24 Jun 2008 |
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E-Payment: Towards A Cashless Economy By Remi Babalola We are all here for a common purpose. And that purpose is to spur the commitment in us to ensure that Nigeria becomes a leading force in Africa and the world. As you are aware, financial systems and mode of transactions all over the world are changing rapidly. The inclination, in developed countries is to move more towards electronic payment than any other form of payment for convenient, fast and easy business transactions. For Nigeria to join this league of developed economies by 2020, e-payment must form the bedrock of all financial transactions. Along that line, I have decided to speak on “e-payments powering NV2020”. In the past 25years, we have seen what people have termed “miraculous” advancements in some economies. Especially our Asian ‘tigers’ – China, Malaysia, India as well as our fellow Africans – Angola, South Africa. Indeed, the immense benefits associated with the use of electronic payments both to the individuals and the country are not in doubt. But while tremendous progress is being made on card system in developed countries, the African continent appears to have been left significantly behind. It is in recognition of the above development which has implications on the growth of business on the African continent that the need for urgent action became imperative, and hence this conference, in order for the continent to catch up with the growing trend. I would like for each of us to reflect when we have a minute and ask ourselves whether some time ago we would have thought to be here right now. About 8 years ago, MTN predicted that there would be 40 million subscribers by the end of 2010. Today there are 43 million active subscribers. Some time ago, would you ever have thought that such a forum as this would assemble to engage the minds of the Nigerian Public. Have you decided where you play in all of this? What is your hope for Nigeria? The main objective of the Conference is therefore to share experiences and compare notes amongst major economies, globally, with a view of up-scaling and fast-tracking the growth of the electronic card payment system across the African continent. I am confident that Nigeria is ready to be part of this global development and we cannot continue to wonder how a country can reposition itself to drive global change. The Nigerian Vision is an economic plan to make Nigeria a fully developed top 20 economy by 2020. Nigeria is currently ranked No. 49 out of 190 (China 4, India 12, SA 30) on the list of countries by GDP (nominal) of the world. In terms of growth rate, she is ranked No. 35 at 6.1%. In order to achieve NV2020, we need to ask ourselves, what drives global change? What have our fellow countries done differently and in what ways? I have identified the main focal points for global change as: • People because demographics drive the rapid expansion of telecommunications and Information network technology. • Geopolitics because there are agreements among nations and regions • Economics because GDP growth in nations like Nigeria is expected to double. • Environment, because issues such as pollution and waste disposal continue to change how we live. • Technology, because technology improves the quality of life, the speed of information flow, and more importantly, technology fosters creativity. We know that Nigeria would have to pull all her resources, garner all the skills, inspire commitment to her citizens and execute!, execute!, execute! to ensure that the vision is reached. Based on Goldman Sach’s analysis and FSS2020, Nigeria will have to attain an annual GDP growth rate of approximately 13% per annum. This can only be attained if we exert some pressure on economic development which invariably will cascade down to allow for reforms in payment systems and encouraging financial institutions to leverage on their IT infrastructure to introduce e-payments. Thereby, giving them competitive edge, convenient and safer means for customers to access their funds. Cardexpo Africa 2008 has been uniquely designed and packaged to focus on how Africa moves towards developing the African renaissance by instituting financial systems hinged on robust cross-border electronic payment models. The conference is therefore positioned to help delegates understand how to benefit from the booming industry. It is expected that interactions at the conference would lead to a greater understanding of the drivers behind e-payment and identification to broaden the industry initiative in Africa. I must also say that the aspiration for the conference emerged out of the realization that this continent is endowed with both human and material resources to place it in a comfortable position to achieve greatness. However, resources alone cannot guarantee greatness. They must be harnessed through a combination of imaginative thinking with dogged and fair-minded implementation. This, by implication, requires concerted efforts on the part of entrepreneurs in the card business which depends on the infrastructure, especially communications, available for transactions to be processed and managed successfully including acceptability by and education of the banked and un-banked market. Nigeria remains the hub of the West African market and any investor coming into Nigeria would easily access the sub-regional market and the rest of the African continent. Essentially, the main thrust of the present administration economic policy is to make the business climate more friendly by revamping the decaying infrastructure that are critical to productivity such as energy, transportation, telecommunications and creating a stable macro-economic environment. Also the government is determined to leave a lasting legacy of transparency, good governance, accountability and the rule of law. Given the reform agenda alongside the return to democracy and the vast resources in Nigeria, the country is now set for orderly development and expansion of the economic base. The medium and long-term prospect for the country is very positive and, indeed, very enticing. Today there are up to seven different electronic payment channels in Nigeria, Automated Teller Machine popularly known as ATM’s, Point of Sales terminals, Mobile, Voice, Web, Interbank Branch, and Kiosks. E-payments initiatives in Nigeria have been undertaken by indigenous firms and have been stimulated by improvement in technology and infrastructure. There has also been an upsurge in the use of ATM’s which have brought convenience to banking but not without a