E-PAYMENT REVIEW

E-PAYMENT REVIEW

Vol. 08. No. 03 September 2018

RAISING CAPITAL

Startups in Africa will raise more money in 2018 than they did in previous years

The Funding Issue INTERVIEW Niyi Ajao, Executive Director Buiness Development Nigeria Inter-Bank Settlement System Plc

STARTUP NATION Segun Akano, Managing Director, Upperlink INTERVIEW Gbenga Adams, Head, Digital Innovation and Fintech at Sterling Bank

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E-PAYMENT REVIEW Vol. 08 No. 03 | | Sep 2018

EDITORIAL Brown N. Ugbaja Editor Lucy Akokotu Assistant Editor MANAGEMENT Onajite Regha Executive Secretary/CEO Kushimo Oluwayemi Strategy & Projects Manager Adesakin Folasayo Conference Coordinator /Manager

Babatunde Olaleke Communications Manager Lucy Akokotu E-Payment Review Manager Joy Obaji Administration & Membership TRUSTEES Adedotun Sulaiman Chaiman, Financial Reporting Council of Nigeria Tunde Lemo Former Deputy Governor, Operations, Central Bank Of Nigeria (CBN)

Kyari Abba Bukar Chairman, Nigerian Economic Summit (NESG) Senator Ayo Arise Chairman, Fortunes Games Limited Demola Aladekomo Chairman, SmartCity Resorts Plc & Director, Chams Plc GOVERNING BOARD Macaulay Atasie Managing Director, Nextzon Business Services Mitchell Elegbe Managing Director, Interswitch

Transnational

Payments Services

of Nigeria

Onajite Regha Executive Secretary/CEO, E-PPAN

Dele Adeyinka Chairman, CeBIH

Gbenga Haastrup Group Legal Counsel, Interswitch

Valentine Obi Managing Director, E-Tranzact International

Folashodun Shonubi Managing Director, NIBSS Plc

Ochanya Dan-Ugo Group Head, Enterprise Risk Management Unified Payments Services

Chukwuma Ezirim Head, E-Business, First Bank of Nigeria

ALTERNATE BOARD Niyi Ajao Executive Director (Business Development), NIBSS Plc

Bami Akinlade Head, Information Technology, SecureID

Eme Godwin Head, Legal, Etranzact International

PUBLISHED BY THE E-PAYMENT PROVIDERS ASSOCIATION OF NIGERIA (E-PPAN)

Kofo Akinkugbe Managing Director, SecureID Nigeria Ltd Agada Apochi Managing Director, Unified

Bob Nwojo Head, Card Business, First Bank

In This Issue September 2018 4 | To Our Readers

10 Questions

6 | Ochanya Dan-Ugo Group Chief Risk Officer, Unified Payments

Event

Talking Points

NeFF Insight

9 | Africa's workforce of the future, briefing, digits

10 | Hashcash financial inclusion plan, mobile payment sees growth, briefly, EPPAN fraud event 11 | Paylater milestone, Lagos ICT village plan, Interswitch partners Azimo, Zenith qwerty banking, NSE launches X-Pay, appointments 12 | Numbers, mobile's 2022 outlook, Africa ICT consensus, BRIC banks partnership, UN inclusion effort 13 | Inshort, low quality of African polcies, digital lenders flood Kenya, KudiGo expnsion

Startup Nation

14 | Segun Akano, Managing Director of Upperlink Limited PARTECH VENTURES

founder/CEO of ISP company, Tizeti

Quick Take

17 | Kendall Ananyi,

MAKING AFRICAN FINTECH WORK Tidjane Deme, left, and Cyril Collon, African general partners of Partech Ventures, an investment firm with hubs in Paris, San Francisco, and Berlin. In January, the company launched a $122 million fund dedicated to target early-stage African startups. Founded in 1982, Partech Ventures has emerged an European VC giant after surpassing $1 billion in new funds over an 18-month period.

17 | E-PPAN's CEO, Onajite Regha pictures 32 | Challenges for the payment system 33 | Rise in ATM fraud cases, Heritage Bank backs NeFF, fintech regulation coming

The Risk Report

34 | Tougher penalties for fraud, mobile fraud still on the rise, hacker mentality needed to thwart fraud, in short

Cover

35 | Windows OS of opportunity, cybercrime pays huge, threat level, fraud by numbers

Interview: Driving strategic partnerships

Digital Commerce

36 |Age of ecommerce empires, tracker, Jumia marks anniversary, data

NIBSS Fraud Report

38 | Q2 2018 fraud benchmarks

Trends & Tactics 43 | Hybrid connected smartwatches for payment, by the numbers

Capitalism 2.0: Funding fintech startups

Financing is one of the most important issues involved in founding a startup and for fintech companies it is reaching an all-time | 18 Niyi Ajao on NIBSS is radically change how consumers experience payment, how he is serving as a catalyst for growth through internal innovation initiatives and quicker ideation | 24

The Sterling advantage

Gbenga Adams, Head, Digital Innovation & Fintech at Sterling Bank on how his financial institution uses fintech innovation and the power of contextuality to create what consumers want | 28

44 | Unified QR code for Singapore, banks drive customers Tinder-style, Mastercard to link crypto to fiat currency, PSG to launch cryptocurrency, Manchester City's

smart band of gold

ing, in short

45 | Georgia university fintech talent pipeline, Dynamics' batterypowered cards hit Japan, Europe's bank branches are shrink-

The Gimlet Eye

46 | Unlocking the Potential: Mobile money in Nigeria

COVER: Blue Gradient with White Coins Vector

by Canva. Courtesy of Canva.com.

E-PAYMENT REVIEW (ISSN: 2360-9818) is published every quarter by the E-Payment Providers Association of Nigeria, 1 Rachael Nwangwu Close, Lekki Phase 1, Lagos. Š Vol. 08 No. 03. September 2018. All rights reserved. The opinions expressed do not necessarily reflect E-PPAN’s policy. E-PPAN accepts no responsibility for views expressed by contributors. Printed in Nigeria.

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To Our Readers

GTBANK / BRANDESSENCENIGERIA

The state of fintech funding “THE APPETITE FOR FINTECH INVESTMENT IS STRONG AND WILL remain so for the foreseeable future,” Steven Ehrlich, lead analyst for emerging technologies at Spitzberg Partners, a New York-based boutique advisory and investment firm that provides strategic investment insights on international economic and technology matters told Tearsheet. His words summate the true state of the fintech revolution that is changing business and possibly fortunes around the world. Fintech is a fast-growing industry across Africa, and that includes Nigeria. The continent's large population has created a hotbed where entrepreneurs with unique technology tools are thriving.

As the continent showcases its homemade aptitude in the fintech space, the ability to attract foreign funds continues to grow. The results are telling: Between 2013 and mid-2018, African fintech startups enjoyed nearly $2.2 billion of funding, according to Disrupt Africa. Several financing deals have been closed since the beginning of this year, driving momentum for Africa’s fintech industry. The areas attracting media and investor attention remain mutable. Digital financial services, education, insurance and agriculture technology are a few of the sectors making waves. Business-to-business fintechs are also playing an increasingly prominent role in the ecosystem.

Since 2010, the number of tech startups that have successfully raised venture capital have seen a steady surge. Though, there are questions about which figures are the most authentic, but different reports put the marginal number of those that benefit between 200 and 400. WeeTracker, a website that produces information on startups and funding in Africa, said that in the first quarter of 2018 fintech startups on the continent raised $169 million in over 120 deals. In the whole of 2017, the number was about $170 million for a total of 201 startups.

It is not bells, whistles, bread and circuses for fintechs though. Considerable hurdles exist in areas of government and financial sector regulations, hiring and retaining talent and funding, customer acquisition, difficult operating environment and profitability. The shock and awe around fintechs emergence that caused them to be viewed exclusively as a threat seem to have worn off. Many financial firms have woken up to the challenge posed by fintechs and are implementing innovation strategies to stave off disruption. The majority of these strategies involve some interaction with fintech firms. Above all, the political and economic structure of most African countries still lack specific fintech support for start-ups. A report by the non-profit Financial Sector Deepening Uganda found that a miniscule percentage of the aforesaid funding come from local sources. More than 80 per cent of funding into fintechs originated from outside Africa.

These issues form the cover of this edition. We tried to identify key drivers and barriers for Africa’s new fintech industry, offering insights on what solutions fintech startups are providing and what investors consider in order to unleash a startup’s potential.

We also interview some notable personalities in the industry like Niyi Ajao, Executive Director, Business Development at NIBSS; Segun Akano, Managing Director of Upperlink Limited and Gbenga Adams, Head, Digital Innovation and Fintech at Sterling Bank. All expressed the belief that the industry is doing well and the enthusiasm that frictionless payments in Nigeria is not far off in the horizon and that when it arrives, it will permanently reset the way people buy products, both online and offline.

In my interview with Akano (sidebar: he chooses his words carefully and decidedly), he offers some counsel on why it is worthwhile taking a more thoughtful approach to taking investor money. He said that there are important things to learn first – the capital source, investing partners, strategic outlook and their ecosystem – than sauté in a situation that will create future worry.

This doesn’t mean that fintech founders should limit the scope of their capitalraising efforts, he said, but that they should think about the efficiencies they are building as an operating principal within their company from the very start and the useful relationships that will matter down the road. We are with him on that.

Feel free let us know your thoughts on this issue.

Thank you.

BROWN N. UGBAJA, Editor

"Our strong belief [is] that building a strong business and making the world a better place are essential ingredients for longterm success.”

Managing Director of GTBank, Segun Agbaje at the launch of the bank's social impact challenge that will fund innovative ideas designed and executed by the public.

N165 billion / $458 million

Interconnection debt in Nigeria’s telecom sector according to a presentation Ikechukwu Nnamani, CEO of Medallion Communications at the Nigeria ICT Impact CEO Forum. Balancing Act said the debt has been rising at around $67 million a year since 2013. According to NCC, 40% of this debt ($183.2 million) is owed to MTN.

40 Percent

Increase in taxes from sports betting in Lagos state in 2017 rising from 30 percent in 2016, according to Reuters. Driven by the explosive growth in sports wagering and continuing improvements in Internet gaming, the sports betting industry in Nigeria is producing superb revenue results. n 2014, the News Agency of Nigeria estimated that Nigerians spent ₦1.8 billion each day on sports betting.

SYNDICATED LENDING MTN CEO, Ferdi Moolman (4th from left) flanked by representatives from the consortium of twelve banks Nigerian banks that syndicated a N200 billion seven-year medium term loan facility for the telecom giant at a the signing ceremony in August at the law offices of Aluko and Oyebode in Ikoyi, Lagos.

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10 Questions Ochanya Dan-Ugo Group Head, Enterprise Risk Management of Unified Payments on the emerging technological opportunities and challenges associated with digital payment.

WHAT IS YOUR FACINATION with risk management?

I love the diversity and dynamism; the way that no two days are the same. I usually don't know what will happen before I walk into the office but I enjoy that I am being tested constantly. Working in an eclectic environment, you are constantly kept on your toes and a lot of lessons come from that. Being able to keep the company like the swan who looks so calm and stable on the water, but a lot of activities with its feet underneath the water.

expect from it or how it fits into their business model. Big data is also speeding up the AI development process, and we may be seeing more integration of AI technology in our everyday lives. In the long term, an important question is what will happen if the quest for strong AI succeeds and an AI system becomes better than humans at all cognitive tasks?

If you could reshape the payment industry, what would you add or what would you subtract?

Electronic payment is a relatively new phenomenon in Nigeria and cash still remains the preferred medium for payment. Ignorance, poor banking culture, lack of trust, illiteracy and the love for the status quo have been blamed for the high volume of cash use. Fixing all this was what led to the creation of the financial Inclusion initiative of the CBN, which aims to the bulk of the money in the economy within the formal environment. In all this, how robust is the consolidated risk management profile of the entire industry? We still seem to be operating in silos and frail risk management practices, lead to fraud and losses, lack of trust and poor adoption. So, we really need to up our game in terms of risk management.

How does your job support the growth of your organisation?

In the general sense, risk has a negative connotation, yet we take risks every day. The real problem is not knowing which risks are worth taking. Some people justify risk management by explaining how it protects value but most importantly how it helps an organization excel. With risk management, you can anticipate possible events and be able to respond quickly, whether to minimize the impact of adverse events or to seize opportunities for gain.

TWITTER - ALAT

What attribute of your organization do you think is often overlooked, yet is crucial to the wellbeing of your clients?

I would say our nature of strict adherence to best practices and standards. People see companies that play by the rules as the least favourite because they seem to be rigid, slow, insensitive, or obstructive. Such belief stems from ignorance and short-sightedness on the part of companies that do not see the benefits of maintaining a high level of acuity in terms of standards, policies, procedural and regulatory compliance. One thing that works for us in Unified Payments is in-depth knowledge and support for the value of risk management by the senior management.

How does your company keep up with changing technology trends?

Technological innovation is the backbone of today’s business and the society as a whole. Firms have to find ways to adopt the tools they need quicker than their competitors. What has helped us operate successfully in this dynamic environment is strategic management,

which we have incorporated to address current issues, such as the concept of sustainable competitive advantage. Its main premise is that organization’s unique market position enables it to earn returns above the industry average.

What technology trends do you see reshaping the payment industry?

The rapid evolution and adoption of digital technology is disrupting established businesses as customers reset their expectations based on their experience. New competitors are proving more agile than incumbents in meeting new consumer demands. Fintech entrepreneurs are disrupting the market with new products, and capturing the hearts and minds of early-adopter consumers.

We are still a long way from where we want to be in terms in financial inclusion, how can we overcome this challenge?

The cash-less initiative of the

Central Bank of Nigeria has been successful so far. We don't expect total success immediately because it is a huge project and also a huge deviation from the norm. However, we can improve on it by exploring other initiatives from around the world.Recently, India launched the Unified Payments Interface to allow people make payments with a unique ID. It enables cashless transactions on any service provider or any interface of the customer’s choice; irrespective where the customer has an account.

Such an initiative is a precursor to the future of banking – it will enable customers to share their data securely with other banks and third-party service providers.

Do you think artificial intelligence (AI) has the potential to change the financial industry and in what way can that happen?

AI definitely comes with its promises and perils but it is here to stay though many aren’t sure what to

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In your opinion, which do you think is more important to have, leadership or sound management skills and why?

Organizations need both managers and leaders to succeed but developing them requires an environment where creativity and imagination are permitted to thrive. Good managers should strive to be good leaders and good leaders, need management skills to be effective.

Administrative excellence is just as important as visionary leadership so for me, a blend of the two is most desirable.

What is the best advice you have ever received?

Of all that have been inscribed on my mind before now, what comes to me was a management session I attended where one word echoed throughout the discussion - relationship. It is the key to everything.

A good relationship is an investment. Your skills can get you so far but your relationships will take you the rest of the way.

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Talking Points BRIEFING

Fintech enters the dictionary After decades of usage, the word fintech was one of 840 recent additions to the online dictionary. Merriam-Webster defines fintech as "products and companies that employ newly developed digital and online technologies in the banking and financial services industries". The dictionary pinpoints its first known use to 1971 but it has gained popularity in recent years due to burgeoning fintech scenes around the world created by the rise of mobile money, digital banking, cryptocurrencies and crowdfunding.

Digits

GOLDEN SCHOOLGIRLS: These five Nigerian teenagers won first place in the junior division of the Technovation World Pitch Summit held in the US in August. Team Save-a-Soul was selected from 2,000 mobile app developers to represent Africa and won with a mobile app, Fake Drug Detector, that can let anyone with a smartphone to know if a pharmceutical product is real or fake as well as tell its expiration date. The summit challenges girls (ages 10 -18) from around the world to identify a problem in their community and find a way to solve it. The girls plan to partner NAFDAC to create a database of certified pharmaceutical products.

REAL-TIME INSIGHTS

TWITTER. -- TECHNOVATION

Africa's gig economy is driving close to the edge THE AFRICAN CONTINENT IS GRADUALLY transitioning towards the gig economy as early-stage entrepreneurs and funders increasingly favour the rapid expansion of short-term contracts and freelance work over permanent jobs. This is according to a recent report by tech startup blog Disrupt Africa, which identified 180 startups that are changing the face of the continent’s work and employment landscape.

The Future of Work: Exploring the African Digital Work Landscape Report 2018 found that African startup have fully embraced the digital workplace to create a thriving “future of work” ecosystem on the continent.

A sudden boom can be identified between 2015 and 2017, the period in which almost 75 percent of the startups currently active were launched.

Though the initial growth in the space was attributable to the establishment of startups applying tech to the traditional jobs board approach, allowing employers to advertise jobs to prospective employees online, the sector is gradually maturing. Increasingly, more mature solutions aimed at freelance, one-off or project-based work are taking centre stage. On-demand platforms now account for a greater percentage of the market - 35% in all - than recruitment services and marketplaces, a share that is increasing over time.

These services are active across a variety of spaces, most notably logistics, transport, education and home services.

“Africa faces significant unemployment issues, with 16 of the world’s 30 highest unemployment levels belonging to African countries,” said Disrupt Africa co-founder Gabriella Mulligan. “In its tech space, however, the answers could be found. Startups are coming up with increasingly innovative ways of connecting all kinds of professionals with work, and investors are seeing the potential.”

As on-demand solutions come to the fore, investors have focused their attentions on this space. Whereas in 2015, the three major sub-sectors -- recruitment, marketplaces, and on-demand -- secured similar amounts of funding, the latter is increasingly asserting itself as the leader, raising over $14.5 million in funding in the last 3.5 years.

“Everyone from domestic cleaners, to teachers, to artisans now has the opportunity to access work via various marketplaces and on-demand platforms across Africa,” said Tom Jackson, co-founder of Disrupt Africa. “These solutions are putting power into the hands of individuals - be they workers or customers - and are ensuring more and more Africans are able to access opportunities. It is an exciting time for the space.”

Nigeria and South Africa are the continental leaders when it comes to digital work startups, with the former hosting 58 startups active in the space, and the latter contributing a further 47.

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N3.17 trillion

Value of ATM withdrawals across Nigeria between January and June 2018, according to data from NIBSS.

509,668,433

Volume of transactions on electronic payment channels in second quarter of 2018, data by the National Bureau of Statistics has revealed.

13.67%

Growth in number of banks staff in Nigeria in Q2 of 2018, rising from 89,608 in Q1 to 101,861, according to NBS.

MTN, banks to refund $8.1 billion The Central Bank of Nigeria has ordered telecom company, MTN and four banks to refund $8.134 billion moved out of the country in breach of the country's forex regulations. It also fined the banks a total of N5.8 billion for allegedly aiding MTN in the illegal action. The affected banks and their fines are Standard Chartered Bank (N2.4 billion), Stanbic IBTC (N1.8 billion), Citibank (N1.2 billion) and Diamond Bank (N0.25 billion).

Talking Points - Nigeria DIGITAL FINANCE

US tech firm, banks to use blockchain for financial exclusion NIGERIAN BANKS WILL WORK with US-based software company Hashcash to tackle financial exclusion through a blockchain banking implementation. The collaboration would target people in rural areas who do not have accounts, as well as offer more efficient methods of transferring money.

Hashcash said it surveyed the remote regions of Nigeria and identified challenges that include manual movement of cash in a way that makes the asset highly vulnerable to theft en route to its destination. It also found that a large percentage of the country’s population is does not have bank accounts.

The plan will allow users by allowing them to make financial transactions of any size with a blockchainbacked wallet. It will also provide transparency over the movement of finances, providing evidenced bank transactions that help can people to move into the larger economy.

Blockchain banking has the potential to increase productivity with a nearly immediate effect while supporting the empowerment of women and communities.

TRANSACTIONS

ERICSSON

Increased adoption of m-payments leads to 4.1% Q2 growth AS PER DATA RELEASED BY THE National Bureau of Statistics (NBS), mobile payment transactions touched a record high of N410.5 billion in the second quarter of 2018 with volumes representing 4.1 per cent of the over 509 million digital transactions in the period.

From April to June, a total of 20.7 million transactions were carried out in the country through mobile payment platforms. A breakdown showed that in April, there were 5.95 million transactions valued at N125.6 billion, while in May, 7.56 million transactions earned N147.5 billion value. Transactions in June, were lower that the previous month in both volume (7.12 million) and value (N137.4 billion).

The transactions were facilitated by platforms that include GTPay, Interswitch, eTransact, SimplePay, UCollect, GlobalPay, Paga, among others. Analysts believe that despite the good showing, mobile payment adoption is still very low and the service slow in the country.

Briefly

DIGITAL ECONOMY

Betting company Bet9ja (bet9ja.com) is the second most visited site in Nigeria after Google, according to Alexa ranking, which aggregates web traffic data and analytics. This new position is a two-place jump from its fourth position this time last year.

The 7th edition of the RemittanceAfrica Expo will hold 23 - 24 of October at the Lagos Oriental hotel with the theme ‘Unlocking Opportunities in Money Transfer and Payment systems in Africa’. The conference will host thought leaders in the remittance ecosystem in Africa and beyond.

N2.3 billion Seed investment in Zone Tech Park by The Workforce Group, touted as Nigeria’s largest tech hub.

E-commerce company, Konga has reintroduced pay on delivery into its operations in addition to its online pre-payment option. CEO Nick Imudia said the service was suspended when erstwhile owners – Naspers and AB Kinnevik were in discussions on the acquisition of the business by the Zinox Group.

E-PPAN to host 9th annual payment systems, fraud conference THE E-PAYMENT PROVIDERS Association of Nigeria (E-PPAN) in partnership with the Central Bank of Nigeria and Visa International will host over 300 professionals from the e-payment and banking community at the 2018 Annual Payment Systems & Fraud Conference on November 6th at the Civil Centre, Victoria Island, Lagos.

Attendees will learn the latest fraud risk, trends and the impact of new technologies from fraud experts.

Now in its ninth year, the conference provides a platform to discuss and brainstorm on current trends in payments fraud and learn winning strategies to manage risks and prevent fraud. In other to broaden the discussion, representatives from the central bank, regulatory bodies, policy makers, key associations, innovation and financial organisations, Director General of MDAs, law enforcement agencies and others are expected to be at the event.

This covers banks, processors, innovators, support businesses, data analytics, regulators, and also the media, legal and investigatory aspect involved with payment risks.

