ failures?

For me, I’ll take that question from a personal perspective. So, the cashless policy has very good objectives. However, considering where we are, we must have observed some issues in the implementation. It is a learning curve for Nigeria; the regulators, the operators, and other stakeholders in the system. I can’t say the policy has failed; it is just that we keep learning and improving the system. We see areas we have to make-up and ensure that everything goes well. We operators in the banking sector need to ensure that yes, we have good technology in place to be able to serve the customers while the public should quickly embrace the cashless policy, embrace the use of technology to improve the transactions.

The other aspect is the enlightenment of the people. I don’t think if the regulator had carried out enough orientation for the people, probably we should have experienced less issues.

Links Microfinance Bank through Sofri rolled out a campaign at the heat of the cashless policy implementation challenges. The reward campaign in which 100 customers get 10,000 a week. Tell us more about it?

Sofri is a lifestyle digital bank. We are proud to be one of the banks in Nigeria that give back to the customers. What we have decided to do is to see that we have encouraged the under-digitized population in the market. When they come to us to open an account we are able to ‘give back’ to them.

So, we thought of the best way to do this which gave rise to the reward promo. Just download the app on the iOS or Google Play Store to create and account, you qualify for a raffle. The raffle is done every Thursday by 12 Noon.

Just follow us on social media for a live stream. Once you are among the winners you get credited N10,000. We have been doing this for the past three weeks which has been a wonderful experience. We roll out N1 million every week.

You know we are talking about cash crunch; do you give the winners cash or it is transferred to their Sofri account?

They get credited instantly via the account they provided. We want to encourage more people to embrace digital payment. They are also encouraged to get the Sofri ATM card for cash withdrawal. It is a very transparent process and everything is Live streamed on social media.

What’s been the feedback from the customers (winners) so far?

It has been wonderful. Like I said earlier, in our society today people want to trust institutions to do business with them. The customers who have won from the raffle exercise have given good testimonials about the bank and they’ve come to understand that yes, it’s not just having an account with Sofri, they cherish the relationship. The Sofri Bank account holders see themselves as part of this family. We take feedback from them on areas we need to improve. We made our platform very interactive.

What is the spread of the (promo) customer participation because when it comes to financial inclusion, most times, rural dwellers are not adequately covered?

The spread of this promo is nationwide (from every location in Nigeria). We’ve seen customers calling us from the Southern part of Nigeria and from the Northern part. It is exciting. Sofri brand, our vision is to see that we can grow from Nigeria to other Sub-Saharan African countries. So, we’re not restricting ourselves to just Lagos.

The promo is open to everyone in Nigeria. Our push, like you said, is to see that we take care of the unbanked.

That is why we’ve made our process so simple. We leverage innovative technology to see that we get more people into the Sofri Bank ecosystem irrespective of where they are. Our customer acquisition has been top notch. Sofri Bank’s customer base has grown to around 60,000 in less than a year. The transfer success rate on the app is around 99%.

The NLC had planned to launch a nationwide indefinite strike tomorrow (March 29), picketing the offices of the Central Bank of Nigeria and other government offices across the country in protest of the cash crisis, which had caused untold hardships for Nigerians and businesses.

In a monitored broadcast by TechEconomy, the leaders of the union gave the CBN, two weeks to normalize the money supply nationwide.

Details later…

The apex bank also directs all Banks to load their Automated Teller Machines (ATMs) as well as conduct physical operations in the banking halls through the weekends.

The Acting Director, Corporate Communications Department of the CBN, Dr. Isa AbdulMumin, said this in Abuja, on Friday, March 24, 2023

He confirmed that the commercial banks had received a large quantum of cash in various denominations for onward circulation to their respective customers.

He, therefore, urges Nigerians to be patient as the current situation will ease soon with the injection of more banknotes into circulation.

