In recent years, non-bank providers have been integrating financial services into various products and services. This enables merchants that have these embedded financial services to interact with their customers in new ways.

Recall Nigeria’s recent cashless experiment? The main problem was not because the country wanted to go cashless, rather, people were unable to pay for goods and services. Yet, embedded finance could have solved this.

There were stories for instance in the poultry industry where thousands of farmers were said to have disposed of their eggs simply because they were dependent on cash. Maybe not individually but the value chain in which they operated was cash dependent. But what if one of the many big players had introduced embedded finance in that value chain?

The European Merchant Bank notes that embedded finance has the opportunity to truly change the financial sector forever, reaching a $138 billion value by 2026.

Other estimates value this market in the trillions of dollars over the next decade, and Nigeria can also tap into these potentials in driving a cashless economy.

Here are three possibilities with embedded finance:

1. Embedded payments

Embedded payments refers to the integration of payments capabilities within an app or a platform that was not primarily designed to offer financial service. What it does is that when users need to make payments within that ecosystem, they need not go outside of it before money can be exchanged.

So, imagine in the midst of all the commotion from Nigeria’s cashless experience, if more organisations providing goods or services had embedded payments, there would have been less worry for Nigerians desperate to find cash.

From such platforms, payments could have served a wide range of reasons, depending on what segment of the economy they were serving.

Examples abound in western markets from Starbucks, Uber, Amazon, Google and even WhatsApp which has a payments service.

Having some of such platforms locally, would have provided reputable intermediaries trusted by people expecting to get paid. For emphasis, while the fear of fake transfers remained an obstacle for some people, receiving payment via WhatsApp (for instance), which they already trust and use daily, would have been easier to adopt.

2. Embedded credit

This works both ways. On one hand, it can enable businesses to extend credit to their customers, allowing them to transact without the need for cash. On the other hand, it can be particularly useful for small businesses, which are already mostly starved of credit, to get access to lending that can keep them afloat when they do not have cash to operate.

What happens when you operate in an industry where vendors are bent on collecting cash before they supply you inputs? This happens a lot, beyond the urban, cosmopolitan areas of Nigeria, where cash still reigns.

In other instances, those coming to buy from you, after you have sourced inputs and produced a thousand eggs, usually only bring cash. However, since their retail side customers did not have access to cash during the cashless period, it means they also didn’t have money to buy from you. As simple as this may sound, it led to the collapse of many businesses.

A solution to both sides of this chaos could have been embedded credit. If enterprises had adopted one platform or the other, which allowed them to embed credit products into their business platforms, they could have been able to allow their consumers to apply for, acquire and repay loans within the platform. They could also have secured credit for their business, maybe in the form of inputs to keep their businesses afloat during the cashless period.

The best part is that they need not invest in custom made technology. These could in fact, be done at, say, cooperative or association levels, and not borne by individuals.

3. Embedded banking

Imagine paying your Uber driver after a trip, but doing so from your wallet in the Uber App. The driver gets this money but does not need to move it to their ‘regular bank account’. Why? Because the ride-hailing app has a feature for a savings account.

This would mean whatever transactions they needed to do from a bank account could now take place from that same Uber app where they picked a customer, got paid and can in turn pay for anything they need.

The payments and credit feature earlier discussed, as well as everything else you can think of in a bank setting, can take place from this facility. This may sound foreign, but an ecosystem like this is possible in Nigeria. It in fact, depicts what could be a perfectly cashless environment. It could even go as far as issuing debit cards, which are linked to that account for them to pay for whatever they somehow can’t do from the app.

Embedded finance can deliver a win-win situation to both businesses that embrace them as well as their customers. The ease of access and low cost to entry is likely to make it viable across social demographics in a place like Nigeria.

Waving your hand to pay after shopping at a store, or simply placing your mobile phone on the checkout counter could seem strange – at least to a number of people in Nigeria. But it is possible and in fact, already standard practice in some countries.

This, and other cashless methods can also be possible in Nigeria if the right technologies are adopted. After all, some people already use tollgates where courtesy of something called e-tag, they are let through without waiting to pay every time. It is a form of cashless technology too.

Global cashless payment volumes are set to increase by more than 80% from 2020 to 2025, from about 1tn transactions to almost 1.9tn, and to almost triple by 2030, according to analysis by PwC.