few challenges for both banks and customers. The web e-Payment market space continues to deepen, with some solution providers offering free access, and others offering value-added reporting and tracking services. However, Security, which has been acknowledged worldwide, is particularly necessary and remains a challenge. It is important to note that unless customers feel secure with a service, they will be unwilling to promote the use of such. The Mobile space is not left out. Nigeria’s mobile market is one of the world’s fastest growing, attracting investments from South Africa, Europe, China and the Middle East. Banks have introduced SMS alerts, solutions that enable account balance checks, mini-statements, and funds transfers. We have bill payments and ATM Recharge and greater customer usage of phones and improved technological interfaces has laid the ground work for adoption. Today the mobile phone provides a feasible alternative to banking, with an almost 25% penetration rate. There is now a need for global players to be introduced to reshape the marketplace and bring about new opportunities For e-payments to power the Nigerian vision, we need to drive the regional economy and take advantage of the proposed West African currency (the Eco) and also position ourselves to become the regional payment hub by providing financial services to include cross border payments and funds transfer. To do this, there will be a need for a strategy formulation and implementation think tank (most likely private sector driven) that can deploy a strong, harmonized and independent payment infrastructure which can administer an efficient payment system. This team will champion and drive the process: • for an adoption of improved user experience and provision of a reliable and efficient service every time • to carve out a reciprocal interoperability and unhindered interconnectivity between all stakeholders in the industry • to develop usability across all channels in Nigeria and overseas based on internationally accepted best practices and vice versa • to develop a complete suite of e-payment Products and Services by industry players • to maximise Stakeholders’ Investments and collaboration between some of the existing players Undoubtedly, these huge steps in the area of e-payment development as well as a full implementation of on-going FGN reform agenda, Nigeria will attain the status of one of the strongest economies in Africa with huge potential to play a dominant role in the global economy. I would therefore like to advise foreign investors and our friends in Europe to come to Nigeria and take advantage of the current investment opportunities and the generous incentive package that abound in the country especially in the non-oil sectors. If there is any time to come in, it is now. Indeed, the President Yar’adua’s Administration has done quite a lot to enhance the business environment especially in the areas of the stabilization of the polity and the economy, through critical policy reforms and programmes in order to stimulate and fast-track economic growth and transformation of the country. We are determined more than ever before to open-up the economy through the vigorous pursuit and acceleration of our policy of liberalization, deregulation and privatisation. This policy has opened up a window of opportunities to both domestic and foreign investors and I am glad it is yielding splendid fruits in the different sectors of the economy. We will remain committed to the eradication of corruption and all acts that compromise transparency, accountability and due process in the country. From the establishment of the Independent Corrupt Practices Commission (ICPC) and Economic and Financial Crimes Commission (EFCC) to the Due Process Mechanism, efforts have been made to ‘clean-up’ the system and cut ‘excess fat’ from all government contracts and check-mate economic crimes and corruption in the system. No nation in the world can make progress when institutions, structures, policies and programmes remain perpetually contaminated and compromised by corruption, fiscal irresponsibility and indiscipline. We are therefore resolute to sanitise the system completely and I am glad we are making tremendous progress in this regard. We expect that both domestic and foreign investors will utilise the opportunities of the various government initiatives and reform programmes to invest in the Nigerian economy. Before I round up, I want you to consider a typical day in Nigeria in the near future…. Mr. A wakes up to a voicemail message from his sister asking for funds to make her school fees payments. He asks her to come over to collect the cash and she laughs at him asking him what century he thinks he is in. She tells him to get with the program and even advises him on the security aspects of electronic payments. He makes the transfer using his card on his personal internet banking service. As he is on the internet, he decides to purchase some recharge as we all know, when we become scratch happy, our PIN disappears. With a reliable public transport service; Mr. A can pay as he goes by using his contact-less travel card which is linked to his account. Mr. A has had a busy day and decided to eat at his favourite restaurant which he pays for using his card and their POS and today because he is a loyal customer, he has been given a gold card membership and will be given a free bottle of champagne when next he visits. Mr. A returns home and decides to pick up some essentials from the supermarket. He parks his car at the parking lot, nips in to purchase his necessities and returns to a parking ticket which he pays for at the machine with his card. He remembers he is yet to pay his religious obligations. He logs onto his religious organisation’s website and makes his contribution online using his card. His friend Mr. B calls him up to invite him over for dinner. On his way, he is accosted by a less privileged citizen. He mouths, “I don’t have CASH” and flaunts his card. “No shakins oga!, I get card terminal and nothing too small!”. It is important to note that all through the day, Mr. A has not used CASH. What is our hope for the future? We should avail ourselves with the opportunity to reflect deeply not only on how to profit from the booming banking and financial system, but also on how to broaden and deepen the electronic payment initiative in Africa, and Nigeria in particular. Remi Babalola is Finance Minister of State. The article is an excerpt from his keynote at CardExpo Africa Conference held recently.
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