POS Operators

Genesis of Nigeria’s Cash Crunch

Backlashes

It’s been weeks since I have touched Naira notes and my experience is not different from a typical Nigerian. Every Nigerian has been experiencing a cash crunch in the past few weeks.

A backstory, Last October, the apex bank announced its decision to redesign the notes, adding that members of the public were hoarding banknotes, with statistics showing that over 85 per cent of the currency in circulation is outside the vaults of commercial banks.

Available data at the bank showed that in 2015, currency-in-circulation was only N1.4 trillion. As of October 2022, currency in circulation had risen to N3.23 trillion; out of which only N500 billion was within the banking Industry and N2.7 trillion was held permanently in people’s homes.

Based on data on the 2022 Nigeria Fintech Map by Segun Adeyemi, we have over 70 Fintech startups playing in Mobile money/Informal banking, payment processing switching infrastructure and digital banks verticals.

Despite the increasing payment channels available to Nigerian consumers, the digital payments industry remains significantly under-tapped. Payment for goods & services is mainly done with cash.

According to the Enterprise Development Centre (EDC) of Pan African University, cash payments accounted for 95.3% of transaction volumes at the end of 2018.

Non-cash transactions are expected to reach 17.8% of total transaction volume in 2023 from 4.7% at the end of 2018.

I guess the EDC forecast couldn’t predict the apex bank Naira redesign that will lead to forcing digital transactions down the throats of Nigerians.

This disruption has created opportunities for mobile money firms and the innovation ecosystem in Nigeria.

Before we get into the massive opportunity for mobile money firms. The failure rate of bank applications is alarming since the massive drive for cashless. The question is are Nigeria banks/Fintech not prepared for this and why is the failure rate so high?

Let’s explore some of them:

Poor internet connectivity: One of the primary reasons why bank apps may fail is due to poor internet connectivity. Nigeria has relatively slow internet speeds, which can cause apps to crash or take a long time to load. If a user’s internet connection is unstable or slow, it can lead to a poor user experience and cause the app to fail.

As of 2022, the estimated internet penetration rate in Nigeria is about 55.4%, according to Datareportal. This means that about half of Nigeria’s population has access to the internet. While internet penetration has been steadily increasing in recent years, there are still significant barriers to the widespread adoption of the internet in Nigeria.

Inadequate infrastructure: Nigeria’s banking sector is still developing, and the country’s digital infrastructure may not be sufficient to support the growth of mobile banking. For example, there may not be enough server capacity to handle the volume of transactions that occur on bank apps, leading to slow response times and app crashes.

Incompatible devices: Bank apps may not be compatible with certain devices or operating systems, leading to technical issues and app crashes. This can be a problem in Nigeria, where many people use older devices or low-end smartphones that may not have the processing power or memory required to run complex apps.

Security concerns: Security is a major concern for banks and their customers, and if there are vulnerabilities in the app’s security protocols, it can lead to app failures. Banks may implement security measures, such as two-factor authentication or biometric verification, which can sometimes cause app failures if not implemented correctly.

User error: Sometimes, app failures can be caused by user error. For example, if a user enters the wrong login credentials repeatedly, the app may lock them out, leading to an app failure. Similarly, if a user does not update the app regularly, it can cause the app to fail due to compatibility issues.

To mitigate these issues, banks can take steps such as improving their infrastructure, conducting regular security audits, optimizing their apps for lower-end devices, and providing customer education to prevent user errors.

However, the ball does not stop at the bank’s door, because if you look at the tech stack of electronic fund transfer in Nigeria it is built on

1. Nigeria Inter-Bank Settlement System (NIBSS) Instant Payment (NIP):

NIBSS Instant Payment (NIP) is an electronic payment system that facilitates instant interbank transfers between accounts in Nigeria.