Delegates will have the opportunity to engage with high-level speakers in interactive sessions focused on the navigation of digital complexity; detection and management of potential threats. The conference is scheduled to cover such topics as Fintech: Tackling the Challenges of Innovation;

Payment Fraud Investigations: Beyond Intelligence Gathering; Setting an agenda to fight fraud, beaming light on 2019 and others being curated to make the event thought-provoking and engaging.

The conference is supported by the Nigeria Electronic Fraud Forum (NeFF), the Ministry of Justice, the Nigeria Police Force, the Committee of e-Business Industry Heads (CeBIH), the Association of Chief Compliance Officers of Banks in Nigeria (ACCOBIN), Information Security Society of Africa-Nigeria (ISSAN) and the Association of Chief Audit Executives of Bank in Nigeria (ACAEBIN) Onajite Regha, CEO/Executive Secretary of E-PPAN, said the annualconference provides a platform for a holistic outlook on fraud in the payment industry.

"It is highly essential for industry participants as well as private and publicsector to collaborate in the fight against electronic payment fraud. We have seen a lot of breeches in the industry and as innovations continue to happen and more advanced technologies are introduced to improve convenience and access to payments, we cannot shy away from some negative consequences on the system. "We must as a matter of responsibility be willing to look squarely into these issues and proffer solutions to keep the payment system safe for everyone," she said.

Only 8% of Nigerians own a mobile money accounts despite a significant number of financial services providers and large mobile phone subscriptions in excess of 145 million, according to a report by the Lagos Business School on the country’s state of financial inclusion.

Minister of Science and Technology, Dr Ogbonnaya Onu has said the government has approved the establishment of a new agency for robotics and artificial intelligence in the south east of Nigeria.

ERICSSON GIRLS IN ICT 10-year old Kambinachi Kanu (middle), a Nigerian primary school pupil emerged global winner in the 9-12-year-old category in this year's Ericsson Girls Who Innovate Competition. Ericsson received many enthusiastic entries from young innovators around the world. Kambinachi’s winning idea is the donation of fairly used tablets to children in internally displaced persons (IDP) camps in Nigeria thus ensuring the continuation of their education in a safe environment.

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Zenith Bank offers Qwerty Banking

Zenith Bank has upgraded its Mobile App to include Qwerty Banking, a new feature designed to enable people perform transactions, while conversing with business partners or chatting with friends and loved ones on messaging platforms like BBM, WhatsApp and Telegram. It supports account opening, funds transfers, purchases and bill payments.

CLOUD-BASED MICROFINANCE SOLUTION Antonio Separovic, CEO of Oradian, right, greets Princess Ogunleye of the Association of Non-Bank Micro Finance Institutions of Nigeria (ANMFIN) at the launch of a partnership that will enable ANMFIN to promote access to financial services on a larger scale using ANMFIN Cloud Express, Oradian’s cloud-based solution specially built for microfinance institutions in Nigeria. On the left (in white) is Onyeka Adibeli, Oradian's programme director for Africa.

CREDIT MARKETS

CREDIT MARKETS

CONSUMER CREDIT APP, PAYlater, which offers digital access to loans has seen one million downloads on Google Play Store, has over 800,000 registered users and has loaned over N6.1 billion to Nigerian consumers so far in 2018, according to parent company, One Finance.

“We are very excited by the market adoption of Paylater and we believe there is still a significant growth opportunity ahead for digital financial services” said co-founder and CEO Chijioke Dozie.

Paylater issues loans to Nigerians completely digitally, without seeing or speaking to borrowers. Customers can receive funds in their account in as little as five minutes, with no need for paperwork, collateral or guarantors.

LAGOS STATE HAS LAUNCHED an initiative it called Knowledge, Innovation, Technology and Entrepreneurship (KITE) through which it aims to build a conducive environment for the emergence of a strong technology industry in hopes of generating more than $10 million in revenue over the next few years.

The initiative is a public-private partnership based on a set of recommendations that include market and demand access, infrastructure, regulation and governance policies, talent development, research development, and marketing.

The state is planning the design and construction of a world-class technology park 30, 000 square metres area it has acquired in the Yaba area of Lagos.

Paylater reaches one million downloads

Lagos targets $10m ICT revenue from KITE

NSE adds digital payment platform

The Nigerian Stock Exchange (NSE) has launched X-Pay, a platform for making digital payments for products, services, events and trainings offered by the bourse. Bola Adeeko, Head Shared Services of the NSE said the exchange is leveraging innovation and digital technology to improve its efficiency and reduce the cost of transactions.

$114.6 million

Nigeria's share of the $560 million technology startup investments that entered Africa in 2017, according to the GSMA.

36.6 million

Mobile phone lines found to be redundant and withdrawn by the NCC in March.

REMITTANCES

ORADIAN / ECOANK / INTERSWITCH

Interswitch partners Azimo on instant money transfers LEADING AFRICAN PAYMENTS COMPANY INTERSWITCH GROUP HAS FORMED A STRATEGIC partnership with European digital money transfer service Azimo to increase financial inclusion and ease instant money transfers from 23 countries in Europe to customers in Nigeria.

"We formed this partnership with Azimo as they are a global leader in cross-border payments with great tech capability and strong knowledge of our core markets,” said Mitchell Elegbe, Group Managing Director and CEO of Interswitch Holdings. "This agreement is a key milestone in our common strategy to better serve Nigerians where ever they are located around the world." Digital money transfers play a significant role in the growth of Nigeria’s economy. Remittances from abroad were worth $22 billion in 2017. By reaching millions of more customers in Nigeria, the partnership will also help to tackle the problem of financial exclusion. "We look forward to working with fintech leader Interswitch to build new digital low-cost financial services that drive inclusion and transform the financial lives of our customers in both the UK and Africa,” said Michael Kent, Founder and CEO of Azimo adding fintech markets in Nigeria is now favourable due to Nigeria’s teeming population and increasing Internet penetration.

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Appointments

ECOBANK GROUP Patrick Akinwuntan has taken over as Managing Director of Ecobank Nigeria. A thoroughbred banker, he held various positions at the bank, including as group executive director, consumer banking at Ecobank Transnational.

Before joining Ecobank, he worked for Ernst & Young, Manufacturers Merchant Bank and Spring Fountain Management Consultants. He is a Fellow of the Institute of Chartered Accountants of Nigeria and an alumnus of the Harvard Business School’s Senior Executive Program.

BOARD CHAIR Diamond Bank has appointed Oluseyi Bickersteth as the new Chairman of its board of directorsHe was the national senior partner of KPMG Professional Services, Nigeria; he oversaw KPMG West Africa region and is a member of the global board.

UBA BOT The United Bank for Africa has named four new members - Erelu Angela Adebayo, Angela Aneke, Abdulqadir Jeli Bello and Isaac Olukayode Fasola to its board of directors. The appointments follow the retirement of four of its former directors at the end of August.

FACEBOOK Chimdindu Aneke has assumed duty at Facebook in London as the manager of the social media giant’s Developer and Startup Programs. In his new capacity, Aneke will oversee growth and success of startups and developers in Sub-Saharan Africa.

TWITTER In July, Twitter named Nigeria's former finance minister, Dr. Ngozi Okonjo-Iweala to its board, in an announcement tweeted by Jack Dorsey, co-founder and CEO of the company. Okonjo-Iweala welcomed the appointment via a tweet.

Talking Points - Africa Numbers

$26.5 billion

Remittances from Egypt’s diaspora during the 2017-2018 fiscal year, the country’s central bank revealed.

$3 billion

Projected value of financial transactions to be made via the internet in Africa by 2020, according to a report by pan-African banking group Ecobank.

$775 million

ECOSYSTEM

Forecast of revenue from Subscription Video-OnDemand (SVOD) in subSaharan Africa by 2023 with subscribers set to reach 9.99 million in that time, according to Digital TV Research.

3%

E-commerce's contribution to the GDP of Senegal. Kenya comes close at 2.9%, Morocco (2.3%), Mozambique (1.6%), and South Africa (1.4%).

Mobile to add $150 billion to Africa’s GDP by 2022 MORE THAN HALF THE POPULATION OF SUB-SAHARAN AFRICA WILL BE subscribed to a mobile service in the next seven years, according to the GSMA’s Mobile Economy report series published in July. It forecasts that there will be 634 million unique mobile subscribers across the region by 2025, equivalent to 52% of the population, up from 444 million (44%) at the end of last year. The report also calculates that the mobile ecosystem will add more than $150 billion in value to the region’s economy by 2022, equivalent to almost 8%of regional GDP. Last year, mobile technologies and services accounted for 7.1% of GDP across Sub-Saharan Africa, a contribution that amounted to $110 billion of economic value. By 2022, the region’s mobile economy is forecast to generate more than $150 billion (7.9% of GDP) as countries continue to benefit from improvements in productivity and efficiency, particularly due to the increase in mobile internet adoption.

CHANCE TO PITCH FOR $1 MILLION Elham Inspire has won the Libya round of Seedstars World and will represent the country at the Seedstars Summit in Switzerland next April to compete for $1 million. "Being part of the Seedstars global family has opened many doors for us to do so," said Elham Inspire Founder and CEO, Mallek Ajaj who is holding the prize ticket. The educational startup helps teens raise their competency using technology-based education.

DEVELOPMENT AMBITION

ONCE.TRAVEL / STARTUPSCENEME

African policymakers seek consensus to drive growth of ICT sector SENIOR AFRICAN POLICYMAKERS HAVE resolved to adopt a common position aimed at propelling growth of ICT sector and embed it in the continent’s transformation agenda.

The policymakers and experts who met in Nairobi for a preparatory meeting ahead of the International Telecommunications Union (ITU) summit to be held in Dubai in October, said that a consensus is required to hasten the fourth industrial revolution in Africa that is based on technology and innovations.

Joe Mucheru, Kenya’s Cabinet Secretary for ICT, stressed that harmonization of policy and regulatory frameworks is key to ensure the benefits of digital revolution in Africa are spread evenly.

“Africa should safeguard its interests in the global ICT arena by speaking in one voice. Our collective obligation going forward is to ensure there is uniformity in policies and regulations to reap from the benefits that the digital era

has ushered,” Mucheru said. It is hoped that by speaking with one voice, African countries will be able to gain the leverage required to harness benefits linked to global ICT development.

“We should not lose on the fourth industrial revolution which is driven by ICT and our collective efforts to harness emerging technologies like artificial intelligence, internet of things and blockchain will boost out socioeconomic development,” said Mucheru.

African countries are united in their quest for rapid growth of the ICT sector that will help address the continent’s endemic socioeconomic challenges like poverty, disease, environmental depletion and illiteracy.

Abdoulkarim Soumaila, the Secretary General of Nairobi based African Telecommunications Union, said reactivating growth of the continent’s ICT sector has gained traction amid rapid transition to knowledge-based economy that promise shared prosperity.

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DIGITAL ECONOMY

BRICS banks to collaborate on blockchain research

Ant and UN body partner for African financial inclusion

THE BRICS DEVELOPment banks will start joint research on how they can use distributed ledger and blockchain technology to develop a digital economy.

According to a press release, State Corporation Vnesheconombank of Russia, Brazilian Development Bank, Export-Import Bank of India, China Development Bank and the Development Bank of Southern Africa signed an agreement during the 10th International BRICS Summit in Johannesburg to take part in the research.

Mikhail Poluboyarinov, First Deputy Chairman and Member of the board of Vnesheconombank said the BRICS national banks cooperation will be in different key areas, including financial cooperation, developing credit financing in national currencies and implementation of innovations.

Collaboration for inclusive growth and shared prosperity in the fourth industrial revolution is key theme of the BRICS summit in Johannesburg.

Details about the research, including when the banks expect to begin the research project, were not were not included in the press release.

THE UNITED NAtions Economic Commission for Africa (ECA) has forged a partnership with the International Financial Corporation and Ant Financial to promote digital financial inclusion in Africa, through investment and technical capacity building. "Essentially, we were talking about information technology and the power of IT for financial, social and political inclusion," said ECA Executive Secretary Vera Songwe, "Agenda 2030 and Agenda 2063 say we should leave no one behind." Ant Financial – an affiliate of the Alibaba Group – runs one of the world’s largest online payment platforms, valued at $150 billion. Its CEO, Eric Jing, said the company would like to replicate his company’s success in Africa so that financial inclusion can be enhanced.

In Short

COUNTRY MONITORING

World Bank review reveals unchanged quality

of policies in Africa

XINHUA / TWITTER -- TODAYONLINE

Alibaba Group chairman Jack Ma has launched a $10 million Netpreneur Prize to empower a new generation of African entrepreneurs. He announced it at a conference in South Africa dubbed Netpreneurs: The Rise of Africa's Digital Lions. The prize will award 10 million U.S. dollars to 100 African entrepreneurs over the next 10 years focused on grassroots innovation, economic empowerment of women and small business. Starting in 2019, the Jack Ma Foundation will host an annual pitch competition, with 10 finalists selected from the continent to showcase their business ideas and compete for $1 million in prize money.

DUE DILIGENCE PLATFORM The African ExportImport Bank has launched Mansa, a platform that will facilitate African trade by serving as the single trusted source of primary data required to conduct due diligence checks on counterparties in Africa.

It will increase trade in, and with, Africa by de-risking compliance and strengthening relationships between global banks and trading entities with their African counterparties.

(also at 75). Japan scored the lowest, with just 2 points.

BITCOIN INTEREST When it comes to ‘Bitcoin’ search interest on Google, South Africa and Ghana in the lead.

Google Trends ranked nations with a scoring system on a scale from 0 to 100. South Africa, with a 100 score commands almost double the search interest in the US, where the score stands at 52. Ghana is second with 75 along with Slovenia

M-PESA TO ETHIOPIA Safaricom is in advanced talks with the Ethiopian government to introduce its popular M-Pesa mobile money service in the market of 100 million people, sources said. The deal could also give Safaricom and its parent company a head-start when Ethiopia follows on plans to open up its telecoms sector to foreign companies.

MOBILE REMITTANCE Up to 90 per cent of international money transfers to Rwanda come through mobile wallets, a survey by WorldRemit indicates. It says that Rwanda – along with Tanzania – is experiencing the fastest growth in mobile money remittances in East Africa, increasing on average of 9 per cent monthon-month.

THE AVERAGE QUALITY OF POLICIES AND institutions in Sub-Saharan Africa was broadly unchanged in 2017, according to the latest review by the World Bank. This is a shift from the deterioration observed in the previous year.

The analysis covered 38 countries and described the progress these countries are making on improving the quality of their policies and institutions. Countries are rated on a scale of 1 (low) to 6 (high) for 16 dimensions reflecting four pillars: economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions.

In 2017, the regional Country Policy and Institutional Assessment (CPIA) score was 3.1.

This average CPIA score for Sub-Saharan Africa remains slightly below the average of 3.2 for other IDA countries.

“In 2017, African countries had a more favourable global environment that provided them with space to implement reforms” said Punam Chuhan-Pole, lead economist and lead author of the report. “According to our analysis, nearly 30 percent more countries strengthened their policy and institutional quality in 2017 compared

with 2016. This is an encouraging trend.”

Favourable global economic conditions supported a turnaround in economic activity in Sub-Saharan Africa in 2017, easing pressure on weak policy frameworks. Country-level policy and institutional quality varied widely across the region. Rwanda continued to lead at the regional level and globally, with a CPIA score of 4.0.

Other countries at the high end were Senegal (3.8), closely followed by Cape Verde, Kenya, and Tanzania, all with scores of 3.7. Overall, slightly more than half (20) of the region’s IDA borrowers posted relatively weak performance -- that is, a score of 3.2 or lower. The fragile countries faced challenges that include high risks of conflict, commodity price shocks, or climate threat.

"The CPIA is important for African countries not only because a better score leads to an increase in concessional financing from the World Bank, but also because it’s an excellent tool for policy formulation and monitoring” said Albert Zeufack, the World Bank’s Chief Economist for Africa. “Our countries should pay more attention to this important tool and use it accordingly.”

SINGAPORE FIRMS TAP AFRICA’S E-COMMERCE OPPORTUNITY Singapore's Senior Minister of State for Trade and Industry Koh Poh Koon (left) and Chairman of CrimsonLogic, Eugene Wong at the opening ceremony of CrimsonLogic's office in Kigali, Rwanda. With its headquarters in Singapore, the office will become the firm’s regional hub for business operations and project implementations throughout Africa.

FINANCE MARKET

Mobile digital lenders flood Kenya KENYA HAS SEEN A SURGE IN THE NUMBER OF MOBILE DIGITAL LENDERS competing with traditional banks to provide small businesses with access to credit. Digital lenders, like Branch, Tala and Okash, have attracted a lot of users in a short period of time making them the country's top finance apps on Google PlayStore. The growing interest in digital lenders suggests that there is enough demand for credit from growing businesses. Jules Ngankam, deputy CEO and CFO at African Guarantee Fund, said there is a $155 billion funding gap for SMEs in Africa, which makes every credit avenue an attractive proposal. He said that the number of digital lenders is growing due to low cost of operations as compared to traditional banks. Meanwhile, mainstream financial operators are fighting back with their own digital lending solutions.

For example, Equity Bank's half-year results show that 78% of transactions and 97% of loans were processed via the company's mobile platform.

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KudiGo to expand into new markets GHANAIAN startup KudiGo, a platform for the informal consumer retail industry, plans to expand to three new markets after seeing impressive uptake at home and in Nigeria.

Launched eight months ago, KudiGo provides integrated, mobile-based payments, accounting and analytics engine for the retail industry.

“Our solution enables convenience stores, provision stores, pharmacies and a host of other micro-SME retailers to leverage on software in understanding and expanding their business,” Kingsley Abrokwah, “chief enabler” at KudiGo, told Disrupt Africa.

Startup Nation EVERY SUCCESSFUL ENTREPRENEUR HAS a story. Tell me yours. What drove you to take this journey?

The desire to service the Nigerian financial system in a friendlier, comfortable and secure manner motivated us to start Upperlink. We are a payment solution service provider; we have a license from the CBN (Central Bank of Nigeria) for that and we are also vendors to many leading banks in Nigeria. We develop software for banks to run their businesses. What we want to achieve is to develop a core banking application for a bank. We want to be able to say this bank is running a core application developed by Upperlink from start to finish. We want to achieve level 3 maturity certification, which is the benchmark to appraise any software developed from product concept to deployment to testing and to post service delivery. We want to stop the capital flight currently ravaging Nigeria with respect to software development. A lot of dollars are going out of Nigeria to people or companies in India, Bangladesh, Switzerland, US, Canada and China.

There is no basis to continue to have them develop software for us. Nigeria is blessed with young talents who can do the same thing that developers in these countries are doing. The exploits that Google, Facebook and others are doing can be achieved if we have full government support.

WE GROW WITH THE FLOW MANAGING DIRECTOR, UPPERLINK LIMITED, SEGUN AKANO ON HOW HIS COMPANY HELPS ORGANIZATIONS TO CREATE POWERFUL DIGITAL EXPERIENCES FOR THEIR CUSTOMERS AND HOW ALLOWING FOR RICH COLLABORATION WITH ITS CUSTOMERS AND THEIR END USERS.

BY BROWN N. UGBAJA

14 /E-PAYMENT REVIEW/ SEPTEMBER 2018

What sets Upperlink apart from other companies offering this same kind of services?

Well, we develop our software round up, that’s one key feature that sets us apart. We proudly call ourselves indigenous software developers.

We work on industry needs of which the financial ecosystem is one. We develop software for all the sectors - educational, the earth system, manufacturers and others. Today, every sector from sports to legal or judiciary needs software.

We can see how every media house is trying to put its stuff online; to drive traffic to its platform because sales of the traditional hard copies are declining in volumes. They want to build their online platform to be very attractive, very userfriendly so that their traffic ranking can go up.

The foundation is who does the coding. Did you buy a software or did somebody in Nigeria build it for you? Everybody in Nigeria needs to encourage the many firms in Nigeria to rise up to build these applications here. The people abroad who build them have same brain like us; the only difference is that they are always challenged to create software that solve problems for people. We are trying to package our own stuff; to make it of high quality and fit to use.

As you grow a business, there are all sorts of things you find yourself figuring out for the first time. How have you adapted your ideas from your original vision?

The industry is so dynamic and collaboration has been the key. When we started in 2003, the concept was to probably do everything on our own, but as we evolved we found that it is not so. Even though you are coding your programmes, there are still many aspects of the business that require you to collaborate, like in areas of product development and marketing. We collaborate with different stakeholders to achieve our goals. We

work with banks and switching companies because we all have our own roles and know where our limits end and where our responsibilities start. That is how we sustain the system.

ORADIAN

Fintech startup founders that I have interviewed often talk about the ups and down of doing business. What keeps you motivated and focused on the target? How do you manage to keep that motivation up within your team?

What has seen us through here is team work. We have been fortunate because all of us who started are still together and have a more focused mindset. It’s been a problem to many fintechs. Within three years you see one or two promoters trying to pull away and this is part of the many diffusing forces killing fintechs. But at Upperlink it’s not so. Six of us who started the company are still here in our own roles and there is no discord.

Team spirit is important not only for fintechs but to every organization. There is an adage that says if you want to walk fast, walk alone; if you want to walk far, walk together. When you are together, overtime you won’t need to say much before somebody understands what to do and that really has helped us. Pertaining to the ups and down in the industry, they are there and they can sweep you out of business. Consider the likes of Nokia, they are no more today. Nokia used to be the leading handsets maker in the phone manufacturing space, so what happened? Continuous innovation is key because as you are showcasing your product, some people are thinking of ways to make it better than it is already and by the time the improved version comes from your competitor, your users will shift to him. That was what happened to Blackberry, one simple thing pushed them out of the market. The Blackberry phone had physical keyboards and Apple came up with digital keyboards, which everybody prefers today. I am not sure if Blackberry can rise up again.

Continuous innovation is key in all applications development. Take PHP, we now have version PHP 5 and PHP 7. The same for other applications with newer versions. Banks demand upgraded versions of our software because of new needs, flexibility and interoperability. Today, in order to integrate my software with yours, I don’t need to touch your core database. All I need is an API to your console and I will be talking to your core application through a layer. Needs are changing and so are the methods of delivering what clients want. We are conscious of that so we engage in constant interaction with our end users.

The Nigeria startup ecosystem is incredibly active with some massive companies around and innovative new ones being created almost on daily basis across the country. How do you see the competitive landscape and what are some key actions you are taking to protect your market position?