Asia-Pacific will grow fastest, with cashless transaction volume increasing by 109% from 2020 to 2025 and then by 76% from 2025 to 2030, followed by Africa (78%, 64%) and Europe (64%, 39%). Latin America comes next (52%, 48%), and the US and Canada will have the least rapid growth (43%, 35%).

Here are some technologies Nigeria should be looking into so as to strengthen the move towards being cashless.

QR code

Have you ever come across a sign that says ‘scan to pay’ (with a pattern of black squares) after shopping at a store? Any business or individual that receives payment can provide this option, which is derived from Quick Response codes, which are machine-readable barcodes that store information.

In 2020, Ghana became the first African country to introduce a universal QR code. In South Africa, the Payments Association of South Africa (PASA) has identified a need to streamline the experience of both payer and payee and is in the process of standardising QR codes across the sector.

In 2021, the Nigeria Inter-Bank Settlement System Plc (NIBSS) launched the New Quick Response (NQR) payment solution code, which it describes as “an innovative payment platform implemented on behalf of all financial service providers.”

The New Quick Response code solution offers a robust platform that delivers instant value for P2B and P2P transactions by simply scanning to pay.

Generally, making QR codes more widely used will create another easier way for people to transact without cash, and cheaper for merchants to receive their money.

Mobile money

Nigeria still hasn’t fully hacked Mobile Money, despite the successes recorded in other countries across Africa. In 2021, CBN data shows Nigeria recorded 1.2 billion mobile money transactions with a value of N15 trillion (about $34 billion using official rates).

However, in Ghana, with a fraction of Nigeria’s population, the volume of transactions was 4.25 billion in 2021, with a value of GH¢ 978.32 billion (about $75 billion).

Let’s not even compare with Kenya or other African countries blazing the trail in mobile money. It is clear that this technology remains largely underexplored in Nigeria.

With the country’s large rural population and low internet penetration, mobile money offers those who would otherwise be disadvantaged a way to send and receive money electronically and with less sophistication required.

Digital wallets

iPhone users should be familiar with Apple Pay and their android contemporaries, Google Pay. But, whenever you are sceptical of inputting your card details on a website, has it occurred to you to use that Apple or Google pay function (which you already trust) on your device?

There are other options which PwC described in a report as ‘super-apps’ such as WeChat Pay and Alipay in China, and in different countries, local options abound with different names. While many people already use these platforms it is still not a widespread means of payment in Nigeria.

These digital wallets allow consumers to load and store payment methods and access funding sources, such as cards or accounts, on their mobile devices.

The use of digital wallet–based transactions grew globally by 7% in 2020, according to a report by FIS, a financial services technology group, which predicts that digital wallets will account for more than half of all e-commerce payments worldwide by 2024, as consumers shift from card-based to account- and QR code–based transactions.

Nothing stops the growing fintech industry in Nigeria from introducing similar platforms to take advantage of the immense opportunities.

Contactless payments

This has been referenced a few times earlier and it is one innovative way to not only get more people to go cashless, but also in a way that would excite them.

Imagine that you have finished shopping at a supermarket and the cashier tells you to simply hold your phone near theirs and with the tap of a button, payment is done.

This movement of money from you as a customer to the merchant happens through near-field communication (NFC) technology, a function you may have seen on your phone, never utilised and probably been curious as to what it does.

A Tappit article further explains that instead of swiping or inserting your bank card into a reader and typing a PIN, you simply ‘tap-and-go’ or ‘wave and pay’. To make a payment, you place your bank card or contactless-enabled mobile phone near the reader.

These technologies, in addition to other existing cashless payment methods like the regular bank transfers, card payments, can help drive Nigeria’s cashless economy further.

When a credit alert drops on your phone, chances are you will get excited. Even if it wasn’t a surprise and you were expecting that money. But when it is a debit alert, there’s also a certain type of gloom you feel; you want money to keep coming in but as little as possible of it going out.

It may be safe to say most of us feel that way.

Now, imagine the debit alert was for a transaction you know nothing about. A commonly reported theme has been alerts that your card was used to make deposits on a gambling website, whereas you may never have even indulged in gambling your entire life.

At other times, you are shown a debit alert by someone who wants to purchase goods or services from you, but only later realise they showed you what has now been termed ‘fake alerts’. By this time, your goods, for instance, would have been long gone.

In recent months, social media has been awash with reports of money literally growing wings and leaving some people’s accounts to those of other people without authorisation. Many of these cases have gone viral on social media, causing embarrassment for the banks involved – The issues are either quietly – or corrected with public acknowledgement. But not all are resolved, at least not yet.