The technology stack behind NIP includes:

• Application Programming Interface (API): NIP provides an API that allows banks and other financial institutions to integrate with the system and initiate transfers on behalf of their customers.
• Web Services: NIP provides web services that allow customers to initiate transfers through their bank’s online banking portal or mobile app.
• Database: NIP stores transaction data in a secure database that is accessible only to authorized parties.
• Encryption: NIP uses encryption to ensure that sensitive data, such as account numbers and transaction details, are secure and protected from unauthorized access.

2. Unified Payments Interface (UPI):

Unified Payments Interface (UPI) is a real-time payment system that allows users to transfer money between bank accounts using their mobile phones. UPI was developed by the National Payments Corporation of India (NPCI) and has been adopted in Nigeria as a way to facilitate instant payments.

The technology stack behind UPI includes:

• Mobile Application: UPI is accessed through a mobile application that is installed on the user’s phone.
• Application Programming Interface (API): UPI provides an API that allows banks and other financial institutions to integrate with the system and initiate transfers on behalf of their customers.
• Immediate Payment Service (IMPS): UPI leverages the use of the Immediate Payment Service (IMPS) to ensure that transactions are processed in real-time.
• Encryption: UPI uses encryption to ensure that sensitive data, such as account numbers and transaction details, are secure and protected from unauthorized access.

3. Payment Service Providers (PSPs):

Payment Service Providers (PSPs) are third-party entities that provide electronic payment processing services to merchants and customers. In Nigeria, PSPs are licensed by the Central Bank of Nigeria (CBN) to provide payment services to banks and other financial institutions.

The technology stack behind PSPs includes:

• Payment Gateway: PSPs provide a payment gateway that allows merchants to accept online payments from customers.
• Fraud Detection: PSPs use advanced fraud detection techniques, such as machine learning algorithms, to detect and prevent fraudulent transactions.
• Payment Processing: PSPs process payments between banks and merchants, ensuring that transactions are secure and reliable.
• API: PSPs provide an API that allows merchants to integrate with the system and initiate transactions on behalf of their customers.

Now, let’s go back to poor internet connectivity: as stated earlier As of 2022, the estimated internet penetration rate in Nigeria is about 55.4%, according to Datareportal.

For perspective, these user figures reveal that 98.63 million people in Nigeria did not use the internet at the start of 2023, suggesting that 44.6 per cent of the population remained offline at the beginning of the year.

So it is apparent that data connectivity is crucial to driving financial inclusion however it is interesting to note that a total of 193.9 million cellular mobile connections were active in Nigeria in early 2023, with this figure equivalent to 87.7 per cent of the total population. Let’s keep in mind that most Nigerians have two sim cards/phones.

Essentially, we need to build solutions that will solve transactions involving low-value amounts of cash instantly. When you think about taking a 100 naira bus or buying 50 naira orange from an Aboki stand or tipping your gateman.

Before the cash crunch, both the payer and payee typically incur zero transaction costs and experience zero settlement time. We need to replicate that fast.

Interestingly, NIBSS has a collection service called mCash. On the website m Cash is described as an innovative payment solution designed to facilitate retail payments to Merchants.

It is accessible to payers via mobile USSD technology which in recent times has become the most accessible channel (even without the internet) for financial and non-financial transactions. mCASH leverages the NIBSS Instant Payments (NIP) infrastructure for immediate fund delivery to Merchants’ accounts.

I believe the opportunity is massive for Fintech which can build amazing solutions on this technology.

This is also a great opportunity for MTN Momo to drive massive adoption.

One of my favourite startups Moniepoint is aggressively driving adoption. With over 100 billion USD processed in 2022, maybe they will be 3x the revenue in 2023.

The innovation ecosystem can also drive a fintech hackathon focused on creating innovative financial products that can work with existing infrastructure in Nigeria, developing solutions that work with existing mobile money platforms, or creating new digital financial products that can be accessed through USSD codes or SMS.

We can also think about developing new technologies to improve internet connectivity.

This could be an effective way to promote financial inclusion and improve access to financial services for people with limited internet connectivity.

*This article by Kolapo Ogungbile was first published here.