To us, customer bonding is key. Customer service means understanding the peculiar needs of your service segments and we take that very seriously.

If a technology is changing and our customer has seen it somewhere, they will be honest and tell us that they have seen something better than ours.

We are enjoying that kind of relationship. Some-

body can come from US or Canada and tell us what they have seen over there and then ask us if we can develop it. Those are the people that have led us to where we are today. They open up to us because we have that friendly disposition. We are not just here to do business with you but we are also here to cement a relationship with you that would even last beyond the business relationship. There are some businesses we have exited and yet we are still friends with those who engaged us for one reason or the other. Take for instance when the TSA (Treasury Single Account) was introduced, we lost some of our clients to the platform the federal government asked them to use but that did not sever our relationships with those customers. The customers are key in our growing up in that we get feedback from them.

We don't make it about money. We go to the extent of interacting to know if the product is serving them the way they want. Such feedback really helps because as it is every fintech startup has a domain that it is operating in. The economy is so big and there are so many sectors. We have developers working for tourism and hospitality, agriculture, IT, telecom, transport, aviation, education or health. The industries are many, you just need to identify where you can play.

ing this same sets of customers. Will we still be relevant? If the answer is yes we keep doing it.

The research I have seen is that seven out of ten fintechs die within five years and this can happen anywhere, even in Silicon Valley. We hear about Twitter and Facebook, which are very successful but we don't hear about many others that are struggling or have closed shop and the people who pumped money into them. If a venture capitalist brings in money people will take it.

Everybody wants to drive a good car and live well but the question is can you sustain the kind of income that you will need to pay it back. We have some companies who took investor capital when the exchange rate was N160 to a dollar. Now that it’s N360 to a dollar, they are paying back at the current rate and if they spent on infrastructure, on process, on people, on staffing now they are paying back two times or even more than that.

We have companies battling that predicament right now and they won’t tell you because to raise money in naira to pay back the dollar you collected is becoming an audacious task. We welcome venture capital but we are not crazy about it, we want to remain relevant.

If you sold Upperlink today, what will be the tone of the conversation? What would you want to gain? What would want to avoid losing?

Today, we have built a good name. We have a good firm we can comfortably sell. If we have good offers and they buy, we know the company will remain relevant with real value in terms of staff potential, market, certification and also good products. We are not to tied to the name; what is essential to us is the service we have rendered. Have we enjoyed it thus far? Yes. We have enjoyed the people we are servicing and that has taken us this far. If we want to hand over to a new set of people, it will be a thing of joy to me. We are not averse to acquisition because we are proud that we have a legacy. We are not desperate or in need but if we have fantastic offers, we will welcome them.

" WE DEVELOP OUR SOFTWARE ROUND UP AND THAT’S ONE KEY FEATURE THAT SETS US APART. WE PROUDLY CALL OURSELVES INDIGENOUS SOFTWARE DEVELOPERS. "

How goal driven are you to make decisions without emotions?

You can’t fire a customer, that’s the source of your revenue.

Making decisions is about fairness not emotions. It is about asking yourself if I were in his shoes what would I love to be done to me and you do likewise. Emotions really shouldn’t come into business whether internally or externally. What is fair may translate to sacrifice to you, to forbearance or even a loss. I look at what is fair to both parties and when you have that mindset, you won't offend anybody because the other party may be able to have that inference that you are fair in handling this matter.

Did you raise venture capital?

Not yet.

What is your opinion about start-ups taking VC funding?

What I have seen about raising capital is that money alone does not guarantee your success and that is a fact. Money can help you to be up, to rise to a certain level; a certain category but it can evaporate if the foundation is not well built.

In this business, We have seen people come up with a product, hype it a lot but within five years they are out of business. We have been here for fifteen years and we know it can only get better and not worse because we have come up organically. We have never done beyond our capability and abilities, and we have allowed our revenue to determine our actions, We have been able to scope the environment to know that in two to three years we would still be relevant. The money might not come big so we ask ourselves whether in the next two three years if we will still be serv15 /E-PAYMENT REVIEW/ SEPTEMBER 2018

What is the most important thing you are working on now and how are you making it happen?

We have a cloud solution for tertiary institutions.

Before now we have been deploying education solutions to schools on one-on-one basis and we found out that it’s not cost effective. So we decided to build a cloud platform where each school can create its own identity and service its customers. That is up now and we call it Educhoice. We will be letting the public to know about it soon because it’s a way to help schools automate their processes. Automation is the only thing that will make you achieve more and spend less. People will say if you want something better you have to pay more but automation does the reverse. With it you can pay less and get more. Automation will reverse the school system like admission, payment, planning and tests. The school will probably be spending 25% of its effort on admin-

Startup Nation

istration and channel the rest to academics. Administrative work should be less and academics should get more time.

What advice would you give to anybody just starting out in this business?

The landscape is getting more saturated so what is needed is a good dose of patience, good ground work and a good understanding of the market.

One thing I would advice a new fintech player is don’t aim to compete with the banks, you can’t do it. If your product aims to compete with any bank in Nigeria, you will not go anywhere but if it is to complement, support or upgrade what the banks have, you can still find your own space.

If you have a product that works the same with what the banks have, they won’t give you any chance. The whole idea of financial applications is geared towards a user doing transactions with his money and who are the custodians of this money? The banks. So if you say you have one application and the banks say they have the same believe me the customer will listen to the bank more than to you. You will need to look at where you are spending your energy What were the most significant obstacles you encountered getting to this point?

Staff turnover is a major issue because the coding landscape is one all over the world. Once you are a programmer you are a programmer there is no barrier of geographical location. Since we started, we have seen about 40 programmers leave this company to either go abroad or join big companies or a bank. These are brilliant people and ordinarily I would not have wished to let them go.

We had staff who went to Malaysia to work for big hotels that need programmers to run their tech. We have some who went to Glo, MTN, NIBSS, Fidelity Bank and even the CBN. Once we train them to develop applications in a standard

way, they will leave to other organizations who will offer them double of their salary. That’s our major challenge and the strength to compete globally in terms of renumerations, we lack it.

Now we are trying to be competitive but we may not be able to compete 100 percent with the big guys. We are trying to do it in such a way that apart from money being your focus, you will love to work here. Programmers exit but other staff, no issue. But the programmers are the core of our work and they are what every other industry needs and they come after them and offer them work and it’s a pain in our heart.

Stress is a natural companion in the journey to success. To other start-up founders who might be going through some rough waters, what’s the best way they can deal with stress?

It varies and no recommendation can work for everyone. What I have found is that everything starts with your family. If the founders are not married, their immediate family still matters and if they are married, the kind of persons they are married to could make or mar their success. Stability comes from the mind and if you are stable in the mind, when you get to the office environment you will be able to handle the challenges.

I have a wife who understands the challenges of the business and who is very supportive. This

”

THE LANDSCAPE IS GETTING MORE SATURATED SO WHAT IS NEEDED IS A GOOD DOSE OF PATIENCE, GOOD GROUND WORK AND A GOOD UNDERSTANDING OF THE MARKET." 16 /E-PAYMENT REVIEW/ SEPTEMBER 2018

has been very crucial in helping me find stablility. Try to enjoy your family because the business can be rough. I just told you about how staff will just leave. You put three programmers on a project you want to deliver in two months and along the line they say they want to leave the company.

What do you do? You will find new set of people and that means you won't be able to meet the delivery date because the new people need to understand the pattern and learn afresh. Something like this can discourage you and make you begin to question why you bother with this. Also, you need to find spiritual stability. Be able to go to God in prayers during trying times. If you trust in God to lead you, you will come to understand you are not working alone and there is always a solution. If you don’t do the things that God said you should not do and you are fair in your actions, you will find inspiration. Technology achievement comes by inspiration. When you have it, you can begin to look for ways to make your ideas come to reality. Every entrepreneur needs inspiration to transfer ordinary ideas to real things that will give real values. Along the line you have to get all the resources you need, the structure, the system, the staff and getting these things could present challenges. But you will surmount them because there is a God in heaven that has given that inspiration to you and that will help you realize it.

I believe every leader has some unique psychological super power. What is yours?

Mine is Jesus, the name I call when I am in trouble and he will answer. I have seen it physically and mentally working for me. When I call the name of Jesus everything begins to work for you and ideas will begin to come in many ways. People will come around to validate the idea and to provide the solutions you have been looking for. You can’t rule out the way spirit works in our favour to guide us through our lord Jesus.

Quick Take

Kendall Ananyi Founder/CEO of internet service provider Tizeti, Kendall Ananyi, talks to Africabusinesscommunities.com about his company's new round of funding and expansion ambitions COULD YOU INTRODUCE YOUR COMPANY? Tizeti is an ISP which operates in Nigeria. We provide fast Wifi technology and unlimited, uncapped Wifi internet through our own solar power base stations. Currently we installed over 7,000 public Wifi hotspots within Nigeria and have 150,000 customers.

WHERE IS TIZETI LOCATED? We provide service in Lagos Nigeria and the parent company is in Oakland, California.

WHEN WAS IT FOUNDED AND BY WHO? Tizeti started as an idea in 2012 and launched publicly as Wifi.com.ng in 2014.

It was founded by Ifeanyi Okonkwo and I. He serves as Chief Operating Officer.

HOW IS THE COMPANY FUNDED AND WHO ARE YOUR CLIENTS?

We initially bootstrapped and then got accepted into Y Combinator and raised a seed fund and have just also recently raised Series A. Tizeti provides residences, businesses, events and conferences with unlimited high speed broadband internet access.

WHAT ARE TIZETI’S UNIQUE SELLING POINTS? We are unique in that we provide unlimited Wifi that is cost effective, using solar power.

We operate our own towers through our solarpanelled network across Lagos. The towers themselves are powered by solar modules instead of electricity from the grid or an onsite generator. This enables us to significantly reduce operating costs which allows us to be hyper-competitive when it comes to subscription packages for customers.

HOW HAS THE MARKET RESPONDED TO TIZETI'S SERVICES? They love the fact that we provide wifi that is unlimited and affordable. Its 30 - 50% cheaper than capped mobile data plans and it has propelled us to the top of Google search for “Unlimited Internet in Nigeria”.

WHAT ARE YOUR COMPANY'S AMBITIONS ?

We plan to expand into other Englishspeaking West African countries, starting with Ghana this year.

WHAT IS THE LATEST THAT HAS HAPPENED IN THE COMPANY? We recently closed a Series A round of $3 million led by 4DX Ventures with participation from existing investors like Y Combinator Continuity, Lynett Capital, Social Capital, Western Technology Investment, Friále and Golden Palm Investments. As part of this round, Walter Baddoo, Co-Founder & Managing Partner of 4DX Ventures will join Tizeti’s board. This investment will be used to expand operations outside of Nigeria, with the launch of a new consumer-facing brand Wifi inAfrica later this year starting with Ghana.

"We are unique in that we provide unlimited Wifi that is cost effective and are powered by solar modules instead of electricity from the grid or an on-site generator."

TWITTER - GEN22ONSLOANE/ ONAJITE REGHA

Events

L-R: Yinka Tiamiyu, Chairman of ACCEBIN, Executive Secretary and Chief Executive Officer, E-PPAN, Onajite Regha and Pattison Boleigha, Chief Compliance Officer of Access Bank at a strategic meeting between E-PPAN and ACCEBIN.

L-R: Greg Nwamadi, Director, Corporate Services, Kite; Executive Secretary /CEO, E-PPAN, Onajite Regha and Prince Shaka Momodu, Executive Chairman, Bics. and Prince Shaka Momodu, Executive Chairman, Bics.

Executive Secretary /CEO, E-PPAN, Onajite Regha at a data protection legislation drafting retreat in Calabar.

Executive Secretary /CEO, E-PPAN, Onajite Regha (left) at a data protection legislation drafting retreat in Calabar.

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Cover

The business of funding fintechs in Africa Examining the opportunities that exist in African fintech, the funding landscape and the available support for entrepreneurs.

BY BROWN N. UGBAJA

CELLULANT

I

F YOU ARE SEEKING EVIDENCE THAT Africa is ripening as a centre of technology innovation, just look at the amount of money that investors have poured into financial technology start-ups so far this year. It used to be that a major bane of entrepreneurship in Africa was financing. For many decades, it was a scarce resource. But recently, the story is changing. Buoyed by funds flooding in from venture capitalists, development agencies and angel investors, African start-ups are spreading their wings and boosting efforts to place the continent at the nucleus of a modern tech revolution.

This is the same picture being painted in many parts of the world today. Global investment in financial technology (fintech) ventures are reaching an all-time high. “This volume of investment reflects the soaring demand within financial services for new digital innovations, as these technologies prove their value and applicability in the market,” said Richard Lumb, group chief executive, Financial Services at Accenture. “That will continue to position fintechs for a vital role in helping reshape the financial services landscape.”

That landscape is already shaping into a mosaic scenery of fields and forests, mountains and streams; each unfolding against a backdrop hanging on highly pertinent factors – innovation, efficiency and access. Each is impacting the financial services sector and transforming modern communal life. Digital innovations are disrupting the shape and delivery of financial services on a much bigger scale. From micro remittances and peer to peer lending to mobile payments, new businesses are bypassing established financial institutions and are delivering products and services directly to consumers.

It didn’t use to be like that. For decades, people depended on traditional financial institutions when they were in need of banking, insurance, lending or money transfer services. Since they were the only options, people had no alternative but to go through their lengthy and wieldy processes all because they needed those services.

Most others (in fact the majority portion of the population) were left in constant precarious positions or stayed away completely. This is where fintech companies are stepping in. Driven by the rapid adoption of cutting edge technologies across the financial services industry, such as digital payments and money transfers, financial software and automation, and alternative lending and funding platforms, fintech companies have settled into the financial sector and created an alternative way for consumers to access banking

services.

Achieving this level of disruption (read: intrusion) required not only digitalization but the skill and innovative thinking to put codes to good use.

But maintaining fintech firms position within the ecosystem requires money. Plenty of money.

The finance trap Financial technology start-ups are becoming a huge part of the African story. They are helping to fuel the continent's innovation and economy.

Digitalization has given them an inimitable opportunity to offer services (all kinds) on a scale that has never been available to people here before. However, in exploring those prospects, these businesses have to overcome a unique set of impediments that analysts everywhere agree are mostly exclusive to Africa. These impeding forces create a tough continent-wide business climate that is characterized by weak infrastructure, inconsistent government policies, lack of minimal public service support, corruption and limited access to finance. These problems are common in almost every African country, along with a lack of skilled labour and sufficient business training.

To every fintech startup, the resources necessary to grow a business – such as finance and human capital are not easily accessible. The most significant among these challenges is the scarcity of finance. Accessing capital in Africa is costlier than in other parts of the world. Reports show that a staggering 85% of small businesses are largely underfunded. The range of financial products amight be appropriate for businesses at different stages simply do not exist. Information from series of researches conducted since the 1970s consistently showed that most entrepreneurs in sub-Saharan struggle to scale their businesses. Many

"UNLIKE THEIR MODUS OPERANDI IN DEVELOPED MARKETS IN NORTH AMERICA AND EUROPE WHERE THEY FOCUS ON LEVERAGED BUYOUTS, INVESTORS IN AFRICA ARE FOCUSING ON JOB CREATION AND CAPACITY DEVELOPMENT. THIS IS GOOD FOR A CONTINENT WITH THE WORLD’S YOUNGEST POPULATIONS, WHICH IS FORECAST TO DOUBLE BY 2050."

18 /E-PAYMENT REVIEW/ SEPTEMBER 2018

of them fail after a short period.

One week before the memorable visit of former United States President Barack Obama to Kenya in 2015, the U.S. State Department, the Global Entrepreneurship Summit, GeoPoll and the Global Entrepreneurship Network conducted a survey of 1000 entrepreneurs drawn from the Democratic Republic of Congo, Ghana, Kenya, Nigeria, and South Africa. The result of the survey was published a day before Obama's Air Force One touched down on the tarmac of Kenyatta International Airport in Nairobi. GeoPoll, which provides research services in emerging markets in Africa, Asia, and the Middle East had queried them via text messge on the biggest challenges facing new businesses in Africa and what resources and facilities would prove essential in encouraging entrepreneurship on the continent.

Respondents gave insightful answers on better facilities and services, and government support to alleviate the challenges new businesses face. A good number of the them (36 percent in fact) said that there was a need for more financial resources to be made available for entrepreneurship. Their response was drawn from the fact that while the number of new businesses were increasing, their ability to access funding remained in the doldrums.

Generally, financing is a major headache for startups in all parts of the world. What makes this a major problem in Africa is the fact that there is limited access to business capital and where it even exists, it comes with a hefty price tag attached : very high interest rates.

"The banking interest rate for business is 2629% on average," observed Lord Michael Hastings, KPMG International's Global Head of Corporate Citizenship at a 2014 roundtable event organized by British daily newspaper, The Guardian. "The continent is flush with opportunity, with ideas, it is highly educated, there's a consumer boom, opportunities galore, infrastructure, investment from China, but a person wanting to expand from selling eggs to selling meringues to British supermarkets can't get the investment capital they need. That is systemic failure."

The formal financial sector is not much help when it comes to cater ing to entrepreneurs on the continent. Worse, players there are unaware that they even have a problem in the first place, since business disaggregated data is rarely captured. When it is, the results would be confounding. Why? Since banks do not have access to data on the businesses that they deny access to funding, they do not realise they are losing customers and discriminating against businesses inc-

EXPANDING PAYMENTS ACROSS AFRICA Seated: Fiona Mungai (Endeavor), Bolaji Akinboro (Cellulant), Yemi Lalude (TPG Growth), Ken Njoroge (Cellulant) Dr. Samuel Kiruthu (Cellulant) at signing of deal in which Cellulant secured $47.5 million, the largest equity financing deal in the African fintech space. Looking on is ICT CS Joe Mucheru and other Cellulant partners.

luding those with high growth potential who are looking to scale or develop export markets and require working capital.

According to Jonathan Ortmans, the president of the Global Entrepreneurship Network, entrepreneuers need to be accorded priority in order to overcome the challenges they experience.

“As policymakers explore smart and sophisticated steps to develop healthy entrepreneurial ecosystems across the African continent, the voice of the entrepreneur must remain in the foreground,” Ortmans, said “Being able to hear directly from the entrepreneurs helps guide our conversations at the Summit and beyond."

Good business sentiment but other stupefying piece of the conundrum is that the voice of the entrepreneurs are muted by difficulties that range from generating business know-how to dealing with expensive and time-consuming bureaucratic procedures and the fact that people don't build synergies that could help entrepreneurship flourish. Many African countries score very abysmally in the World Bank’s Ease of Doing Business surveys. Nigeria is ranked 145 among 190 economies in the latest ratings. It was 169th in the 2017 ranking. At 49, Mauritius is the best in Africa.

On a global score, New Zealand, Singapore and Denmark are in first, second and third places, respectively. They are followed by the Republic of Korea; Hong Kong SAR, China; the United States; Britain; Norway; Georgia; and Sweden.

The World Bank ranking assesses how easy or difficult it is for small to medium-size businesses to start and run in line with relevant global best practices. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a small business. The rankings are determined by measuring 11 key areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency (bankruptcy) and labour market regulation.

Apart from Mauritius, other economies in the region that perform well on the ease of doing business rankings are Rwanda (at 41), Kenya (80), Botswana (81) and South Africa (82). The lowest ranked economies are the Central African Republic (184), South Sudan (187), Eritrea (189) and Somalia (190). Four economies in Sub-Saharan Africa rank in the top 10 in getting credit (with an average rank of 115). Zambia ranks 2, just after New Zealand, and Rwanda, Malawi and Nigeria all rank 6.

That is not all. Recent studies using World Bank Enterprise Survey data show that that businesses in sub-Saharan Africa are, on average, up to 24% smaller than those in other parts of the world and are less productive and competitive. Even when they do manage to mature into larger enterprises, they do not see the gains in productivity we mi19 /E-PAYMENT REVIEW/ SEPTEMBER 2018

ght expect. The result is that there are relatively few large firms in Africa, compared with other developing countries.

Then there is the issue of geography. There are disparities in the growth profiles of the sub-regions of Africa. The Francophone part is lagging behind the Anglophone part. Francophone Africa accounts for only 19% of sub-Saharan Africa’s average GDP while Anglophone Africa (excluding South Africa) accounts for 47%. The World Bank’s Doing Business report, shows that the English speaking countries rank more favorably than the ones that speak French.

These conditions have caused real problems for Africa for a long time. In 2013, philanthropic investment firm, Omidyar Network released a report that identified significant barriers to fostering an environment in which high-impact entrepreneurship can thrive in Africa. A lack of access to financing, inadequate infrastructure, insufficient skills training, limited affordable and accessible business support services and burdensome administrative policies were among the obstacles included in the report's findings. In a survey of the continent’s entrepreneurs, 60% of respondents held that the cost of capital hinders company formation and growth, while 55% contended that the business support services available for new and growing firms were not sufficient.

Years earlier, the International Finance Corporation (IFC) published estimates showing that 84% of small and medium-sized enterprises in

Cover BRANCH

$20 million

Online micro-lending startup Branch lined up the money in Series B funding to expand its offerings to more countries. also secured a $50 million debt facility from Victory Park Capital, an investment firm with a focus on alternative credit.

PEG AFRICA

YOCO

$18 million

South African PoS payments provider Yoco will use the money raised in a Series B round to grow its network of merchants, invest in product development, and hire top-tier fintech talent.

This takes its total funding to US$23 million.

Africa were either un-served or under-served, leaving a value gap in credit financing of $140 billion-$170 billion. Omidyar Network cited the IFC figures but outlined investors argument that most of those seeking financing did not present projects that they could back with their money.

Today, the situation is changing. African entrepreneurs are developing fundable ideas, business plans and projects. Their strategy is to found new companies by recreating foreign business models. The ubiquitous nature of technology is giving them the power to overcome the challenges presented by their business environment. And to encourage them, investment funds and venture capitalists are ensuring that finance is available to firms with the potential for growth.