As much as the country and even individuals would like to go cashless, these bad experiences leave a sour taste in the mouth, and they have continued to rain on the parade as Nigeria marches towards a cashless economy. It must be stressed that a cashless economy does not mean theft of money will stop, what it does is to change how thieves go about it. But more importantly, it also doesn’t mean thefts must occur, at least not if systems are strengthened and the right protocols are put in place.

In the electronic world, an article on The Balance Money describes hackers as the bank robbers and muggers and in a cashless society we are all exposed to them. According to the Nigeria Inter-Bank Settlement System Plc (NIBSS), growth in the use of electronic channels, specifically mobile devices has also enticed fraudsters into focusing their efforts on these electronic channels.

When an attack is successful and the culprits are able to drain funds from your account, you could be effectively left stranded. God forbid you needed that money for a life threatening emergency because that could be the end unless you are one of the lucky few whose funds get recovered in a place like Nigeria – and on time too.

Agusto & Co.’s ‘2022 Consumer digital banking satisfaction index for Nigerian banks’, found that approximately 59 percent of respondents had been fraud victims on the digital platforms of their banks.

The figures in terms of number of attacks, success rate and amounts lost remain a source of concern. By the third quarter of 2022, the total number of frauds & forgeries cases reported by Nigerian banks was 19,314 as against 27,356 incidents reported in the second quarter of 2022.

But there’s more. While the number of attacks represents a 29.40 percent decrease between the periods, the total sum reported to be involved in fraud cases increased by 9.50 percent to N9.62 billion from N8.78 billion in Q2 2022. Also, for the total amount lost due to fraud incidents, there was a significant increase of 207.94 percent from N1.17 billion in the second quarter of 2022 to N3.62 billion in the third quarter of 2022.

In essence, the number of attacks may have decreased within that particular period, but more money was lost to the fraudulent attacks.

These insights were provided in the Q3 2022 report by FITC, an organisation mandated to receive data on fraud from all Nigerian banks and prepare quarterly reports.

The figures show that the highest number of occurrences were recorded under computer/web fraud followed by mobile fraud which includes fraud activities through USSD transactions and ATM related fraud.

BusinessDay had even reported that every day between January and March 2022, there was an average of 450 incidents of frauds and forgeries against Nigerian bank customers. In those three months, the attackers targeted N14.65 billion, with Computer/Web Fraud responsible for N10.57 billion (72.18 percent), and Mobile Fraud recording 1.48 billion (10.08 percent).

Those 40,522 attacks had resulted in N1.54 billion lost by bank customers. Computer/Web Fraud accounted for 70.51 percent (N1.07 billion), followed by Mobile Fraud accounting for 17.58 percent (N270.92 million) at the time.

Going back a bit, data by NIBSS also showed that fraud attempts via mobile channel saw a 330 percent increase year-on-year (YoY) between 2019 and 2020, while attempts via web and POS channels saw a 173 percent and 215 percent increase YoY. In those nine months, 96 percent of the attacks were successful and there were 46,126 of such attacks.

“This trend is expected to continue as Nigeria further grows financial inclusion and customers become increasingly dependent on electronic channels for their day-to-day transactions,” said NIBSS. In other words; things are expected to get a lot worse, according to the organisation described as Nigeria’s central switch for the financial industry.

Fraud is and has always been a large threat to commerce and e-payment transactions. It is impossible to totally eliminate the chance of fraud, but applying timely measures and ensuring the use of secure payment infrastructure can help reduce or even eliminate these risks.

Security should continue to be top priority for every party involved in ePayment transactions. Fraud prevention involves taking measures to stop fraud from occurring and taking steps to detect frauds quickly (when they occur) and stop them as soon as possible. Different techniques for preventing and detecting frauds are required as there are different types of fraud in e-payment transactions.

Awareness of these risks by merchants, consumers and individuals plays an important role in reducing fraud in e-payment transactions. Merchant awareness and education is important – they should be aware of the types of frauds, implications and application of best practices.

Consumer awareness and education is also important in order to reduce identity theft or payment data theft. This would help the individual in adopting an active and cautious attitude when carrying out electronic transactions. It could teach them to be aware of possible risks, avoid e-scams, and minimise giving vital information to merchants (or other parties) when carrying out electronic payments.