Digital payment platforms
Digital payment platforms
Business Model Description
Provide digital payment services especially for healthcare and transport service providers.
Expected Impact
Improve financial inclusion across the country as well as drive financial literacy and economic growth.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Case Studies
Country & Regions
- Nigeria: Countrywide
Sector Classification
Services
Development need
Nigeria is currently lagging behind on SDG 8, with a score of 50.3. Steady and sustainable economic growth drives many sectors of the economy, because it allows for investment in infrastructure, human capital, innovation etc.(1) The service sector is necessary for economic growth and transitioning away from a resource-based economy towards social and economic development.
Policy priority
The service sector is the biggest contributor to gross domestic product (GDP) accounting for around 54.6% in Q1 2019.(2) The government has identified the need for better legal and regulatory frameworks to drive domestic and foreign investment and growth in the service sector. Policy measures include stimulating financial inclusion by providing open banks in rural areas.(3)
Gender inequalities and marginalization issues
Only 27.3% of women (females aged 15 and older) have an account at with a financial institution or a mobile money service provider in 2017.(13)
Investment opportunities introduction
Reflecting the country’s rich cultural diversity, the tourism and creative industries offer tremendous opportunities to create jobs and attract foreign exchange earnings. Cumulatively, the service sector has the potential to provide employment opportunities and increase revenue.
Key bottlenecks introduction
Legal and regulatory frameworks need significant reform around digital services to mobilize private investments.
Consumer Services
Development need
The low penetration of financial services (insurance) relative to other countries presents a huge opportunity for growth. The financial sector is highly vulnerable to external shocks (especially capital markets). Therefore, the government has prioritized strengthening institutions to build healthy financial systems.(2)
Policy priority
The service sector is the biggest contributor to gross domestic product (GDP) accounting for around 54.6% in Q1 2019.(2) The Nigerian Electricity Regulatory Commission's (NERC) order for all electricity distribution companies to migrate to cashless payment platforms in January 2020 has contributed to expanding the digital payment market.(4)
Investment opportunities introduction
The Nigerian e-payment ecosystem has gained significant traction and continues to expand. The Nigerian Electricity Regulatory Commission's (NERC) order for all electricity distribution companies to migrate to cashless payment platforms in January 2020 has also contributed to expanding the digital payment market.(4)
Professional and Commercial Services
Pipeline Opportunity
Digital payment platforms
Provide digital payment services especially for healthcare and transport service providers.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Between 2012 and 2018, instant payment volume increased from 4.4 million transactions to 729 million.(5)
Indicative Return
10% - 15%
Investments in financial technology can generate internal rates of return (IRRs) up to 12%.(6)
Investment Timeframe
Short Term (0–5 years)
Investment in digital e-payment platforms typically generates cashflow in fewer than 5 years.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - Volatile
Business - Supply Chain Constraints
Market - Highly Regulated
Impact Case
Sustainable Development Need
Cash transfer remains the most common payment instrument, especially with a significant proportion of the population dwelling in rural areas with limited access to internet and mobile broadband connectivity.
The financial sector is highly vulnerable to external shocks (especially capital markets). Therefore, the government has prioritized strengthening institutions to build healthy financial systems.(5)
The low penetration of financial services (insurance) relative to other countries also presents a huge opportunity for growth.(5)
Gender & Marginalisation
Numeracy rates among rural dwellers are high, which makes digital payment solutions viable.(5)
Expected Development Outcome
Adopting digital financial services could increase Nigeria’s gross domestic product (GDP) by as much as 12.4% by 2025 through increases in productivity, investment and labor.(7)
Investments could increase financial inclusion, by promoting access to financial services, increasing cost savings through higher efficiency and speed, and increasing transparency by improving business accountability.
Gender & Marginalisation
Digital payment services can increase financial literacy among women and lower entry barriers for female and small businesses to digital market sales.
Primary SDGs addressed
8.3.1 Proportion of informal employment in total employment, by sector and sex
8.10.1 (a) Number of commercial bank branches per 100,000 adults and (b) number of automated teller machines (ATMs) per 100,000 adults
8.10.2 Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider
Women accounted for 52.3% on non-agricultural employment in 2019 (compared with total employment in non-agriculture).(13) In 2019, Nigeria had approximately 54.6 million informal workers, accounting for 53% of the labor force.(14)
N/A
39.67% (15)
One of the major avenues considered in the Economic Recovery and Growth Plan (ERGP) is formalizing the informal sector. This focus reflects Nigeria's high rate of informal employment and the enormous potential of this sector to absorb a large proportion of the working age population.
N/A
100% (15)
Secondary SDGs addressed
Directly impacted stakeholders
People
Corporates
Indirectly impacted stakeholders
People
Outcome Risks
Inequalities may widen if low income earners in rural areas lack access to financial services.
Impact Risks
Efficiency risk given current poor infrastructure and limited technical know-how.