The VC Interest “If you want to become extremely wealthy over the next five years, and you have a basic grasp of technology, here's a no-brainer: move to Africa,” that was the opening sentence of a 2011 article on Wired announcing the opportunities that the internet had created in Africa. The write-up was motivated in part by a four-day whirlwind visit that year by then British Prime Minister David Cameron who was so keen to give British entrepreneurs both a taste and a toehold in the emerging Africa market that he took a high-level delegation of UK business leaders to Nigeria and South Africa to highlight what he called "one of the greatest economic opportunities on the planet." His entourage included founders and chief executive officers of firms like banking behemoth Barclays, aeronautical giant Bombardier, mobile-money business Monitise, multinational telecommunications conglomerate Vodafone, a clever text-messaging system called FrontlineSMS and the crown jewel of the Virgin Group, Virgin Atlantic.

Cameron’s office hailed his effort as "a historic visit to a continent with a trillion-dollar economy and the potential, according to the IMF, to grow

$13.5 million

The West African solar company PEG Africa secured funding through a combination of debt and Series B equity financing which will be used to help it accelerate growth in Ghana and Côte d’Ivoire. It raised $9 million last year via two different deals.

O-MOBILE

VEZEETA

$12 million

Launched in 2015 in Cairo, e-health startup Vezeeta helps people to find and book appointments with over 10,000 doctors in Egypt, Jordan and Saudi Arabia. It raised the amount in a Series C funding round, the largest single investment ever received by an Egyptian startup.

faster than Brazil over the next five years." Much of that growth, the writer and Cameron believed, would come from startups with knowledge of mobile internet and how to deploy it for various uses by businesses and consumers. They identified the markets that were primed for explosive growth to included mobile money, ecommerce, business directories and health.

Four years later, Ndubuisi Ekekwe, the founder of the non-profit African Institution of Technology and Chairman of Fasmicro Group, wrote an article on the challenges facing e-commerce start-ups in Africa, which was published on hbr.com.

In the piece, he outlined the reality of internet business in Africa and how the optimism about Africa ignores the blind spots on the hard road that e-commerce start-ups and other businesses have to travel to arrive at a point of success. Towards the end he chipped in this démarche: “Any startup with few millions of dollars in funding can jump in preeminence in the region because Africa has a poor pool of companies. There are 3,186 companies in the continent (in all sectors) with revenue of above $50 million. So when a firm raises $100 million, it can beat anyone for market share because there are so few companies — especially in the web sector — that can challenge it.”

In the interim between the two cited articles, there were a huge number of other write-ups that stoked both entrepreneurial enthusiasm and investor confidencein the potentials of Africa. Today, internet-driven businesses are being founded with regularity while the field of those looking to put their money in these businesses has broadened into areas of daily activity.

However, such a rush of interest is raising concerns about a neo-colonial Scramble for Africa.

There has been some worry that investors are not pouring in money for the love of fintech or for Africa but that they are here to exploit opportunities that promise rich rewards. In one telling, China has been accused of donning neocolonial garb 20 /E-PAYMENT REVIEW/ SEPTEMBER 2018

$10 million

O-Mobile Multimedia, a Nigerian firm that specializes in technology deployment for financial and agricultural services secured the funding in the form of a grant from So.Sui.Ben Foundation, a Swiss non-governmental organization that promotes development in Africa.

AFRICA’S TALKING

$8.6 million

Kenya’s mobile solution startup Africa’s Talking raised the Series A financing for expansion into more markets.

The mobile solutions firm integrates reliable two-way SMS, voice, and USSD functionality across mobile providers in Africa.

to advance its interests on the continent. "The result of neo-colonialism is that foreign capital is used for the exploitation rather than for the development of the less developed parts of the world.

Investment under neo-colonialism increases rather than decreases the gap between the rich and the poor countries of the world," writes Alemayehu G. Mariam, professor of political science at California State University, San Bernardino in an opinion piece for Fahamu. "China has literally invaded Africa with its investors, traders, lenders, builders, developers, laborers and who knows what else." A corollary is the energy expended by the West in spread ingthe gospel that progress that can only be brought by the infusion of private capital into underdeveloped African societies.

Even if these were to be the case, they only tell half of the story. The other half is that those investing in African emerging tech sector are gradually emerging as an established asset class with a vision much broader than the original motivations that enticed them into the African market. Where the author of the Wired article was urging a smash and grab operation that could yield billions, these investors are making a long play for growth – growth for their money possibly in perpetuity and growth for the continent.

Take private equity for instance, during the 1990s, there were about a dozen Africa-focused private equity companies that collectively shuffled about $1billion around to back businesses in Africa especially the ones in oil and gas, mining, agriculture and manufacturing. That number has since grown to more than 200 firms with a combined portfolio of more than $32billion.

Between 2010 and the first half of 2016, these firms backed 928 reported deals, with a value of $22.7billion and in the same period, investors raised $17.3billion and invested in every region of the continent.

Unlike their modus operandi in developed markets in North America and Europe where they focus on leveraged buyouts, investors in Africa

SWVL

$8 million

The Egyptian-made app-based mass transportation platform closed a $US 8 million Series A investment round led by regional venture fund BECO Capital, Africa-based investor DiGAME and global VC fund Silicon Badia.

COINAFRIQUE TRADEDEPOT

$3.9 million

This mobile B2B trade platform that connects Retailers in Emerging Markets directly to consumer goods brands for ordering and delivery secures the funding in a Series A round from Partech Africa.

are focusing on job creation and capacity development. This is good for a continent with the world’s youngest populations, which is forecast to double by 2050. They are trying to salvage a situation, which every economists, development expert and financial analysts have painted as a doomsday scenario. While that may sound dramatic, the truth is that the situation is dire. Here is why: working in Africa is what McKinsey consultants in a 2012 report characterized as “vulnerable employment.” The unemployment rate in Sub-Saharan Africa is 7.5%, while unemployment rates for youth aged 15-24 are reported to be between 12-14%. This classifies close to 70% of all workers in Africa as vulnerable. Currently in many sectors, people are working with no guarantee of income or wage receipts. But investors are working to change that that even though at a pace many would conclude is still slow. A study by the African Venture Capital Association (AVCA), which examined 199 African companies backed by investors between 2009 and 2015 found that these companies generated tons of jobs. The mobile cum telecom sector alone contributes over 4 million jobs to Sub-Saharan Africa and more than $100 billion to its economy.

McKinsey and Boston Consulting Group estimate that there are more than 10,000 African companies with revenues of $10 million to $100 million. Growing these companies into conglomerates seems to be part of the long term strategy of these investors. At present, many of these small businesses are benefiting from the expertise and discipline that private equity investors wrap around their money. This is highly essential since the businesses are operating in under-developed high growth sectors that have yet to reach scale, such as education, telecom, agriculture, cross-border commerce and other consumer-facing industries. The AVCA study found that apart from providing funds, investors offer better education, transfer actionable skills, implement job-quality initiatives and strengthen competencies

$3.085 million

Senegal-based classifieds app CoinAfrique raised the funds from several investors. Launched in May 2015, CoinAfrique connects online sellers and buyers in 16 African countries.

KOBO360

JANNGO

$1.18 million

The Côte d’Ivoire-based start-up in, which supports high-growth businesses and digital platforms in Africa, got its first fundraising from an investor pool. The funds will be used to open offices in Abidjan and Paris.

in human resources, corporate governance and general management. These help create a business environment that is attractive and good for economic development.

Entrepreneurial revolution Revolutions only get called with hindsight. At the time, they are generally experienced as incremental steps that later are viewed as an extraordinary period of change. We are in a period of accelerated evolution that will be called a revolution in financial services. For decades, people depended on traditional banking institutions, consolidating much of their financial needs at a single bank where they worked with the bank’s staff to conduct deposits, loans, transfers, and investments. Since the banks were the only option, everybody went along with their curmudgeonly lengthy process. But digitalization changed that.

Not only did it alter banking processes, it brought the world fintech. The rise of fintech has significantly altered financial services in Africa in the last few years. Instead of the methods traditional banks use, fintech companies are able to process financial services by evaluating a set of diverse data points that banks would never consider valuable like social media profiles and a company's or individual's web presence. From mobile payments to crowdfunding platforms to e-commerce systems, fintech companies reflect the needs of a group of consumers who have operated outside the mainstream for a long time. It also caters to a new generation of customers who are looking for an easy to use service whether they are at home or on the move.

According to Investopedia, “since the internet revolution and the mobile internet revolution... financial technology has grown explosively, and fintech, which originally referred to computer technology applied to the back office of banks or trading firms, now describes a broad variety of technological interventions into personal and commercial finance.”

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$1.2 million

Nigerian-based logistics startup raised the money in pre-seed funding round, which is often used to bridge the gap to the next round. The Uber-like app connects Nigerian truckers to companies with freight needs.

PIGGYBANK

$1.1 million

The dgital savings platform targeted at African millennials, got seed funding of from Olumide Soyombo, founder of LeadPath Nigeria, and international and pan-African investors, Village Capital and Ventures Platform.

Today, fintech companies directly compete with banks in most areas of the financial sector to sell financial services and solutions to customers. Mostly due to regulatory reasons and their internal strucutres, banks still struggle to keep up with fintech startups in terms of innovation speed. Fintechs have realized early that financial services of all kinds – including money transfer, lending, investing, payments, ... – need to seamlessly integrate in the lives of the tech-savvy and sophisitcated customers of today to stay relevant in a world where business and private life become increasingly digitalized.

Part of the allure of the fintech enterprise for investors in Africa is that they understand the needs of entrepreneurs, the landscape in which they operate and the barriers that need to be removed to create vibrant businesses. Owing to the fintech success story, entrepreneurship is gaining credibility as a vocation in Africa. The Omidyar Network survey found 57% of respondents consider becoming an entrepreneur a desirable career choice. According to another survey by the Global Entrepreneurship Monitor, 90 percent of Nigerian adults strongly believe they have the skills required to run a business, 82 percent of youths see becoming entrepreneurs as a career path and 35 percent of Nigerians are already involved in at least one startup activity or the other.

The report writers said that such enthusiasm is an important condition necessary for high-impact entrepreneurship to thrive in Africa.

Now, allure and enthusiasm are finding a point of convergence and the result is a preponderant flow of cash to startups in need of the lifeline needed to scale their operations. In 2017, global investment in fintech ventures reached over $31 billion, sustaining the high level of investment seen in 2016, according to the KPMG Pulse of Fintech report. This brings the total global investment in the fintech sector over the past three years to $122 billion. In Africa, venture capital funding for startups jumped 51% to $195 million

Cover

MINES

GROWTH MINDSET L-R: Mines' executives Adia Sowho Managing Director, Nigeria / VP of Commercial, Ekechi Nwokah, Chief Executive Officer and Kunle Olukotun, Chief Scientist. The digital credit platform raised $13-million in a Series-A funding round. The company mines high-volume data like phone/bank records, and payment transactions to assess credit risk in markets.

in 2017, according to a report from Disrupt Africa. Fintech was the biggest attraction for investors, the report said, with 45 startups raising one-third of total funding. While Kenya, Nigeria and South Africa raised the highest amounts, venture funding momentum was seen in Ghana, Egypt, Morocco, Tunisia, Uganda and even Somalia.

What’s more, African fintech firms have raised over $100 million in investment since 2015. In 2016, fintech startups accounted for 24% of the total capital raised in Africa. 2017’s total was $167.7 million. Companies like Andela, Cellulant, Flutterwave, and Paga are among those leading the pack of new entrepreneurial adventurists. Last year, payment technology company Flutterwave, raised $10 million in a series A funding round led by Greycroft Partners, Green Visor, Y Combinator and new investors like Glynn Capital. Andela, an African developer training school for engineering jobs across the globe, has raised over $81 million since it started accepting funds from venture capitalists. In August, Paystack, which provides online payment facilities to merchants and others by way of an API and a few lines of code, announced that it snagged $8 million in a Series A round of funding led by global payment giant Stripe with participation from Visa, Tencent and Y Combinator.

This year is even shaping up to see far larger investment. Halfway through it, there have already been 118 deals valued at $168.6 million.

Fintech accounts for four of the 10 largest deals completed, receiving $95 million in funding.

The two largest recipients are Cellulant, a digital

payments solutions company which operates in 11 African countries, which obtained $47.5 million in its Series C round and Branch, an online micro-lending platform, which raised $20 million. Nigeria-based digital credit platform Mines also closed a Series A round of $13 million led by The Rise Fund, a global fund managed by TPG Growth. Mines, which provides a Credit-as-a-Service digital platform that enables institutions in emerging markets to offer credit products to their customers, plans to use its investment to hire staff, grow assets in Africa, and expand to South America and South East Asia.

Others benefiting from investments are mobile money company Paga, which raised $10 million in a growth financing round led by the Global Innovation Fund. The company is gearing to expand into new markets in Ethiopia, Mexico, and the Philippines. Another Nigerian fintech startup, Lidya raised $6.9 million in a Series A investment round led by Omidyar Network and Alitheia Capital. The company said the money will allow it to expand its loan book, bring in more skilled professionals and scale in Nigeria, enter new markets in Africa.

This is just a small sample of investment inflows to Nigeria. Interest is spreading across other African tech ecosystems as start-ups leverage the opportunities presented by a continent that lacks legacy assets in any sector of its diverse economy.

The attention is intensifying to the point that governments outside the continent are putting Africa’s entrepreneurial funding into their strategic geopolitical calculation. In May, during 22 /E-PAYMENT REVIEW/ SEPTEMBER 2018

VivaTech 2018, an annual global technology rendezvous held in Paris, French President Emmanuel Macron unveiled a €65 million African startup fund. The French Development Agency (AFD) will manage the fund "to fill the gaps in the support with small sums ranging from 30,000 to 50,000 euros, which is what startups need", Macron said. The money will divvy up into three parts. “There are €10 million for technical assistance to support the African ecosystem… €5 million will be available as interest-free loans to high-potential, pre-seed startups…and…€50 million will be for equity-based investments in series A to C startups,” AFD Digital Task Team Leader Christine Ha told Techcrunch..

In a far-ranging speech at the event, Macron emphasized his belief in African innovation, and singled out Rwandan president Paul Kagame (who incidentally was in the Vivatech crowd) for investing in digital innovation. Something he described as the best way to provide the solution made by, and for African people. “Because when you speak about innovation, when you speak about digital, it’s by providing services for people to learn, to be able to be educated, to work, to get access to energy, and so on. But you speak as well to job creation for people,” said the French president Paying it back Fintech startup founders like to recall how they scraped and saved to put together enough money to actuate mere ideas into real products and services. Many depended on the support of family

DATA: FUNDZ.NET / INVESTOPEDIA / STARTUPFREAK

and friends to raise seed capital that went into the development of their businesses. Most were not apprised of the funding opportunities they could have exploited to make going to market an easy task. Recently, awareness amongst SMEs regarding the range of alternative finance options has risen. Both startups and mature businesses now have the chance to determine the type of finance that is right for their business based on a variety factors: their ambitions, how much they need, their revenue profile, and if it is a new business their ability to pay back, assets ownership and willingness to sell shares. To satisfy any of these funding markers, there are plenty of financial options available to businesses who are starting out or are looking to fund their growth.

First of among them is bootstrapping, which is generally believed to foster innovation and creativity but leads to constricted funds and limitedgrowth. Second is crowdfunding, the method where a number of people, interested in an idea showcased on the internet chip-in through either investment or donations and then their money is pooled to reach the funding target. Then there is the good old business loan, obtainable from a bank or even a friend in the form of credit, which you will need to pay back, plus interest, based upon the agreed terms. Loans are usually provided for a set term and will have an interest rate that is either fixed or variable. Another is small business grant, essentially free money that does not need to be repaid, which is awarded typically by the government or development agencies.

Fintech startups have exploited these different types of funding opportunities to raise cash. But the latest funding driver is equity finance which involves selling a stake in your business. The investor who buys that stake will take on a portion of the profits or losses that your business makes.

This funding type is usually led by angel investors and venture capitalists. Angel investors are high-net-worth individuals, often with extensive business experience, who provide capital early in a business’ life in exchange for a portion of equity. Venture capitalists or VCs are investment firms who are willing to fund high risk, high potential startups for a slice of the company. The advantages of taking money from either of the two is that you will not have to make repayments in the same way that you would if you took out a bank loan. Such an investment does not need to be repaid. If things do not work according to plan and your business fails, the investors share in the risk. More importantly, though, it is often not just about the cash. Equity investors frequently have extensive business experience which they bring to bear on a venture. Many act as mentors, using their experience and connections to propel the growth of the business.

In the wake of the many stories accompanying successful fund raises, there have been calls for caution in the way startups are pushing for funding. In the midst of all the excitement it is easy to forget that raising venture capital funding can be a risky business. For startups and new businesses with significant potential for growth, venture capital can provide a vital source of money to grow quickly. But then, getting funds from VCs is usually a tough experience because they are seasoned investors that know the intricacies of

GLOSSARY OF FUNDING TYPES MAGIC OR MYTH PRE-SEED The earliest stage of funding,with money from the founders themselves, their families, friends and family, and maybe an angel investor or an incubator.

PLANTING THE SEED The first outside investment in a company in exchange for equity. The amount ranges from tens of thousands of dollars to up to around $2 million.Typical company valuation: $3–10 million. Common Investors: Angels, early-stage VCs, startup accelerators. Large tech companie like Google and Facebook, offer seed funding to promising startups working on innovative ideas which might be good acquisition candidates later.

SERIES A IS FOR OPTIMIZE At this funding round, initial stock is sold to investors. If a company raises a series A round it means its business plan and initial results passed scrutiny and the company has shown a real potential to tap into a big market. The money is used for early stage business operations.

Average funding amount in 2018: $10.5 million. Typical company valuation: $15 - $30 million. Common investors: VCs, “super” angels.

B IS FOR BUILD Series B is to pour the gas on growth with a larger investment round to help the company to scale up, to face competitors and have a market share.

Valuation of company is done on basis of performance in comparison to the industry, revenue forecasts and assets like intellectual property. Average funding amount in 2018: $24.9 million. Typical company valuation: $30 - 60 million.

Common investors: VCs, Late-Stage VCs. LET’S SCALE: SERIES C Series C Funding Round generally occurs to make the business appealing for acquisition or to support a public offering. This is the first of what are called "later-stage" investments. This can continue into Series D funding, Series E funding, Series G funding, private equity funding rounds, etc. Average funding fmount: $50 million. Typical company valuation: $100–120 million.Common Investors: Late-stage VCs, private equity firms, hedge funds, banks.

startup, investing and running businesses. They are driven by results and profits and returns on invesment. In a typical VC portfolio, funds are structured as 10 year commitments for the limited partners who invest in the fund and most of the returns are from 20% of the investments.

Meanwhile, , taking equity investments means the owner of the company is no longer the only 23 /E-PAYMENT REVIEW/ SEPTEMBER 2018

running or making decisions about the company’s direction. Both angel investors and VCs have been known to grate on the nerves of startup founders by either pushing for rapid expansion into new markets too early or for a quicker exit from the market than the original owners were willing to consider.

For venture capitalists, the primary drawback of forking over all that funds is the significant risk that closely hugs the potential for bountiful reward. Potential is no guarantee of success, and a huge payoff is not the favoured outcome. Africa has potential but exploiting that potential is a business act. By its nature, business is characterized by risk or what Investopedia described “as the possibility a company will have lower than anticipated profits or experience a loss rather than taking a profit.” Business risk is influenced by numerous factors. Poor business decisions, fundamental flaws in a business model, changes in economic conditions and competition may impede growth even with ample funding. If a company fails despite attracting venture capital, investors could lose most if not all of their investment. The same characteristics of fintech startups, which make them a draw for investors could also work against them as a business. Facts bear this out.

In 2016, total global funding to fintech companies fell to 47 percent to $24.7 billion from $46.7 billion the year before, according to KPMG’s quarterly fintech funding report, The Pulse of Fintech. Deal activity also dropped to 1,076 from 1,255 largely due to investors’ focus on business models and plans for profitability. Without a developed business model, a fintech startup can’t bring a product to market. And without a defined target market, it is more difficult to determine the size of an opportunity. Pressure to quickly get into market, realize revenue and prove acquisition and risk models to investors could lead to products being brought forth prematurely in order to hit tight deadlines and avoid hurdles to future investments.

One shining example of these outcomes is Jumia, Africa’s leading ecommerce company. Since its launch in 2012, the Jumia Group has raised a total of $767.7 million in over 4 funding rounds.

In March 2016, the company got over $326 million at a $1 billion valuation from U.S. investment bank, Goldman Sachs, French insurance firm, AXA, telecommunications giant, MTN and a host of other investors. But while Jumia is celebrated for spreading to 27 countries in Africa, it has yet to be profitable. According to Rocket Internet’s 2017 financial results, Jumia had a loss of 107.9 percent, which it attributed to continued investment in building its product.

The Jumia example shows that investment in a company does not guarantee its success. It does mean, however, that the investor expects a return on his investment. In an environment plagued by identified challenges for entrepreneurs such as inability to raise funds, finding customers, wearing too many hats, lack of guidance, slow sales, customers paying late and unpredictability of business conditions, running such losses for the period Jumia has is almost a guarantee. When you insert the issue of exchange rates that are constantly on the rise, the cumulative effect means making returns could be a challenge.

Cover interview

THE NIYI AJAO FACTOR AS EXECUTIVE DIRECTOR OF BUSINESS DEVELOPMENT, NIYI AJAO IS RESPONSIBLE FOR DRIVING STRATEGIC PARTNERSHIPS AND TRANSACTIONS TO ACCELERATE GROWTH FOR NIBSS AND ITS CUSTOMERS. HE WORKS WITH EXTERNAL PARTNERS, RANGING FROM FINTECH START-UPS TO LARGE-DEPOSIT BANKS, TO IDENTIFY AREAS OF COLLABORATION, DRIVE INNOVATION AND UNLOCK SHARED VALUE. NIYI TOOK SOME TIME FOR AN INTERVIEW TO DESCRIBE THE MOST IMPORTANT RESPONSIBILITIES AS WELL AS THE CHALLENGING AND INTERESTING ASPECTS OF HIS POSITION.

NIYI AAO

BY BROWN N. UGBAJA CAN YOU START OFF BY TELLING OUR READERS A LITTLE BIT ABOUT YOURSELF AND your career highlights to date?

I started off my career as a Mathematics and Computer Science lecturer at Ogun State University now Olabisi Onabanjo University. Then I moved on to IT consultancy and then commercial banking where I left as AGM and Head of IT to join NIBSS as head of operations; later I became the executive director in charge of technology and operations and after four years in that role I took charge of NIBSS business development, the role I occupy at the present. I have led key projects within NIBSS including the Nigeria Automated Clearing System(NACS) platform for cheques and ACH clearing and settlement, the Nigeria Central Switch (NCS) which facilitates interconnectivity and interoperability in the industry today, 24 /E-PAYMENT REVIEW/ SEPTEMBER 2018

integrated e-collection and bulk payments, the instant payment service and a whole lot of other industry shared services and portals. My present focus is driving the business development arm of the company.

Tell me about your role and key objectives as executive director of business development.

My role really is to oversee NIBSS product develpment and customer relationship management strategy and activities. Our primary customers are the banks and other entities licensed by the Central Bank of Nigeria, i.e. Other Financial Institutions like microfinance banks, primary mortgage banks, switches, processors, payments solutions services providers, etc. We ensure that all our customers are aware of our products and that in using these products they get full value.

Whenever there are hitches, which could happen once in a while, we are able to step in to ensure that the technical team gives attention to the issues and fixes them very quickly. We also drive innovation in the industry towards enhancing the national payment system. We have a training arm that is focused on enhancing the capacity of electronic payment system operators in the industry, drawing their attention to local and global trends, and best practice in the management of present and emerging threats and opportunities.

The payment and fintech ecosystem is expanding and getting stronger with new startups emerging every day. What is your view on this trend and what challenge does it pose for an established company like NIBSS? We are in a new world - the information and artificial intelligence age - and the trend we are seeing is not happening only in Nigeria, it is a worldwide phenomenon. Fintechs are springing up, led mainly by millennials with bright ideas and who don’t take no for an answer. They are breaking the old traditional ways of doing things and are making impact. For NIBSS and key stakeholders, this new trend is good. Over the years, there had been black spots in the system that these new entrants are helping to focus on and to fix. One is the question of inclusion. We have done the Bank Verification Number (BVN) system and have enrolled about 35 million people. But the projection per our population is that there are about a hundred million adults in Nigeria and about 65 million of them do not have BVN nor bank accounts. So I see this new entrants coming with potent ICT tools that would enable them, working in partnership with banks and existing operators, to onboard the financially excluded. The EFInA 2016 survey shows that 41.6% of adult Nigerians are financially excluded, and 30.7% of those surveyed gave accessibility problem as a major reason for not being part of the financial system. There are just about 5500 bank branches in this big country of 200 million people. Now banks will not set up branches everywhere; it is not economically viable but because of these new entrants and new technological advancements, there are now much easier ways to reach the people, especially through the mobile phone. According to the Nigerian Communications Commission (NCC) there are 160 million active SIMs in the country. With an average of two SIMS per person, a rough estimate should mean that there are 80 million individuals in this country who have mobile phones and out of that number, only 35 million have bank accounts. There are still about 45 million yet to be reached with financial products. I see this number as a blue ocean that these new entrants should help us to reach with banking services and it is already happening. There are many players doing all sorts of things in Nigeria and around the world. Their presence is a welcome development and we are partnering with a number of them. Many of them have Central Bank licenses and luckily CBN has created licenses that cater for them. The latest license types are Super Agent license and Payment Services Solution Provider (PSSP) license and a number of firms are using it to operate presently. On the second part of your question, yes, there are challenges. We work with every one of them as long as they have the right license but we know that banking is all about risk management. Now these new entrants, who have technology in their hands, are very vast in technology and want to do things.

But the big question is how competent are they when it comes to risk management? For me that’s where we have to be very cautious and as we engage them, we bring this matter up. These tech guys want to do new things but they will work well if they partner the banks because the banks understand the intricacies of data protection, data management and risk management such that when they combine forces society will be the better for it.

The banks are very strong and experienced and they are going digital. I think if they work together with fintechs they can achieve a lot in getting more people included financially and improving efficiency in the payment system in general.

be bank branches, then it moved to internet banking and now it’s mobile. In the last two years the mobile phone has become king when it comes to accessibility with every bank now offering its own mobile apps and USSD services. Like I said earlier, we have an estimated 45 million people who have mobile phones but don’t have access to finance. Our focus should be on getting them to use their smart phones and feature phones as applicable and mobile apps, USSD, SMS, WhatsApp etc for financial services such as account opening, savings, fund transfer, securing loans, making payments, pensions and insurance.

SHORT PROFILE

An amateur astronomer, and loves adventure travelling, Niyi taught Mathematics and Computer Sciences at Olabisi Onabanjo University, Nigeria, for 4 years before joining banking. He worked with Societe Generale Bank (now Heritage Banking) where he left as Head of Information Technology to join NIBSS. An alumni of the Lagos Business School Advanced Management Programme, he holds an MBA from Obafemi Awolowo University, and M.Sc. (Computer Sciences) degree of the University of Lagos. Niyi actively participates in, and speaks at, industry fora on Nigeria payment system practices and policies, and on payments innovation.

He is married and has 4 children.

Nigeria has 84% mobile penetration and one of the highest percentages of unbanked people, according to the latest Global Findex report with more than 60% of adults lacking access to bank or mobile money accounts. What will be some of the key lessons to achieve scale in the digitization of payments in Nigeria?

One key lesson that stares us in the face squarely is that of channels for providing financial services. Even within the banking system, data shows that in the last four years, the preferred channel for accessing financial services has shifted. It used to 25 /E-PAYMENT REVIEW/ SEPTEMBER 2018

Fintech companies are already taking advantage of mobile and the number of unbanked adults. How can the industry work to overcome consumer apathy and speedily bring more people to adopt mobile payments?

I think it’s too early in the day to express worry about the pace. Most of these mobile banking and payments moves started only some years ago and it takes time to change human behaviour, reach people and gain their confidence. However, I am happy at the way things are working and believe that in a matter of time we will get there. But we just need to create more awareness. There are so many financial services on the ground but we are not making noise about them and I am beginning to get worried about that. For instance, there are different micro loan schemes operating right now with proper licenses from the CBN through which people can get loans in a matter of minutes, yet many people are not aware that such things exist. The industry needs to create effective awareness campaigns to let people know about the different digital financial services that are available and encourage them to use these services. On the other hand, most people who have knowledge of these services are somewhat wary to use them due to concerns about fraud. The onus is on service providers and other stakeholders to let them know that we have enough protection in the system against fraud. With the BVN system we have in place it would be hard for anyone to commit fraud in the financial system and get away it. For every account used to commit fraud there is a BVN and we can track the payer and payee. Also all service providers have customer complaint mechanisms in place as required by regulation, to attend to user issues that may arise, so people need to have trust in the system.

MCash was recently relaunched and in an interview with CNBC Africa you said mCash will drive financial inclusion in addition to other benefits.

Can you provide details on the strategic direction you are following to achieve these objectives?

You know NIBSS is a shared infrastructure. Our mandate is to continuously work with the financial services to come up with solutions that will bridge identified gaps in the market and that was how we got mCash. Making sure it reaches those that need to use it is the responsibility of the banks. They have the customers and they know the customer. At the launch, I said that we have close to 200, 000 merchants that have PoS terminals but just about 110, 000 terminals that are active. Statistics show that there are more than 20 million MSMEs in the market. So we have like 20 million businesses out there who need to taste and enjoy the benefits of e-payments but are still transacting in cash. Studies and country experiences have shown that the national economy will not grow when majority of buying and selling is done with cash. The turnover of the said busi-

Cover interview nesses is generally so low that banks will not give them PoS terminals, so we see mCash bridging that gap. We are working with the banks to create awareness among such businesses to adopt mCash for receiving instant payments into their bank accounts when their customers pay them with mCash on the mobile phone, and these businesses can in turn use mCash to pay their own suppliers without delay. Our major strategy right now is to see how we can propagate the product among small businesses and we are engaging Deloitte to guide the industry on the best and cost effective way to reach people and let them see the benefits of mCash and to use it. In terms of financial inclusion, mCash is an effective tool in the hands of banking services agents. There are many digital finance agents who are using it to receive and to transfer payments i.e. cash in, cash out services.

What is the opportunity for merchants to join the mCash network?

There are basically two ways to join. One is to go to your bank. No matter how small a business is the bank will give that business an eight-digit

"NIBSS IS AT THE CENTRE OF PAYMENT FOR THE COUNTRY AND WE HAVE APIS FOR MOST OF OUR SERVICES AND ALL THE PLAYERS IN THE MARKET THAT HAVE RECEIVED CBN LICENSES ARE FREE TO COME TO US FOR APIS. BANKS HAVE APIS FOR THEIR SERVICES AND THEY SHARING THEM WITH THEIR PARTNERS FOR ALL KINDS OF SERVICES."

NIYI AAO

mCash Seller code which he or she can display boldly in the shop or social media presence such as web, Instagram or Facebook page and people can use it to make payments. The other way is through merchants’ auto enrollment. What it means is that you can use *402*2# to get a code that lets you do some limited mCash transactions until you go to your bank to regularize the registration.

Are you looking at a tipping point where we will start to reach at least half of the 20 million merchants?

Our goal is to reach all the 20 million because they can all use mCash. Many of them are already using instant payments, which we created for person to person payments and that’s why we created mCash specifically for P2B and B2B payments. In fact, mCash offers more than just transfers from person to person. You use it to receive money; it is insured and if things go wrong such as network glitches you can be sure you won’t lose your money. It is a micro payment tool. Transactions below N1000 attract no fees for both the payer and the payee. It was made for payments where you can send even small amounts of money and receive alert on all payments.

It’s such a flexible solution that merchants can use. You can recall your last five transactions, as well as use it to understand your inventory, bill payments and funding of your mobile or service provider wallets. At the July 2018 relaunch we had about 10 different use cases showcased involving ten different companies and what they have done with mCash. Some agents came from Lagos, Potiskum, Yobe State, and Port Harcourt and showed us how they use mCash for cash-in, cash-out, and money transfer transactions. There is a whole lot happening out there and we believe if we push it out and create awareness, the adoption rate will spike. Today, I don’t need to push instant payments because the whole world already knows about it and I believe mCash will soon reach its critical mass too with the collaborations of agents, the banks and the GSM companies.

Other than payment, there are a lot of adjuvant concerns about risk, security and identity that face the industry and which it is still trying to solve. Looking ahead, how do we tackle all this to ensure the digital transformation of payments in Nigeria?

I think the key thing is collaboration and I am happy with the way things work here in the Nigeria financial services industry. There is a lot of collaboration. One example is the Nigerian Electronic Fraud Forum (NeFF) which brings all banks and fintechs together under CBN coordination to regularly review the issues of risk, security and safety in the banking and payments industry. The CBN spearheads the NEFF initiative and works with stakeholders to assess what is going on, to review fraud trends, even on the global scene, and to come up with recommendations and countermeasures. Where countermeasures require regulatory intervention, the CBN will move immediately to release circulars and guidelines and that has helped the industry greatly. I tell people that Nigeria has one of the safest payment systems in the world. We have even better protection than are available in advanced economies. Most the fraud that happen here are by means of account compromise. Either the victim wrote his PIN where someone can easily access it or he was tricked into giving it out. Banks are constantly warning customers not to disclose their PIN; that it is like the key to their house or safe and not to write it anywhere. If people listen to these warnings from the banks, other service providers and the CBN, the level of fraud will reduce drastically. Even when there are losses, there are mechanisms in place to address the issues. The CBN has the consumer protection department that is the last resort where a customer who loses money through a bank channel and complains to the bank and the bank is not taking him seriously, can go to ensure his issue is addressed. I have seen incidents where the CBN stepped in to engage some banks when it was clear that they were at fault, and the CBN compelled such banks to refund lost money to the customers.

NIBSS is a repository of the BVN and transaction data for all Nigerians and part of the benefits of having such data is that you get a lot of information about the transaction habits of Nigerians. How do you that data to enhance 26 /E-PAYMENT REVIEW/ SEPTEMBER 2018

the broader consumer experience?

We are in the age of big data and we take that very seriously in NIBSS. We have a lot of information in our hands and they are very sensitive data and we are holding them very carefully to ensure the privacy of the owners is protected. We analyse the data at the aggregate level to understand general customer preferences, experiences and trends.

Today, we know that the mobile phone channel has become the most preferred by the generality of bank customers because of the convenience it gives; we know over 53% of BVN holders are young adults below the age of 35 years and we share such information with banks because it helps them to package special products for that age group. We can see global transaction patterns. For instance, we know that the 370 million digital transactions we had in 2017 were all done by 12 million bank accounts and 9 million BVN holders only. So when you talk about inclusion that opens the door for another kind of discussion entirely. The question then is that 12 million out of 80 million bank accounts and 9 million out of 30 million BVN holders as at December 2017 are the only ones doing the transactions. What was the nature of the financial activities of the 68 million account holders and 21 million BVN owners? They must have been using cash thereby slowing down the growth of the national economy. The data in our hands have helped us to know that. We make all this information available to banks because it helps them in designing products to bridge identified gaps and take advantage of emerging opportunities in order to serve the banking public better.

It seems some of that value is proposed mostly to people in metropolitan areas like Lagos, Abuja, and state capitals. The fintech companies and banks are not doing much to accommodate the needs of people in interior areas of the country. How do we build the needed structures in those areas to encourage more people to be part of the digital economy?

Thank God for the existing ICT infrastructure in Nigeria. GSM services cover most parts of Nigeria and again if we create awareness through electronic and print media, word of mouth or social media, people everywhere can use their mobile phones to do banking transactions. Where they need to get physical attention and there are no bank branches around, they can go to a financial services agent nearby. Luckily the industry has realized this. Earlier this year, the banks launched SANEF, the shared agent network expansion facility. The objective is to grow the number of financial services agents in the country from the present 20,000 to 500,000 by 2020. The CBN and all the banks are taking an interest and super agents are working hard at it. NIBSS has specific roles in the process, which is to give support to all the players, monitor the activities of the agents and, provide reports to CBN on the success of the project. The number of agents is growing but like I said that move only started this year but the agency banking idea has been around for about three years. We need to wait six months to one year to see how it all works out. If we can reach the numbers that would rank Nigeria in the league of Brazil then we would have made tremen-

concept in Europe and I would say in Nigeria, we have that in place already and we often call it open banking. India codes theirs as UPI. Today, we are in the world of APIs and what that means is that with APIs banks are able allow licensed non-bank entities to have access to bank customers account information so they can offer them services, be able to debit them and to facilitate payments subject to account holders’ authentication and authorisation. That is happening here already. NIBSS is at the centre of payment for the country and we have APIs for most of our services and all the players in the market that received CBN license are free to come to us for APIs. Banks have APIs for their services and they are using them and sharing them with their partners for all kinds of services. The PSD2 concept itself is here with us in Nigeria and that’s why the fintech companies are making waves and are able to do what they are doing. They are partnering with banks, processors, and switches and are able to release new products leveraging existing bank customer information; most of them running on the phone. When a customer enrolls with a fintech scheme, he can give instructionS to have his account debited and that can only happen because his bank is authenticating the transaction using his card details or an OTP that his bank has given him, which can be hard token or soft token.

He is able to use all that tool to advise his bank to authorize a debit to his account or to release specified information. There is a complete partnership within the ecosystem and banks don’t hold on to information and start saying they are the only ones that can deal with customers and nobody else should play. Our version of PSD2 also works with sandboxes. NIBSS has a sandbox in place where APIs are released for fintechs to try their hands on and when they work with it and perfect their ideas with an appropriate proof of concept, they can go to the CBN and obtain a license or go to a bank and sell their technology and play. Like I said earlier, exciting days are ahead, we have all the basic tools we need to go all out there to get everyone included financially and to delight the banking public with exciting technology-driven financial services.

dous progress. Brazil is renowned for having the highest number of financial services agents in the world. Brazil, whose population is about Nigeria’s, is reported to have about 350, 000 agents.

There are many service providers in the field all over the country - people in the north, west, south, and east; banks are funding different initiatives targeted at growing the number of agents out there and the agents themselves are being empowered to do so many things like opening bank accounts, cash withdrawal and BVN enrolment for people. It is still too early in the day to gauge the results because the structure has to mature to a level in the next couple of months where we will begin to see things change seriously. The number of bank branches might not move bey-

ond the 5500 we have right now but we should get to a point where Nigerians wherever they live and work will have access to banking services through these agents.

Despite the prevalence of digital payments, organizations in the sector are still competing with cash. People still prefer cash because it's easier to use than a digital payment platform.

Looking at the situation, do you think an initiative like PSD2 might help to remove the obstacles to mobile payment uptake?

When we talk about financial inclusion the summary of it all is to give every adult Nigerian a transaction account. The revised Payment Services Directive (PSD2) is the code used for the 27 /E-PAYMENT REVIEW/ SEPTEMBER 2018

What book have you read recently that has had an impact on you; that you found important or that you would like to recommend to our readers?

I have just read The Top Five Regrets of the Dying

by Bronnie Ware, and I am reading Jack Canfield’s The Success Principles. The former really touched me. The author is a lady nurse who cared for people who have been certified terminally ill but who still have their mental faculties intact.

She was privileged to have worked with so many of such patients. Many were successful individuals, male and female who wept bitterly as death approached having discovered so late regrets that Bronnie have categorized into the following to guide us all to live more meaningful lives while time still permits: I wish I’d had the courage to live a life true to myself, not the life others expected of me; I wish I hadn’t worked so hard; I wish I’d had the courage to express my feelings;I wish I had stayed in touch with my friends; and I wish I I had let myself be happier.

Interview

EXECUTION AGILITY IS ENGRAINED IN STERLING BANK'S CULTURE AND OUR RESPONSE TO DIGITAL DISRUPTIONS HEAD OF DIGITAL INNOVATION AND FINTECH AT STERLING BANK, GBENGA ADAMS, ON HOW HIS BANK IS CULTIVATING AN AGILE ENVIRONMENT THAT QUICKLY RESPONDS TO CHANGE THROUGH AN ITERATIVE, ONGOING PROCESS, THAT IS SENSITIZED TO THE EVOLVING NEEDS AND EXPECTATIONS OF CUSTOMERS.

BY BROWN N. UGBAJA TELL US ABOUT YOUR BACKGROUND AND YOUR responsibilities in Sterling Bank.

I have been in the payment industry for over a decade and have worked across multiple areas from cards to mobile financial services to running the full digital and transaction banking suite at Sterling Bank. My role as the digital innovation and fintech lead is to look at innovation within the financial services industry and how Sterling Bank can be at the forefront of it. I also specifically look at innovation and potential disruption in adjacent markets. We work with different partners in the ecosystem, including fintech and early stage companies to accelerate our innovation capabilities. Critical to the work we do is our focus on what term the HEART sectors of the economy that require intervention.

These areas are health, education, agriculture, renewable energy and transportation. Our goal is to solve problems specific to these sectors in ways that usually go beyond finance.

GBENGA ADAMS

Tell us about Sterling Bank’s digital transformation programme. Are you focused more on creating a customer centric journey or being an innovative financial enterprise?

I would say both. The customer is at the centre of innovation itself. When you innovate without putting the customer at the heart of it, it becomes innovation for innovation sake.

For us, the core of the work we do here is to try and deliver superior value to the customer. However, in impacting value to the customer, there are a whole lot of things that need to be done when you start to look at sectors within the economy and that’s why we focus on the core sectors I mentioned. For example, if the right kind of innovation is done say in health or in education, the overall impact goes down to the customer. All the way from each sector’s structural and organizational design to last mile delivery, our approach is to deliver value to the customer by innovating across the entire chain. It’s a complex web of different things as you go along that journey.

As an industry not very used to change, the banking sector is currently undergoing a radical transformation - in terms of digitization, personalization, mobile etc. What are the other promising areas where digital advances could revolutionize the banking industry?

For us at Sterling Bank, our approach to the digital disruption is a focus on specialization and digitization with execution agility. It is very critical to transformation and the disruption happening in the industry. When you look at industry verticals, it is easy to see what areas of specialization the bank brings to the table. It goes beyond payment; beyond just money itself. The essence of digital banking has already moved beyond nice looking mobile apps to something much deeper. Take the work we are doing in transportation; it gives you a view of how we see the impact of digitization.

We funded the procurement of buses for the Lagos BRT project; we have spent about $50 million to support the operator of the BRT buses. We believe that mass transit sys28 /E-PAYMENT REVIEW/ SEPTEMBER 2018

tems are important as city congestion and urbanization generally grow. From an environmental perspective, emission reduction is an immediate outcome when implemented at scale, improved productivity of the citizens because of reduced travel times and less hassles navigating traffic.

We also implemented, working with partners, an automated fare collections system on the buses.

Contactless payments capability is one of the things we introduced in that area; enabling payments with the tap of a card. We brought in next generation payment in the form of the EMV contactless payments, which is still relatively new across the world. You can use them for tap and go payments on the bus and at various channels like ATMs, Point of Sale and for web payments.

The summary is that we brought in funding into making sure the entire transit system evolves and made sure payment is easy and frictionless for commuters and the average person using the bus. This is how we view digitization. It goes well beyond the everyday technology devices and into solving real problems and there are lots of areas in Nigeria that requires such intervention.

I think that’s the whole promise of digitization, it empowers banks to do good by incentivizing different sectors to solve problems.

The idea of doing good speaks to the motivations behind the innovations in Nigeria’s financial sector. Banks are trying to go beyond money management and are getting involved in critical sectors of the economy. In doing that, what are they doing well and what are the opportunities for improvement?

Well, I wouldn’t want to speak for other banks but I would like to give credit to my colleagues in the industry because everybody is putting in their best to make sure the industry is moving in the right direction. Many of them are implementing digital innovation in ways that helps them achieve their set objectives. Our approach, however, is to tie innovation and finance to solving problems specifically within the areas I identified earlier. Take renewable energy for example, we want consumers to have access to affordable and clean energy that is off the grid. Our efforts are geared towards doing good in different ways - trying to make electricity affordable and at the same time impacting the environment by ensuring reductions in emissions. In education, we are focused on working with institutions across all segments. In health care, we want to deliver value by providing funding, financing and technology capabilities through our partners. Those are the kind of goals we are keen to deliver. In everything we do, we try to focus on how it impacts the environment and how we can help solve problems in the country. It’s a very interesting mix because we are achieving the corporate goal while at the same time driving innovation and solving real problems. Giving back to the society by solving problems is the way we approach banking. I think that banking would continue to evolve this way because over time, payments will become commoditized. Where an institution delivers real value becomes its core area.