Execution risk if activities are not delivered as planned and do not result in the desired outcomes given weak regulation.
Impact Classification
What
Likely to generate positive outcome through increased access to financial services, improved transparency of business, increased efficiency, contribution to gross domestic product (GDP).
Who
Healthcare providers, transport operators, consumers
Risk
Poor stakeholder management and lack of regulatory frameworks could slow progress. Security threats are also a major risk.
Impact Thesis
Improve financial inclusion across the country as well as drive financial literacy and economic growth.
Enabling Environment
Policy Environment
The Central Bank of Nigeria (CBN) has issued several policy and regulatory frameworks to guide the development of payment systems in Nigeria.(7)
Digital financial services (DFS) pilot: Nigeria recently started transitioning to a cashless economy by 1 January 1 2021, with an initial DFS pilot in Lagos state. The policy aims to reduce the amount of physical cash circulating in the economy, and encourage more electronic-based transactions.
The Nigerian e-payment ecosystem has gained significant traction and continues to expand. The Nigerian Electricity Regulatory Commission's (NERC) order for all electricity distribution companies to migrate to cashless payment platforms in January 2020 has contributed to expanding the digital payment market.(4)
Financial Environment
Financial incentives: A 3-month incubation program - Startup Nigeria - is designed to support innovative idea-staged companies across Nigeria with funding, mentorship and training. The curriculum is designed to move companies from ideas to viable products/services.(10)
Fiscal incentives: The Report on Fintech Laws and Regulations (2020) found no specific investment incentives targeted the financial technology sector.(11)
Regulatory Environment
Central Bank of Nigeria Act of 2007: This Act serves as the regulatory guide for National Payment Systems.
Central Bank of Nigeria Act of 2007: This Act mandates the Central Bank of Nigeria (CBN) to promote and facilitate the development of efficient and effective systems to settle transactions, including developing electronic payment systems.(7)
Electronic Commerce (Provision of Legal Recognition) Bill of 2008: This Bill is modelled on the United Nations Commission on International Trade Law (UNCITRAL) Model Law of 1996 on Electronic Commerce. It incorporates some of the provisions of the UNCITRAL Model Laws on Electronic Commerce and Electronic Signatures, and outlines legal recognition of electronic commercial transactions.(8)
Additionally, the CBN issued regulation for bill payments in 2018 and regulation on electronic payments and collections for the public and private sectors in 2019. These regulations document minimum standards for payment transactions.(9)
Marketplace Participants
Private Sector
Helios, Partech, Global Accelerex, Interswitch, Opay, Flutterwave, Visa
Government
Central Bank of Nigeria (CBN), Nigerian Deposit Insurance Corporation (NDIC)
Target Locations
Nigeria: Countrywide
References
- (1) SDG Center for Africa and Sustainable Development Solutions Network (2019). 2019 Africa - SDG Index and Dashboards Report.
- (2) Nigerian Bureau of Statistics (2019).
- (3) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
- (4) Energy Mix Report (2020). NERC orders DisCos to go cashless over billing. https://www.energymixreport.com/nerc-orders-discos-to-go-cashless-over-billing/
- (5) Nibss-plc.com.ng. (2020). Instant payments mid-year analysis 2019. https://nibss-plc.com.ng/data_image_central/2019/08/INSTANT-PAYMENTS-MID-YEAR-2019-ANALYSIS-min.pdf
- (6) UNDP/PwC Interviews (2020).
- (7) USAID (2020). Enabling market conditions for pay-as-you-go solar - Executive summary. https://www.usaid.gov/sites/default/files/documents/1860/Enabling_Market_Conditions_for_Pay-As-You-Go_Solar_Executive_Summary.pdf
- (8) Oxford Business Group (2015). The Report: Nigeria 2015. https://books.google.pl/books?id=CvRrDQAAQBAJ
- (9) Elias, G., Jikenghan, E. and Edojariogba, N. (2020). International Legal Business Solutions - Global Legal Insights. https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/nigeria
- (10) Startup Nigeria (2021). Startup Nigeria is here. https://www.startupnigeria.ng/
- (11) The International Comparative Legal Guides (2021). Nigeria: Fintech Laws and Regulations 2020. https://iclg.com/practice-areas/fintech-laws-and-regulations/nigeria
- (12) Kazeem, Y. (2019). 'Everything you need to know about African fintech right now', QuartzAfrica, https://qz.com/africa/1751701/everything-you-need-to-know-about-african-fintech/
- (13) United Nations Development Programme (2020). Human Development Report 2020. https://www.ng.undp.org/content/nigeria/en/home/library/human_development/the-2020-human-development-report.html
- (14) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf
- (15) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/profiles/NGA
- (16) Dada, B. (2020). Carbon reports ₦112.6 million PAT and 2.2 million active customers. https://www.benjamindada.com/carbon-financial-result/