What about improvement in the adoption rates for mobile payments, cards and POS use?

Do we need fresh incentives to foster acceptance in rural areas?

When you look at financial inclusion especially for people in rural areas, you will find that traditional financial institutions are not putting branches everywhere because of profit considerations. Going into these areas is not the most attractive financially. However, what we consider is how we can get people living in these areas into the financial system. At Sterling, we have an agent management and financial inclusion team that has done a lot of work in this area.

Expanding the distribution network into rural areas is crucial and in doing that it is important to create an incentive structure for agent networks to make it attractive enough for individuals in these areas to want to be part of the system.

Sometimes, it looks like the people in these areas don’t want to use banking services. They do but access poses a problem. On the agent side, we need to understand the profit incentive for them to run this service. I think that agent services should have multiple streams of income sometimes as a bundled package to make it attractive to run these services. Having said that, I think the country has made significant progress in the use of electronic payment services. We have seen a surge across virtually all the channels. So, it’s not a situation of no growth. It would require more effort from the industry and stakeholders to push hard on expanding access for people living in rural areas. This links into my notion about solving problems and it also applies to these areas. For the digitization effort to help inclusion, we can tie it, for example, to agriculture by infusing the digital elements to how we educate farmers, how they access credit or purchase fertilizer. Hence, for financial wellness to happen, it will go beyond access, it will be about solving problems. But that is not a single bank’s job, a lot of stakeholders need to be involved.

How has Sterling Bank collaborated with fintechs to expand products and services for customers?

For us, working with fintechs is a very natural thing. I think as a bank even before the proliferation of fintechs, we have always had the knack to partner with companies and find ways to collaborate and make things happen. We see fintech firms as collaborators and not a threat.

We see them as partners helping us achieve our objectives. We are working with several fintech partners in the core areas I mentioned.

Has such collaboration yielded any products or services?

We recently supported I-Invest, a mobile application for treasury bills purchase. We worked with

"THE ESSENCE OF DIGITAL BANKING HAS ALREADY MOVED BEYOND NICE LOOKING MOBILE APPS TO SOMETHING MUCH DEEPER." 29 /E-PAYMENT REVIEW/ SEPTEMBER 2018

Parthian Partners, a fintech firm. Our FarePay contactless card technology project involved several partners including ePurse Systems, Visa and Mastercard to make sure the product is delivered the way it should work. Also, our OnePay app, which offers a wide range of intuitive banking experiences was developed in collaboration with a fintech partner. In many cases, our technical teams work very closely with third parties to make products and experiences more compelling.

What does it take for fintech companies to successfully partner with banks?

Every bank has preferred pathways to achieving this, but our interest is determined by the problem that such collaboration aims to solve. Like I mentioned earlier, innovation for the sake of innovation doesn’t make sense. We must be able to see a clear compelling problem that the fintech solution can solve. When we see that, we help them by instituting governance structures, help in financing; in getting their first set of clients, and in helping them scale.

What questions do banks need to focus on when building a digital agenda?

The early questions are for banks to decide where and how they want to play. How their business models need to transform to keep pace with the changes they see and those potentially they do not see. Market and industry lines are becoming blurred and other players from adjacent markets will inevitably get into finance deliberately or inadvertently. I honestly do think it is not just about building a digital agenda but placing digital centre stage in the culture of the institution and in the way, services are delivered. It must be an intrinsic part of the institution.

One founder of a fintech company I interviewed sometime ago said that all fintech companies are eating from the banks. His point is that fintech entrepreneurs are developing novel solutions and offering unique prepositions but they still require to plug those solutions into banks. Can you give an idea of how they might leverage banks’ current assets to do something completely new?

About fintech eating from the bank, I think it was in the early stages when fintech companies were focused on the development of payment solutions which needed interface with the banks.

It’s going deeper than that; payment has become an add-on to different solutions that are being created by fintechs. Companies are building incredible stuff for areas like agriculture, health and are adding payment capabilities and in turn creating innovation in the payment industry. However, in relying on the banks assets, I think with the open APIs environment and the right kind of regulations, we will start to have banks and fintechs work more closely to create services. In a couple of years, we should essentially have something close to banking as a service provided on a B2B level. That’s one area where fintechs should start to leverage on banks' capabilities. The fintechs have wonderful and innovative services but not the scale and that’s where the collaboration with the banks should hinge on.

When that collaboration happens, how would it impact the economy?

We are already seeing some of the impact but we will have significant ripple effect in the market.

The impact of collaboration at that level will be ease of access and lower cost. It will help financial institutions as a whole to reduce the cost of doing business. Certain income lines might be disrupted but new ones will open. It is always about how as an institution you can take a hard look at your business model and where your new revenue lines will be and in what form.

Tell me more about FarePay, which Sterling Bank called the largest implementation of contactless cards for bus transit in Africa. It was recently named ‘card with the most utility relevance for the cardholder’ at the Digital Pay Expo Awards. What other key digital initiatives is Sterling Bank looking to bring to market in the next 2-3 years?

The work we have done with stakeholders in the market has been extensive. By other stakeholders I mean regulators, switching companies, card schemes and many others who were involved in this. The whole idea around FarePay was to solve multiple problems at the same time. We looked at the distribution network across the entire bus corridor, we situated agents across core residential areas where people use BRT buses to commute and then created a network which made it easy for them to get their cards, put money in their cards and do other transactions with the card. The other thing was to enable payments, which for the bus can be very tricky. The system must be able to recognize different routes and different passengers that get off at different destinations. The system needs to understand all this to charge the right fares. The transactions are contactless and enable faster check-in. The whole essence of the card is to move beyond just the buses in Lagos but to make it work in any other city in the world. It can be used at a Point of Sale, for Web payments or an ATM. With FarePay, you automatically have a bank account opened when you obtain the card. The whole idea is to expand this into other parts of the country by working with other stakeholders to ensure that people who don’t have financial access can have it using the card. It cost quite a bit to do all this but the overall gain to the economy outweighs the initial cost. In the next few years, we expect to be involved in multiple areas using digitization and specialization to solve problems.

How is Sterling Bank leveraging big data, analytics, artificial intelligence and blockchain to create customer-centric products and services?

The beautiful thing with doing the hard work of specialization and going into certain sectors is the sheer amount of data and insights available. But it is mostly unstructured data that doesn’t give you much to go with. Without the right dataset and the right data structure you can’t do anything with artificial intelligence because artificial intelligence feeds on data. We are one of the banks that already have a chief data officer as a core role within the bank. These are all the things we are putting in place in preparation for deployment of artificial intelligence. When data becomes better

"CUSTOMER PREFERENCES ARE CHANGING FAST AND WHAT WE TRY TO DO IS CONTINUE TO EVOLVE OUR WAY OF MEETING THEIR NEEDS."

operations and processes to make sure not only that we are keeping pace but that we stay ahead. It requires a lot of effort, determination, and heavy lifting. A lot of the time the results are not immediately apparent, but they show in the medium or long term.

structured ultimately we will employ artificial intelligence tools to offer the right kind of solutions. We can then begin to anticipate the needs of our customers before they probably realize it.

So that’s where we are heading. As a bank we had an early foray into artificial intelligence; I think probably one of the earliest in the industry.

What do you see as the biggest barriers to innovation in the bank?

We have always proved ourselves as an innovative bank from way back. If you look at our top executives, they are as digital focused as the team working on innovation and that gives us a lot of edge. We adopt an agile approach to the work here. We focus on problems and how to resolve them and our agile approach doesn’t require us to go through several hierarchies to get things done. It’s in our DNA to get things done in an innovative way.

Digitization has been described as something akin to redesigning an aircraft while it is in the air. What are the challenges for Sterling Bank in the competitive market space?

The challenges are not unique to Sterling Bank.

With technological disruption, things are changing by the minute. Customer preferences are changing fast and what we try to do is continue to evolve our way of meeting their needs. It can be tough because we do that in all areas of our

Bonus question: What profession would you have loved to work in if you were not in your current job?

I would probably be a serial entrepreneur. I love the opportunity to handle new challenges and solve different problems in different areas. For me, every opportunity is an enriching learning experience because for every problem you try to solve you learn a lot of things which are always transferable to other areas. I thrive on that.

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31 /E-PAYMENT REVIEW/ SEPTEMBER 2018

NeFF Insight PRACTICAL ADVICE FOR THE MITIGATION OF PAYMENTS RISK BY THE NIGERIA ELECTRONIC FRAUD FORUM

Impact of Nigeria's cybersecurity legislation on individuals and financial institutions

By IBRAHEEM ADEKA ATUKPA entitled to freedom of expression, including THE EVOLUTION OF ELECTRONIC PAYfreedom to hold opinions and to receive and ments system has made financial transactions impart ideas and information without intereasy and life more interesting as financial transactions can be made at the comfort of one's ference”. There is nothing in these words that suggest the use of unprintable and vulgar lanhome or office or “on-the-go”. Payments system guage, direct abuse or words that impugn on the platforms are made accessible courtesy of internet banking where so many electronic devices integrity of a person, a group, a tribe, a religion (computers, mobile phones, etc) are deployed or even a region. This is not contemplated in to make financial transactions simple, efficient the provision because there is limitation to the extent one uses his right or freedom of expresand effective. sion.

But, all of these are not without sunny sides For example, section 24 of the Cybercrime because the internet is a cyberspace accessible to the user without some sort of restrictions. (Prohibition, Prevention, etc) Act, 2015, provides extensive provisions covering varied Therefore, organisations try to build firewalls around their platforms to restrict or deny access aspects of electronic communications, particularly section 24(1)(a) and to unauthorized users. (b). It states: “A person who Firewalls notwithstandknowingly or intentionaling, electronic fraudsters "Organisations try to ly sends a message or other do “wake-keep” to device build firewalls around matter by means of commeans to break the walls puter systems or network and defraud organisatheir platforms to that: (a) is grossly offensive, tions and people. restrict or deny access pornographic or of an indeC y b e r c r i m e to unauthorized users. cent, obscene or menacing (Prohibition, Prevention, Firewalls notwithstandcharacter or causes any etc) Act, 2015 was enactsuch message or matter to ed on the 15th May, ing, electronic fraudsters be so sent, or (b) he knows 2015 as a response to do “wake-keep” to device to be false, for the purpose the necessity to address means to break the walls of causing annoyance, cybersecurity chalinconvenience, danger, lenges; and to criminaland defraud organisaobstruction, insult, injury, ise unauthorized access tions and people." criminal intimidation, to the nation's Critical enmity, hatred, ill will or National Infrastructures needless anxiety to another and businesses. or causes such a message to be sent, commits an The Objectives of the Act are provided in Section 1(a-c). It states: “The objectives of this offence under this Act and is liable on conviction to a fine of not more than N7,000,000.00 Act are to (a) provide an effective and unior imprisonment for a term of not more than 3 fied legal, regulatory and institutional framework for the prohibition, prevention, detection, years or both”.

Section 26 of the Act also provided for racists prosecution and punishment of cybercrimes in Nigeria; (b)ensure the protection of critical and xenophobic offences, including offences of harassment, threat to persons for the reanational information infrasfructure; and (c) son that they belong to a group distinguished promote cyber security and the protection of computer systems and networks, electronic by race, colour, descent or national or ethnic communications, data and computer programs, origin, as well as religion. Committing or supporting acts constituting genocide or crimes intellectual property and privacy rights." against humanity is prohibited and punishable Implications to Individuals Freedom of Expression: Section 39(1) of the under the act.

Learning points from the provisions of section 1999 Constitution of the Federal Republic of 24(1)(a) and (b) and section 26 are to the effect Nigeria (as Amended), entitles every person(s) in Nigeria the freedom to express himself or that: How have you been using the computer herself in these words, “every person shall be system assigned to you for your official duty?

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Are you mindful of the kind of messages you send or receive? Beware! You may be falling foul of the Law which will qualify you for prosecution under the Act. Note that under the Act, a computer system: (a) refers to any device or group of interconnected or related devices, one or more of which, pursuant to a program, performs automated or interactive processing of data; (b) covers any type of device with data processing capabilities including computers and mobile phones; (c) consists of hardware and software which may include input, output and storage components that may stand alone or be connected in a network or other similar devices; and (d) includes computer data storage devices or media.

What this means is that those mobile phones (especially smart phones) at your disposal could be an albatross if not properly manipulated or operated in line with the provisions of the Act. It is therefore surprising that some members of the National Assembly who enacted the Cybercrime Act in May, 2015 were proposing a bill to enact a law to regulate social media.

One wonders what will be the content of the bill that would not have been taken care of by virtue of S.24 (1)(a) and (b) and S.26. Some of the Senators who moved the motion for the enactment of a law that would regulate social media communication were not “first-timer” Senators. It was unnecessary and would have been counter-productive. We need to read and understand our Laws!

Implications to Financial Institutions Before the Cybercrime Act, 2015, the Central Bank of Nigeria (CBN), had its information technology (IT) policies which prohibited some of these crimes as contained in the Act. Of particular interest and relevance to this paper is the email acceptance usage policy which outlined what to do, what not to do and the consequences of a breach. A phrase in the policy reads: “Users shall not send mail messages that carry malicious content, provocative, ethnic, racial discrimination or other profane content” (CBN IT Policy document, pg7). This conveys the spirit of the provisions in section 24 of the act.

Section 37 of the act chronicled the duties of financial institutions in the course of electronic financial transactions or transfer. It includes the following: Verification of identity of customer -- sub-section 1(a) requires financial institutions to verify the identity of their customers before carrying out electronic financial transactions; the principle of Know Your Customer (KYC) -- Sub-section 1(b) of the act places on the financial institutions the duties of applying the principle of know your customer in documentation of customers before execution of the transactions. The other is unauthorised debit on customers' account -- sub-section 3 provides that any financial institution that makes an unauthorized debit on a customer's account, the financial institution shall reverse it within

Fraud on the rise: NeFF releases its 2017 annual report

L-R: Christabel Onyejekwe, Executive Director, NIBSS Plc, Dipo Fatokun, Director, Banking and Payments System Department, the Central Bank of Nigeria (CBN) /Chairman, Nigeria Electronic Fraud Forum (NeFF), and Tokunbo Martins, Director, Other Financial Institutions Supervision Department, CBN at the unveiling of the 2017 NeFF Annual Report unveiling the 2017 NeFF Annual Report.

R-L: Sam Okenye, CISO, UBA Plc, Niyi Toluwalope, Ag. Managing Director, eTranzact Plc, Dipo Fatokun, Director, Banking and Payments System Department, CBN/Chairman, NeFF, Tokunbo Martins, Director, Other Financial Institutions Supervision Department, CBN, MDesmond Anumkua, Divisional Head, Information Assurance, Fidelity Bank, Christabel Onyejekwe, Executive Director, NIBSS, M’fon Akpan, Chief Risk Officer, Stanbic IBTC Bank and Ike Williams, CIO, Heritage Bank .

NIBSS

72 hours upon a written notification by the customer. Failure to reverse the debit within the stipulated hours attracts restitution.

Any financial institution that fails to perform its duties in line with the provisions of Section 37 of this Act, is liable on conviction to a fine of N5,000,000.00, including restitution of the debit in the case of failure to reverse the debit within the stipulated timeframe.

Conclusion A good understanding of the Cybercrime (Prohibition, Prevention, etc) Act, 2015; Money Laundering (Prohibition) Act, 2011 (As amended); the CBN AML/CFT Regulations, 2013; and Information technol-

ogy policies of our various institutions will guide our behavior on how to use the devices or computer systems at our disposal. If they are properly used in line with the extant laws, regulations and policies, they will impart our lives positively. On the contrary, if they are used otherwise we may be breaking the laws and may eventually face the full consequences of our actions or inactions.

Atukpa is in the Anti-Money Laundering and Countering the Financing of Terrorism Division of the Financial Policy and Regulation Department of the CBN. Culled from the 2015 annual report of the Nigeria Electronic Fraud Forum (NeFF).

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THE NIGERIAN ELECTRONIC FRAUD FORUM (NeFF) would be instituting an industry customer protection plan to reduce the volume of fraud in the payment system and ensure safety of customers’ funds.Director of Banking and Payment System at the Central Bank of Nigeria (CBN), Dipo Fatokun intimated this at the unveiling of the 2017 NeFF Annual Report recently in Lagos.

Data released by NeFF showed that N5.571 billion has been lost to electronic banking fraud in the last three years. It revealed that while fraud perpetrated across the counter has been on the decline, those on Automated Teller Machines (ATMs) and mobile are on the rise.

Fatokun, who is also the chairman of the forum, explained that fraud on mobile come mainly from USSD transactions. He said that the CBN is reviewing and strengthening the existing rules and enacting new regulations to combat electronic fraud in the country.

He also said that mobile payment fraud rose to N347.6 million in 2017 from N235.17 million in 2016. ATM fraud rose from N355.89 million in 2015 to N497.643 million in 2017. The value of fraud committed across the counter dropped from N732.85 million in 2015 to N259.022 million in 2017.

Fatokun also gave assurances that the forum is committed to ensuring that the Nigerian payment system is not only easy to use but also reliable and trust worthy. He said the CBN is working to provide a legal framework for fintech firms which supports innovation and protects consumers.

CBN to introduce new cybersecurity framework THE CENTRAL BANK OF NIGERIA (CBN) IS DEVEloping a risk-based cyber security framework to combat internet fraud in the country, CBN Governor Godwin Emefiele, said this at the 2018 Nigeria-JP Morgan Chase Cyber Security Conference in Abuja in August.

“These new conveniences of modern technology have ushered in complex security challenges and cybercrime, These range from identity and intellectual property theft, phishing, email spamming, virus dissemination to sophisticated hacking and theft by digital crime syndicates." he said in reiteration to the CBN’s commitment to strengthening the regulatory and supervisory framework for cyber risk in the country.

John Ayoh, CBN's Director of Information and Communication Technology also told the conference that the bank has a solid cybersecurity set up to protect its systems against assaults. He said the CBN is looking into the installment system, especially the Society for Worldwide Inter bank Financial Telecommunication, to guarantee the security of the financial system.

The Risk Report CRIME & PUNISHMENT

Europe green-lights tougher sentences for payments fraud CRIMINALS TARGETING DIGITAL PAYMENTS IN EUROPE CAN EXPECT STIFFER JAIL SENTENCES UNDER NEW RULES approved by a powerful European Parliament committee. The Civil Liberties Committee passed plans to combat fraud and counterfeiting of non-cash means of payment such as cards, electronic wallets, mobile payments and virtual currencies in an effort to remove gaps in national legislation and introduce more effective deterrents. The new rules establish three to five years prison terms, depending on the offence, as the minimum penalty in cases of non-cash payment fraud. The plan includes virtualcurrency transactions in the scope of offences andstrengthens assistance to non-cash fraud victims, such as psychological support, advice on financial, practical and legal matters and free legal aid at least for those who lack sufficient resources for it.

MOBILE SECURITY

Attacks targeting mobile transactions soar

SUPERIOR ONLINE PROTECTION Google is extending its high level security to everyone by offering the Titan Security Key, which it built using the FIDO security standards. One is a USB key, and the other supports Bluetooth and NFC for mobile devices. You need to enroll both keys - one stays in a safe space, and the other stays with you. These keys help high-risk users protect their accounts from sophisticated hackers. A downside of these physical keys is that if lose them, you’re toast.

MOBILE FRAUD NUMBERS ROSE BY 24%IN THE first half of the year, as crooks followed their victims to the increasingly popular digital channel. According to ThreatMetrix, there were 150 million mobile fraud attacks around the world in the first half of 2018.

The firm analyzed 17.6 billion online transactions during the first half of 2018 via its Digital Identity Network, finding that over half (58%) now come via the mobile channel. Mobile fraud now represents one third of all attacks stopped by ThreatMetrix, but the channel still represents a more secure way to transact than via desktop, the company claimed.

This is because mobile offers organizations unique opportunities for accurately assessing user identity, thanks to highly personalised device attributes, geolocation and behavioural analysis. It also offers strong customer authentication options that require no user intervention, including cryptographically binding devices for persistent authentication.

“The key point of vulnerability is at the app registration and account creation stage. To verify users at this crucial point, organizations need to tap into global intelligence that assesses true digital identity, compiled from the multiple channels that their customers transact on,” said Alisdair Faulkner, chief identity officer at ThreatMetrix.

Bot attacks continue to fuel the growth in global fraud, with an “unprecedented” 60% increase in the second quarter of the year: from one billion bot attacks in Q1 to 1.6 billion in Q2. ThreatMetrix claimed that this automated traffic can account for more than half of all transactions at peak times, as fraudsters try to crack user accounts. Without the right tools in place to spot this traffic, organizations can find order processing slows, the firm warned.

In Short 31% of companies that experienced a data breach in the previous 12 months said the incident cost certain employees their jobs, according to a Kaspersky Lab survey of 1,062 small businesses and 863 enterprise across 29 countries.

A threat actor has been targeting Windows and Linux servers with a self-propagating malware mash-up that’s comprised of botnet, ransomware, disk wiper, cryptomining and worm elements all in one.

Researchers from Palo Alto Networks’ tied the malware, dubbed Xbash, to the APT actor known as Iron Group.

Online mega-retailer Amazon reportedly launched an investigation into employees who may have accepted bribes from independent merchants in exchange for sharing private corporate data. Citing sellers and brokers with knowledge of the practice, as well as people familiar with Amazon’s investigations. The Wall Street Journal reported the scheme is especially prevalent in China.

PUNCH BACK AGENDA

MOX.TURRIS.CZ

World needs to embrace hacker culture to battle cyber-criminals A SELF-DECLARED HACKER AND CYBERSEcurity expert has suggested that moving from a reactive to a proactive stance to fight cyberattacks is a key element of an effective cyber strategy and advocated the adoption of hacking practices to protect organizations and customers.

In a guest keynote at a Gartner security summit in London, Keren Elazari, said that active defense strategies are highly effective, but underutilized. She said that cyber-criminals are

continuing to evolve and move upstream using evasive attacks with legitimate tools which exist in the infrastructure, insisting that they have evolved to a point where “a world of hackers” need to be unleashed on them.

For cybersecurity professionals to be ready to thwart attacks, Elazari said, they must “harness the hacker mindset and invest in skillsets like digital forensics, incident response, threat hunting and red team testing. Those are the skills we 34 /E-PAYMENT REVIEW/ SEPTEMBER 2018

should cultivate and in which we should invest today to be ready tomorrow.”

This includes deploying bug bounty programmes and tapping into hacker conferences.

According to her, decisions need to be made on who stands on the front lines, as every day users and individuals make hundreds of security decisionsdaily, and while many are assisted and helped by brilliant security officers, they need the tools to make better decisions.

THREAT LEVEL

OPPORTUNITY

Microsoft OS remains most lucrative target for hackers WHAT DO HACKERS see as their easiest point of entry? This is the question at the heart of a survey which asked hundreds of white hats about their favoured system targets in 2018.

The study by Thycotic, polled more than 300 hackers at this year’s Black Hat USA conference and nearly 50% of respondents – most of whom identified as white hat hackers – said they had compromised Windows-based systems more than any other within the past year.

Of the respondents, 26.7% said they infiltrated Windows 10 most frequently, followed by Windows 8 (22.4%). Some 18% of hackers were focusing their efforts on Linux targets, while just 5% of respondents said Apple’s Mac OS was their “most conquered“.

More than half the hackers surveyed said that social engineering was the fastest technique for gaining access.

One in 10 admitted to using identity theft to gain access, while fewer than 7% made use of malware or stolen endpoints. Application and OS vulnerabilities were also a problem, with 20% claiming they are able to exploit unpatched systems.

FACIAL RECOGNITION SYSTEM Japanese technology company NEC unveiled this large-scale facial recognition system for the 2020 Olympic and Paralympic Games in Tokyo that will be used to identify the over 300,000 people expected at the games. Tokyo 2020 won’t have a single Olympic park where people can move freely between several venues and facilities; instead, events will be spread out across the metropolitan area, and people will need to authenticate themselves at each venue.

Organizers will use system to speed the process up as much as possible.

FANTASTIC BEAST

Cybercrime pulls in $1m every minute IF CYBERCRIME WERE A COUNTRY, IT would have the 13th highest GDP in the world. Globally, cybercriminals rake in at least $1.5 trillion every year), according to research by Michael McGuire, senior lecturer in criminology at Surrey University.

In fact, more than $1m is lost every minute to cybercrime, while 1861 people fall victim to scams. Research by RiskIQ shows that despite businesses spending $171,233 every minute on cybersecurity, $1,138,888 is lost to cybercriminals. McGuire's revenue figure includes estimated earnings of $860 billion from illicit or illegal online markets, $500 billion from intellectual property theft, $160 billion from data trading, $1.6 billion from crimeware-as-a-service, and $1 billion from ransomware.

Both research presents evidence that cybercrime revenues often exceed those of legitimate small to midrange companies.

RiskIQ found that every 60 seconds 1.5 organizations fall victim to ransomware

attacks, with an average cost to businesses of $15,221.

The global crime economy has become a self-perpetuating organism — an interlinked web of profit where the boundary between the legitimate and illegitimate is often unclear. The McGuire report notes the emergence of platform criminality, which is similar to the business model used by companies like Uber and Amazon and whose stock in trade is data.

Today, engaging in cybercrime is as simple as legitimate e-commerce. According to the report, whether it's through hacking companies to steal users or personal data, distribute malware, flog illegal goods and services, establish fake shopfronts to launder money, or simply connect buyers and sellers, cybercriminals are clearly adept at leveraging existing platforms for commercial gain. The fabled "darknet" provides the platform for transactions, the place where demand meets supply.

Fraud by Numbers ENTERPRISE

THE VERGE

$114 billion

Gartner's forecast of worldwide spending on information security in 2018, an increase of 12.4% from last year. It said the market will to grow 8.7% to $124 billion next year.

NETWORK BREACH

DISCOVERY

LARGE HAYSTACK

Average cost of a data breach to a company, according to estimates from the Ponemon Institute. The cost for each lost record containing sensitive information is $148.

Average number of days required to identify a data breach while it takes 69 days to contain a breach once it is identified,a new global study based on 500 interviews conducted by The Ponemon Institute on behalf of IBM found.

Malicious web domains that are active for one hour or less, a trend that speaks to the rise of attacks targeted at the network of a single organization making detection difficult, according to research by Enterprise Strategy Group.

$3.86 million

197

50-60%

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VULNERABLE FAX // Researchers at Check Point Software Technologies have found vulnerabilities in fax machines that could potentially allow an attacker to penetrate a company's network using just a phone line and a fax number. The researchers faxed over lines of malicious code disguised as an image file to a HP all-in-one printer that was decoded and stored in the printer's memory, which allowed them to take over the machine. From there, they were able to infiltrate the network to which the printer was connected.

ROTTEN APPLE // Security firms, Malwarebytes and Tripwire have found that Apple and its purportedly safe Mac App Store have had issues of late with malicious apps and the company is not always quick to remove them. The firms specifically named apps like Open Any Files: RAR Support, Dr. Antivirus, Dr. Cleaner and Adware Doctor, Apple's popular security apps, which were found to be secretly exfiltrating Chrome, Safari and Firefox browser history, along with a list of all running processes and downloads to China.

CYBER CAMPAIGN // Threat actors are using lightweight modular downloaders to scout and “fingerprint” target machines before launching their malware. Proofpoint researchers said the emergence of the AdvisorsBot and Marap malware and zero-day attacks from PowerPool, a group exploiting Microsoft ALPC, and CobInt code from Cobalt indicate a new trend of attacks designed to stay hidden until it is time to strike. They noted this type of malware have a small footprint, stealthy infections and a focus on reconnaissance to help defeat institutions as they improve their defense.

Digital Commerce

E-commerce empires compete for marketplace dominance

ANNIVERSARY

TRACKER

DHL, MallforAfrica deliver pro-Africa e-commerce site

WEBSITE BUILDER EXPERT / PARISRETAILWEEK

A BATTLE FOR SUPREMACY IN THE GLOBAL E-COMmerce marketplace is being waged by digital business empires, with recent analysis finding Amazon in the lead with footprints in 58 countries and serving more than 1.2 billion people. Chinese e-commerce giant Alibaba is not far behind, with nearly 1.1 billion online users in 15 countries, according to analysis by Website Builder Expert (WBE).

WBE did some interesting research using data from Alexa Internet from 174 countries and 8,700 websites, and categorized them into types - search engines, portals, social media, and so on. By combing through the data, identifying the most visited online marketplace in each country, and working out who owned them, the company was able to map the world’s current ecommerce empires. gathered data. It then identified the most visited online marketplace in each country and ranked those against each other.

“E-commerce is heading for an Amazon vs. Alibaba showdown, as they dominate the two biggest markets, China and U.S.,” said Jessica Laporte, lead researcher with WBE. The third-biggest e-commerce empire is MercadoLibre, which dominates Mexico and most of South America. South African media group Naspers is fourth after managing to wrangle itself most of Africa and the old Soviet Union. Avito is the online marketplace of choice for Russia, with OLX coming out on top in places like Pakistan, Brazil, India, Bulgaria, Poland, Portugal and Ukraine.

U.S.-based eBay Inc. is fifth on the list, despite being eclipsed at home by Amazon. It was found to be the most visited online marketplace in eight countries, including Australia.

A number of ecommerce sites are vying for the dominant position in Africa. Amazon, Rocket Internet, Naspers, Be Forward and eBay all have a presence in the African market but none have succeeded in expanding their empires across the whole continent. In six African countries, the top online retail site was Be Forward - a Japanese used car dealership that exports cars internationally.

E-commerce Countries empire Amazon 58 Alibaba 15 MercadoLibre 9 Naspers 16 eBay 13 Rocket Internet 8 Schibsted 8 Be Forward 6

Online population 1,216,306,113 1,072,076,950 341,044,208 261,223,414 132,117,951 103,691,145 40,692,996 12,465,441

Area (km2) 34,956,262 13,680,139 17,516,992 23,803,457 9,803,937 3,043,144 1,445,306 3,370,740

Source: Analysis by Website Builder Expert

This indicates an open opportunity for full-line online merchants. In the Middle East, Amazon acquired a stronghold by buying Souq.com in Dubai last year. More acquisitions of this kind are likely as large e-commerce companies look to enter new markets by buying existing competitors.

WBE provides advice, reviews and other information about online website builders such as Wix and Squarespace.

MallforAfrica and DHL have launched MarketPlaceAfrica. com, an e-commerce site for select African artisans to sell wares to buyers in any of DHL’s 220 delivery countries. The site will prioritize fashion items — clothing, bags, jewelry, footwear and personal care — and crafts, such as pictures and carvings.

MallforAfrica is vetting sellers for MarketPlace Africa online and through the Africa Made Product Standards association (AMPS), to verify made-in-Africa status and merchandise quality.

UN urges Africa to spur e-commerce growth The United Nation wants African states to develop regulations in order to spur e-commerce growth. Mukhisa Kituyi, Secretary-General of UN Conference on Trade and Development (UNCTAD), said in Nairobi that the continent lags the rest of the world in the uptake of digital trade due to lack of a conducive ecosystem. "Africa needs to develop laws to enhance on integrity of procurement on electronic platforms so that consumers can trust e-commerce platforms," he said.

Online business thriving in Somalia Despite insecurity, low numbers of internet users and sluggish speeds, e-commerce businesses are popping up in Somalia and they are doing well. Soomar, the first e-commerce firm established in Somalia in 2016 offers all sorts of goods from electronics to food on its website. Customers can also book travel tickets and make doctors’ appointments. It sees more than 25,000 sales every month. Its competitiors include Sami-Online and Hubaal, According to Somalia’s Ministry of Posts, Telecommunications and Technology, just 1.88% of Somalis used the internet as of 2016.

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Jumia Nigeria marks six years of operation THROUGHOUT THE MONTH OF JULY, E-COMmerce company, Jumia Nigeria celebrated six years of operations in Nigeria with a focus on the major milestones it has achieved over the period. Since launching, the platform's vendor network stretches across 14 African countries.

SUSTAINABLE IMPACT Jumia Nigeria has over 100,000 active merchants on its platform and created access to new services in Nigeria. It also listed over five million unique products in that time.

CELEBRATIONS To mark the anniversary, Jumia created a campaign it titled, ‘Salebrate With Us’ that lasted 13 days and had over 1,000,000 exclusive deals, 500,000 free shopping vouchers, daily flash sales exclusive to the Jumia app and free delivery on any item above N10,000 via Jumia Express. Customers who made payments with Jumia Pay got a five per cent discount.

TOAST “Over the past six years, we have created sustainable impact on the Nigerian economy, enabled access to new services on our platform, such as food ordering, hotel and flight booking, as well as finance solutions with Jumia Pay," said the Jumia Nigeria’s CEO, Juliet Anammah.

"We’re especially excited about these milestones; yet we’re challenged to do more and be more to our local vendors and customers.”

DATA

$3.8 trillion Predicted value of online retail sales by 2020 out of a global retail market of nearly $30 trillion, according to an April study by England-based digital commerce and fintech consulting firm Juniper Research.

54% Nigerians who use cash on delivery to pay for online retail purchases, according to a report by The Boston Consulting Group (BCG) based on a survey of more than 15,000 urban internet users in Brazil, China, India, Indonesia, Kenya, Nigeria, Morocco, the Philippines, and South Africa.

NEW FUEL TO ECOMMERCE: The 132nd Annual Session of the WCO Council took place in Brussels, Belgium under the direction and guidance of the

Chairperson, Enrique Canon, Director General of Uruguay Customs, and with the participation of the Directors General of Customs representing the WCO’s members. It reaffirmed the importance of using data analysis and analytical tools to improve risk management capacities

INCU.ORG

Global Customs body adopts framework on e-commerce THE WORLD CUSTOMS ORGANIZATION (WCO) has seized the momentum garnered in the domain of electronic commerce and published the Framework of Standards on Cross-Border E-Commerce as adopted in June at the 132nd annual session of its council, the organization’s highest decision-making body, in Brussels, Belgium, together with a resolution that ensures its harmonized and effective implementation.

Building upon the key principles laid down in the Luxor Resolution adopted in 2017, the framework sets out baseline global standards on how Customs administrations process cross-border e-commerce transactions, as well as countryspecific best practices. It contains 15 standards that are concise, progressive and focused on the e-commerce environment, with a view to providing pragmatic, fair and innovative solutions whilst taking into account the diverse expectations and concerns of Customs administrations and stakeholders.

The Luxor Resolution unanimously adopted at the WCO Policy Commission meeting last December in the Egyptian city which gives its name to the agreement was aimed at helping Customs and other government agencies, businesses, and other stakeholders in the cross-border e-commerce supply chain to understand, coordinate and better respond to the current and emerging challenges. ​The WCO recognized the rising volume of e-

commerce transactions as challenging Customs administrations in the ways that include: Ensuring speedy and efficient clearance of packages at the border as volumes increase; managing the transition from few large/bulk shipments to large low-value and small shipments; managing risks resulting from reduced knowledge on small shipments; ensuring data quality on small shipments; and determining processes, procedures, and roles for all stakeholders in an e-commerce transaction.

The core essence of the framework is the exchange of advance electronic data for effective risk management and enhanced facilitation of growing volumes of cross-border small and low-value business-to-consumer (B2C) and consumer-to-consumer (C2C) shipments, and the adoption of simplified procedures with respect to clearance, revenue collection and return, among other things, in close partnership with e-commerce stakeholders. It also encourages the use of non-intrusive inspection (NII) equipment, data analytics and other cutting-edge technologies to support safe, secure and sustainable cross-border e-commerce.

The framework is for Customs agencies wishing to develop legislative and operational frameworks for cross-border e-commerce. It will be equally useful for those seeking to enhance their existing frameworks in order to effectively meet the requirements of new and evolving business models.

The first two standards pertain to the implementation of advance electronic exchange of data. One calls for establishing a legal framework for this type of exchange, and the other prescribes the use of relevant WCO and other international standards in order to facilitate the exchange of ad37 /E-PAYMENT REVIEW/ SEPTEMBER 2018

vance electronic data. The third and fourth standards deal with risk management. Three notes that customs administrations should “develop and apply dynamic risk management techniques that are specific to the e-commerce context to identify shipments that present a risk.” Four, however, focuses on the use of non-intrusive inspection and data analytics as part of risk management.

Other parts of standards involve the principle of facilitation and simplification, said WCO. The fifth standard urges simplified clearance formalities/procedures utilizing pre-arrival processing and risk assessment of e-commerce shipments, as well as streamlined procedures for immediate release of low-risk shipments on arrival or departure.

Countries are expected to implement these standards in close cooperation with other relevant government agencies and e-commerce stakeholders, in accordance with their national priorities, capacity, human and financial resources and internal procedures. Going forward, the framework will be further enriched with technical specifications and guidelines for its expeditious and effective implementation in a harmonized manner.

The WCO Council acknowledged the critical role played by capacity building, research and the sharing of intelligence and information, emphasized the need for enhanced collaboration with business and relevant government agencies, and reaffirmed the importance of using data analysis and analytical tools to improve risk management capacities. The organization said it stands ready to support its members with the framework's implementation through capacity building activities.

NIBSS Fraud Report Industry Fraud Report, Second Quarter 2018 DMBs Q2 2018 Fraud at a Glance

9, 256 Fraud Volume 8,124

Individual Accounts

FRAUD VOLUME

Mobile -- Volume - 3,151 Value - N124 million

Q2 2018 Vs Q1 2018 Comparison

Q2 2018 Vs Q2 2017 Comparison

Increase

Increase

8.41%

49.0%

The second quarter of 2018 ended with a total fraud count of 9,256 resulting in an increase of 8.41% and 49% when compared with volume from Q1 2018 and Q2 2017 respectively.

28 Corporate Accounts

PoS -- Volume - 318 Value - N16 million

ATTEMPTED FRAUD VALUE

N2.3 billion

Attempted Fraud Value

N490 million Actual Loss Value

79+21+z 79%

Percentage of the attempted fraud value that was salvaged by the industry.

With no surprise at all, mobile channel fraud came top as the channel with the most reported fraud cases within the quarter. The channel recorded the highest figures in both volume and value for Q2 2018. This channel made up for about 34% of the total fraud volume for Q2 2018 and an increase of about 45% when compared with fraud count from Q1 2018. Despite the increase in fraud attempts recorded for this channel, the industry was able to salvage about 64% of the NGN350M attempted mobile fraud value for the quarter. It is noteworthy to mention that a lot still needs to be done with respect to this channel. Mobile channel fraud represented about 25% of the total amount lost to fraud and about 14% of the overall attempted fraud value reported within Q2 2018. Considering the recent developments around mobile transactions with a focus on USSD, we hope to see a decline in mobile fraud in the remaining half of the year.

Q2 2018 Vs Q1 2018 Comparison

81% Increase

Q2 2018 Vs Q2 2017 Comparison

202% Increase

ACTUAL LOSS VALUE Q2 2018 Vs Q1 2018 Comparison

Q2 2018 Vs Q2 2017 Comparison

Decrease

Increase

38%

2%

Notwithstanding the upsurge in the count of fraud recorded within the quarter, the attempted value recorded 81% increase when compared to volume from Q1 2018. Having an attempted value of 2.3 Billion, the industry efforts in salvaging 79% was quite commendable. The decline in the amount lost to fraud this quarter also connoted a 38% decrease and 2% decrease in actual loss value when compared with figures from Q1 2018 (794M) and Q2 2017 (501M) respectively. Although there has been an increase in fraud attempts recently which may be linked to several emerging products and services, we do hope that the industry will not relent in its efforts to identify loopholes, improve on collaborative efforts and increase customer awareness in ensuring a continuous reduction in actual lost value to fraudsters.

Internet Banking -- Volume - 799 Value - N24 million

While there was an increase in the actual loss value for this channel when compared to Q1 2018, we experienced a 31% decrease in the volume of fraud for this channel. The quarter closed with a statistics of 59% increase in amount lost to fraud and also with about 9% increase in the total attempted fraud value when compared with Q1 2018. Fraud perpetrated through this channel represented about 8% of the total fraud volume for the quarter.

Across The Counter -- Volume - 73 Value - N104 million

With a huge increase of about 308% in total actual loss value and about 279% in total attempted value when compared with figures from Q1 2018, indeed this channel calls for urgent attention. Institutions need to review their internal processes and identify loopholes that permit this gargantuan increase in the amount of funds lost to fraud within the quarter.

This channel is the second highest channel with the most losses and also represented about 21% of the total actual loss value.

Web -- Volume - 2,020 Value - N29million

This channel is the fourth in position for channels with the highest losses and represented about 5% of the total actual loss within the quarter. While there was an increase in fraud volume by 19%, we witnessed a slight reduction in the amount lost to fraud by 8% when compared with figures from Q1 2018.

Cheque -- Volume - 0 Value - N000

Surprisingly, nothing was reported for cheque this quarter. As mentioned last quarter, cheque fraud appears to be steadily on a decline.

FRAUD BY CHANNEL ATM -- Volume - 2,405 Value - N91 million

Although PoS remains one of the lucrative channels for dissipating funds in a coordinated fraud, the sharp decline experienced in the amount lost to fraud against last quarter is quite laudable. We witnessed a whopping reduction of 95% in actual loss value when compared with the figure from Q1 2018. While there might have been a paradigm shift in the tactics and attractive channels to "the bad guys", we recommend continuous monitoring of this channel.

With a drastic decline of about 60% in the amount of money lost to fraud when compared with figures from Q1 2018, fraud perpetrated through the ATM emerged as the second highest channel in terms of fraud count and also occupied 3rd position in terms of actual loss value recorded for the quarter. The ATM witnessed an attempted fraud value of NGN227M which in turn represented a 26% decrease in value when compared with Q1 2018. The fraud amount lost through the ATM translated to about 18% of the overall actual loss within Q2 2018.

Ecommerce -- Volume - 473 Value - N865, 000

With a slight increase of about 2% in the fraud volume and an invigorating reduction of about 83% in total actual loss value when compared with figures from Q1 2018, the several mitigation strategies employed for this channel by the industry really paid off. This channel has the lowest actual losses and represented less than 1% of the total actual loss value for the quarter.

38 /E-PAYMENT REVIEW/ SEPTEMBER 2018

S/N Channels

1 Across Counter 2 ATM 3 eCommerce 4 Internet Banking 5 Mobile 6 Others 7 Web 8 POS TOTAL

Fraud Volume 73 2,405 473 799 3,151 17 2,020 318 9,256

Attempted Fraud Value 265,677,065.85 227,014,471.00 21,743,578.19 127,927,056.94 350,987,428.80 1,231,707,213.00 137,235,601.74 32,777,104.34 2,395,069,519.86

Actual Loss Value 104,690,585.45 91,592,042.79 865,116.00 24,984,371.46 124,135,965.88 98,607,794.22 29,055,492.33 16,888,197.84 490,819,565.97

FRAUD BY CHANNEL Fraud Volume Comparison by Channel - Q2 2017 Vs Q2 2018

Monday recorded the highest fraud volume for Q2 2018 followed by Wednesday. With Friday and Sunday recording the lowest volume of fraud in Q2 2018, it is evident that fraud can happen at anytime and not necessary over the weekends and we need to be prepared at all times. The highest loss in value was recorded on Monday with Wednesday and Tuesday taking the 2nd and 3rd place respectively. The lowest loss was recorded on Sunday. In addition, Monday which recorded the highest actual loss value amount accounted for about 34.6% of the entire loss within the quarter.

OFIs Q2 2018 Fraud at a Glance FRAUD VOLUME

74 Fraud Volume

Q2 2018 Vs Q2 2017 Comparison

74 Individual Accounts

0

Actual Loss Value Comparison by Channel Q2 2017 Vs Q2 2018 [in Millions]

Corporate Accounts

Attempted Fraud Value

N10.2 million Actual Loss Value

Fraud Volume Comparison by Day - Q1 2018 Vs Q2 2018

2+98+z 1.6%

Attempted fraud value that was salvaged by the industry.

Actual Loss Value Comparison by Day Q1 2018 Vs Q2 2018 [in Millions]

34.5% Decrease

Q2 2018 witnessed a fraud volume of 74 within the "Other Financial Institutions" space. This represented a 17.4% increase in volume when compared with figures from Q1 2018. From the analysis, it was discovered that a 34.5% decrease in volume exist for this quarter in comparison with the fraud count of Q2 2017. Same with last quarter, all amount involved in the reported fraud cases were completely lost with the exception of two cases which was salvaged.

ATTEMPTED FRAUD VALUE

N10.4 million

FRAUD BY DAY

17.4% Increase

Q2 2018 Vs Q1 2018 Comparison

Q2 2018 Vs Q1 2018 Comparison

16% Increase

Q2 2018 Vs Q2 2017 Comparison

54% Decrease

ACTUAL LOSS VALUE Q2 2018 Vs Q1 2018 Comparison

Q2 2018 Vs Q2 2017 Comparison

Increase

Increase

20.9%

50.4%

We witnessed a 20.9% increase in the amount lost to fraud and also about 16% upsurge in the total attempted fraud value when compared with values from Q1 2018. The increases in volume and values of fraud for this quarter shows the need for OFIs to step up their games. There is an acute need for OFIs to be proactive in their approaches in order to salvage a greater percentage of the fraud attempts. It is important to mention that over 98% of the attempted fraud value was made off with by the fraudsters; this is quite discouraging.

FRAUD BY CHANNEL ATM -- Volume - 18 Value - N3 million

The fraudulent transactions carried out via the ATM channel increased in volume by 63.6% and in actual loss value by 61.2%, when compared with Q1 2018. Though a slight increase can be seen in the fraud value when compared with Q2 2017, there was a reasonable decrease of 25% in fraud volume. It is also observed that no funds were salvaged within the current quarter.

Mobile -- Volume - 14 Value - N2.2 million

The mobile channel which accounted for about 22% of the entire actual loss for the quarter had a 13% reduction in actual loss value. Also, when compared with Q2 2017, we calculated a icrease of about 82% in fraud volume. It is noteworthy to mention that only 2% 39 /E-PAYMENT REVIEW/ SEPTEMBER 2018

NIBSS Ffraud Report ANALYSIS OF UNIQUE CUSTOMERS

of the attempted fraud amount was salvaged.

Defrauded Customers

Web -- Volume - 32 Value - N2.6 million

Being the channel with the highest reported fraud count within the quarter, this channel accounted for about 43% of the total fraud volume for Q2 2018 and about 25% of the total actual loss value. A 20% decrease in lost amount was recorded when compared with the last quarter.

Furthermore, there was a huge increase in actual loss value by about 222% in comparison with Q2 2017, which can most likely be attributed to greater exposure to the channel over time. All amount involved were completely lost.

Distribution according to state of residence

Internet Banking -- Volume - 2 Value - N200, 000

Regarded as the channel with the least fraud count within the quarter, it accounted for just about 3% of the entire attempted fraud amount. Also, we witnessed about 71% decline in the amount lost to fraud and about 37.8% of the attempted fraud value was salvaged as against nothing in the last quarter.

PoS -- Volume - 8 Value - N2.1 million

From a fraud count of zero last quarter to eight this quarter and contributing about 20% of the entire actual loss value, this channel deserves some attention. Being one of the attractive channels to fraudsters amongst the DMBs to dissipate fraudulent proceed, it is equally important to monitor PoS within the OFI space.

S/N Channels

1 ATM 2 Internet Banking 3 Mobile 4 Web

5 POS 6 TOTAL

Fraud Volume 18 2 14 32 8 74

Attempted Fraud Value 3,074,000.00 322,000.00 2,314,735.00 2,602,688.95 2,123,400.00 10,436,823.95

Actual Loss Value 3,074,000.00 200,000.00 2,265,735.00 2,602,688.95 2,123,400.00 10,265,823.95

In Q1 2018

3,752

Unique People Defrauded

26%

Above 20% Between 5% and 10% Between 1% and 5% Below 1%

Defrauded Customers By Age

People defrauded that live in Lagos Top 10 States

FRAUD BY DAY Fraud Volume Comparison by Day - Q1 2018 Vs Q2 2018

State Percentage Lagos 25.63 Rivers 6.71 Oyo 5.89 Ogun 5.65 FCT 5.27 Delta 5.09 Edo 3.99 Abia 3.91 Anambra 3.30 Enugu 3.14

Below 20 years (0.67%) Between 20 and 30 years (31.16%) Between 30 and 40 years (25.19%) Above 40 Years (42.98%)

Defrauded Customers By Gender

60% Male

Actual Loss Value Comparison by Day Q1 2018 Vs Q2 2018 [in Millions]

Monday and Saturday had a tie as the days with the highest volume in Q2 2018.

Tuesday and Friday also had a tie and came next in the second position followed

by Thursday. Saturday recorded the highest value loss to fraud in Q2 2018, followed by Monday and Friday in the second and third positions respectively.

The analysis above is based on the BVN reported to have been linked to customers defrauded in the Q2 2018. Financial institutions reported 3,752 unique BVNs belonging to defrauded customers. The statistics above revealed that one-quarter of the defrauded victims reside in Lagos.

The analysis also proves that more male customers are being defrauded than female. Customers between 20 and 40 years constitute about 56% of those defrauded within the quarter.

40 /E-PAYMENT REVIEW/ SEPTEMBER 2018

60% Female

Fraudulent Customers In Q1 2018

Fraudsters By Gender

384

71% Male

Unique Customers Received Fraudulent Inflow

23%

Fraudsters that reside in Lagos

29% Female

In Q2 2018, the financial institutions reported 213 unique customers for BVN watchlisting for several fraud-related cases. Majority of these customers were reported for category 1 in line with the BVN watchlisting framework. Also, most of these fraudsters live in Lagos.

It is quite unfortunate that not all the reported 384 unique customers that received fraudulent inflow during the quarter were reported to NIBSS for BVN watchlisting. As always mentioned, in order for us to kick these "bad guys" out of our space, we need to take watchlisting of confirmed fraudulent customers as very essential.

55+45+z 55.5%

Percentage of the reported 384 fraudulent customers were sent for watchlisting.

ANALYSIS ON UNIQUE CUSTOMERS QoQ analysis for watchlisted customers last 6 quarters

Defrauded Customers By Age

The QoQ analysis for watchlisted customers shows the change we have experienced in the last 6 quarters regarding the volume of customers reported to NIBSS for watchlisting in relation to the count of customers that received fraudulent inflow within a particular quarter. As depicted above, there has been consistent progress in the usage of the BVN watchlist database but as always advocated, there is room for improvement.

FRAUD INTEREST INDEX Below 20 years (1%) Between 20 and 30 years (52%)

Between 30 and 40 years (25%) Above 40 Years (21%)

Watchlisted Customers In Q1 2018

213

Unique customers were watchlisted for fraud

Fraudsters By Gender

85% Male

37.6%

Fraudsters that reside in Lagos

By Category

15% Female

85.45% 14.55%

Fraud Interest Index is a mathematical fraud model that shows the channels with best ROI for fraudsters. The greater the ROI, the higher the probability of investing in the business.

Channels

Fraud Interest Index

Across Counter 17.28% ATM 28.36%

eCommerce 0.01% Internet Banking 0.34% Mobile 21.12% POS 3.39% Web 1.53% Others 27.96%

Grand Total 100.00% Just as usual, ATM emerged highest on the Fraud Interest Index. The ATM channel still remains one of the most viable channels through which fraudulent proceeds could be easily dissipated. Mobile which is the current booming channel and which has also gained fraudsters interest in recent times followed as the next identifiable channel.

Category 1 (as stated on the BVN watchlist report) Category 99 (as stated on the BVN watchlist report 41 /E-PAYMENT REVIEW/ SEPTEMBER 2018

Courtesy of Nigeria Inter-Bank Settlement System Plc (NIBSS).

42 /E-PAYMENT REVIEW/ SEPTEMBER 2018

Trends & Tactics The Connected Smartwatch face-off.

Real wrist all-rounders on the payments front

They might look like regular, stylish designer watches but these devices are evidence that watchmakers are strongly embracing the wearable technology revolution and are moving closer to a head-tohead battle with the Apple Watch.

These full-screened smartwatches made by designers led by the Fossil Group, which also produces for an ever-increasing list of designer names including Emporio Armani, Michael Kors, Skagen, Diesel, Kate Spade, Marc Jacobs and Misfit have closed the gap on Apple Watch with their 2018 collection.

The new smartwatches coming from the designers are all equipped with the NFC tech needed to power contactless payment systems.

Designers had steered clear of contactless payment technology because they wanted to keep their watches as stylish as possible, which could have been compromised if the payment technology made the cases too big. But the increasingly popularity of mobile payment is changing their minds. With the new features and benefits, these smartwatches ensure that their owner can be more connected than ever before and that they can pay anywhere.

FOSSIL Q FAMILY This fourth generation of Fossil's smartwatch evolution have functionality that include heart rate tracking NFC-enabled payments and GPS connectivity directly from the watch, and waterproofing for swimmers. Charging has also been improved, so that an hour of recharging will keep the watch working all day.

MICHAEL KORS ACCESS RUNWAY Equipped for every need, this smartwatch features digital dial designs that connect to and visually show your heart rate, making it easy to measure and track. It has NFC-based contactless payments and untethered GPS so that the watch keeps all its functionality even when it is out of range of a smartphone.

SAMSUNG GALAXY WATCH This is the first of Samsung's wearables to be aligned under the Galaxy banner. It runs Tizen OS 4.0 and features 4G support and seven-day battery life, NFC for payments, 4GB of internal memory, Bluetooth, Wi-Fi and a IP68 water resistance rating. There's plenty of sensors on board, too - a heart rate monitor, accelerometer, gyro, barometer and an ambient light sensor.

EMPORIO ARMANI’S 2018 CONNECTED In addition to heart rate, swimming and GPS distance tracking, these touchscreen smartwatches are compatible with both iPhone and Android phones and have inbuilt NFC-based system for contactless payment. They are also fitted with Google Assistant, which responds to voice controls and questions.

FOSSIL / WATCHPRO / SAMSUNG

BY THE NUMBERS

87 billion 2 million Projected volume of annual mPOS Global number of biometric(mobile Point-of-Sale) transactions by 2023, according to Juniper Research, which said adoption of the devices will drive increased usage of payment cards in emerging markets.

enabled mPOS by 2023. The research also forecasts that biometrics will become an increasingly common part of mPOS offerings citing national identity schemes using biometrics.

46% $33 Average annual growth rate in the Average price of an mPOS device number of mPOS devices in India over the next 5 years, the fastest of any global region due to the Indian government's digitisation of payments, spurred on by the policy of demonetisation.

43 /E-PAYMENT 43 /E-PAYMENT REVIEW/ REVIEW/ SEPTEMBER JUNE 2018 2018

in the projected period dropping from $40 in 2018. This affordability, coupled with the simplicity of mPOS devices, will make them highly attractive to smaller, previously cash-driven businesses.

Trends & Tactics

Singapore rolls out unified QR code for payments

LEDGER INSIGHTS

SINGAPORE HAS LAUNCHED what it claims to be the world's first unified payments QR code, which will be adopted by 27 payment schemes on the island. The Singapore Quick Response Code ((SGQR) will be rolled out over the next six months in an effort to make QR-code-based mobile payments simpler to use for both consumers and merchants.

Merchants will have to replace their existing QR codes with SGQR labels while shoppers will be able to check for their preferred QR option on the label and then pick it, scan the code and make payment.

"We have taken some time to build up an open, accessible and inter-operable e-payments infrastructure which fosters competition, innovation and enhances consumer experience. SGQR is our latest feature, and we are developing the next piece in the national e-payments infrastructure through broader access to e-wallet players," said Ong Ye Kung, Singapore's education minister and MAS board member.

MASTERCARD HAS FILED A PATENT FOR CONsumer protection and payment transactions based on blockchain technology, according to a US Patent and Trademark Office patent filing published in July. The application includes a new form of a public blockchain-based method for linking assets between blockchain and fiat currency accounts.

Mastercard’s patent describes the method for “managing fractional reserves of blockchain currency” as storing fiat currency in one central account with a “blockchain currency” stored in a second. The system would include a “plurality of account profiles, each profile including a fiat currency amount, blockchain currency amount, account identifier, and address,” for identifying user accounts for transactions.

The company said that the combination of traditional payment systems with blockchain-based currencies “may provide consumers and merchants the benefits of the decentralized blockchain while

Mastercard files patent for payment system that links blockchain currency with fiat accounts still maintaining security of account information and provide a strong defense against fraud and theft.”

Mastercard said that the new method would allow for the assessment of fraud or risk associated with blockchain transactions, since existing payment algorithms like credit bureau data or demographic information can be provided by the traditional payment networks. The patent also states that the public blockchain-based method can reduce transaction times, as well as secure users’ information.

In June, Mastercard filed a patent for a blockchain system to speed up payments and to make them more secure. It alsopublished a patent in April to provide faster blockchain node activation. Although Mastercard has been moving towards adoption of blockchain tech through its patent applications, it has been more negative in its stance towards cryptocurrencies. Last fall, the company’s CEO referred to non-government-backed cryptocurrencies as “junk.”

PSG to launch own its cryptocurrency FRENCH SOCCER CLUB, PARIS Saint-Germain (PSG), will launch its own cryptocurrency as a way to incentivize participation from its fans around the world. According to a French news site, Presse-Citron, PSG will start issuing its proprietary tokens next year, making it potentially one of the first soccer clubs anywhere to do so. Rather than a monetary role for PSG's coin however, the goal is to allow fans who hold the token to be able to vote for and decide on less strategic matters, such as team jersey choices or opponents in friendly matches, the report said.

NIKE / MANCHESTER CITY

Bank using Tinderstyle apps to drive customers PORTLAND, OREGON-BASED Umpqua Bank has created a mobile app that could be likened to Tinder for bankers, offering users the capability of selecting their own personal banker from a host of mugshots and profiles.

With the Go-To app, customers choose their own personal banker based on professional background, expertise, personal interests and location. Then, using secured text and chat capabilities they connect with their chosen banker to resolve issues or receive expertise.

“Our approach is grounded in a core belief that human interaction matters in banking - especially in the moments when life and money meet," said Cort O’Haver, Umpqua Bank president and CEO. "Instead of using technology to create distance between our associates and customers, our Go-To platform leverages technology to create a more meaningful customer experience that helps people make smart financial decisions.”

Man City give fans NFC wristbands

CHELSEA GETS FIRST NIKE NFC-ENABLED SOCCER KIT Nike is bringing its NFC-enabled replica sports jerseys to the soccer sphere for the first time through a partnership with English Premier League club Chelsea. The $90 shirt, which Eden Hazard above is wearing and will don in Europa League games, features a NikeConnect label.

Fans who use the NikeConnect mobile app to connect to the label will gain access to exclusive content and experiences, including playlists, the chance to win tickets and the opportunity to collaborate with Nike designers on a “fan jersey.”

44 /E-PAYMENT REVIEW/ SEPTEMBER 2018

UK football club Manchester City has released an NFC wristband that focuses on delivering team news and stats to fans.

The Fantom wristband, developed

by Sweden’s Turnpike Group, features a touchscreen that gives the wearer a countdown to kick off on match days, match stats and updates as they happen, and voting functionality.

The £80 wristband features a Manchester City branded silicone strap and incorporates NFC to deliver contactless ticketing and payments, reports SportTechie.

Europe sees shrinking bank branch network

NFC ENABLED GLASS FOR QUICK ORDERS Pernod Ricard, the makers of Havana Club, partnered start-up BlackSheep to launch this NFC enabled drinks glass. It has an embedded NFC tag that allows consumers to quickly and easily re-order drinks via their mobile.

The glass connects via a consumers phone to transmit an order to the bar. The logic is that one in three customers give up a purchase if they have to wait more than ten minutes. The glass/ NFC/app combination makes the ordering process quicker as the consumer will either get the drinks served or get notified when the drinks are ready so they do not have to wait at the bar.

Additionally, the glass can be used at home. A scan of the NFC tag will provide cocktail making advice and ideas.

MOBILE AND ONLINE BANKING continues to take their toll on physical bank branches and staff numbers, with new figures from the European Banking Federation (EBF) showing that European banks culled almost 6000 branches in 2017, down 3.1% over the previous year.

In total, the EU is now host to 183,000 bank branches, a 21% fall on the numbers evident ten years ago, with Spanish banks leading the way, culling over 18,000 branches in the past decade. States the EBF: "This partly reflects the increasing use of digital banking by consumers as more than half of EU individuals used internet banking in 2017 up from 29% in 2008."

Staffing levels have also been hit, reflecting a tightening of costs controls in the decade since the financial crisis and the ongoing advance of technology. By end-2017, EU-28 banks employed about 2.7 million people, about 40,000 fewer than in 2016 and the lowest level since the ECB’s data series began in 1997.

IN SHORT

TALENT PIPELINE

PERNOD RICARD

University System of Georgia creates fintech academy THE UNIVERSITY SYSTEM OF GEORGIA IS CREATING A fintech academy to build a talent pipeline for the US state's fastgrowing financial technology sector. All 26 institutions in the university system are backing the new fintech academy, which will prepare individuals to enter fintech or transition from another career through degree programmes, executive and continuing education, and apprenticeships and internships.

Georgia is a fintech hotbed, with more than 40,000 people in the state employed in the industry, thanks largely to 'Transaction Alley', where around 70% of all US payments are processed.

And the sector is expecting to continue to grow, with an associated escalating demand for talent, including a need for 5000 new hires by 2020 - 95% of whom must possess industryspecific functional experience.

"The Georgia FinTech Academy is an innovative response to the call from the fintech industry for more and better workers," Steve Wrigley, chancellor of the University System of Georgia.

"With the strength of all 26 institutions of the University System of Georgia behind it, I believe fintech will see immediate results from this new programme."

A curriculum has been developed in conjunction with fintech employers to address their priority needs, with virtual access to online courses and degrees through USG’s eCampus and cloud-based talent development programmes. In addition, the academy has two physical locations, both located in Atlanta at Georgia State University’s Robinson College of Business.

FIS, which has offices in Atlanta, is one of the firms backing the effort. Denise Williams, chief people officer at the vendor, says: "The academy represents a true partnership between a visionary university system and the corporate world to accelerate the development of tomorrow’s fintech talent."

Japan to get first battery-powered interactive card A JAPANESE BANK PLANS TO introduce the first battery-powered, interactive card that provides both debit and cash functionality on a single card into the Japanese market in 2019. The card by GMO Aozora Net Bank and Dynamics Inc will feature unprecedented levels of security with a touch-sensitive keypad and digital display for consumers to enter a pass code that turns the card on so that it can be swiped, tapped, or inserted into a reader, or contactless EMV chip. The pass code also activates the card’s display to show the payment card number. The cardholder can select on the keypad whether to use a debit card or a cash card. This card works with the existing payment infrastructure and merchant systems.

Consumers may use the card wherever Visa is accepted.

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SMOKEBOT South Korean will adopt a new mobile cash card settlement service starting next year in a bid to simplify mobile payments in the country. A council on financial information by the Bank of Korea and local banks decided to develop standards and a mobile application for the new service to enable sellers to receive money directly from buyer’s bank account.

CARDS RULE Cards now account for more than three quarters of the value of retail purchases in the UK, as contactless payments continue to eat into cash's share of the pie.

A British Retail Consortium's payments survey showed cards were used to pay for £277.1 billion worth of goods in 2017, representing 76% of retail sales volume.

CASH PAYMENT China is urging

its citizens and businesses not to refuse or discriminate against cash.

The People’s Bank of China said cash should be accepted alongside the debit card at all business outlets, with the exception of e-commerce and unstaffed stores.

Businesses were given one mon to make necessary adjustments to avoid being investigated for breaches by the authorities.

BLOCKCHAIN BOND The World Bank launched bond-i (blockchain operated debt instrument), a global bond created, allocated, transferred and managed through its life cycle using distributed ledger technology.

The two-year bond raised A$110 million, marking the first time that investors backed the World Bank’s in a transaction that is fully managed using the blockchain technology.

The Gimlet Eye

Nigeria can realize mobile technology's potential for the unbanked

users, like deposits, withdrawals and transfers. For mobile money to reach a critical mass, Nigeria needs a dense network of mobile agents. Allowing MNOs to issue mobile money could help expand mobile networks in parts of the country typically ignored by financial services providers. However, MNOs need incentives to do this; the Ghana data show how things take off when a clear regulatory framework is in place and providers have an impetus to invest. Good infrastructure - such as reliable mobile network coverage – is also vital.

By Leora Klapper

A

DATA SOURCE: BANK OF GHANA / GLOBAL FINDEX DATABASE

lthough it’s Africa's largest economy, Nigeria is missing out on the region’s most exciting financial innovation: mobile money. Twenty-one percent of adults in Sub-Saharan Africa have a mobile money account, nearly double the share from 2014, according to the latest Global Findex report. By contrast, Nigeria lags behind: just 6% of adults have a mobile money account, a number virtually unchanged from 2014.

In the last three years mobile money has spread from East to West Africa. In Senegal, mobile money ownership jumped from 6% to 32%, with similar gains reported in Burkina Faso. In Ghana, 39% of adults now have a mobile money account, up from 13%, on par with Tanzania. In Kenya, more than 70% of adults use a mobile money account; in addition, over 30% of adults use mobile phones to make payments from a traditional bank account. The rise of mobile money has led to an increase in bank accounts; overall, account ownership now exceeds 50% in seven sub-Saharan African countries, and 80% in three regional economies.

Mobile money can expand financial inclusion, which can help reduce poverty. For example, mobile money helped 194,000 Kenyan households climb out of poverty, enabled women to move from farming into business and retail, and helped families build up savings. Its low uptake in Nigeria means that people may be missing opportunities to participate in the economy and improve prosperity. Nigeria’s financial inclusion rates have also stagnated since 2014; only 40% of adults have a formal account.

The good news is that mobile money has plenty of potential to take off in Nigeria, as Global Findex data reveals. Roughly seven in 10 adults have a mobile phone, including 35 million unbanked adults, among them 20 million women. This offers a tremendous opportunity to expand mobile money if the necessary infrastructure, including the number of agents, is put in place. Where are the opportunities?

Reform the regulatory framework to allow subsidiaries of mobile network operators (MNOs) to apply for mobile money operators’ license.

Countries with strong mobile money growth have benefitted from engaged MNOs. By contrast, Nigeria's mobile money market is dominated by banks and technology companies. While they play an important role, they alone are not enough to unlock Nigeria’s massive potential. Allowing MNO subsidiaries to operate mobile money services could invite private investment and help Nigeria tailor and apply the models that have succeeded elsewhere.

Ghana is a good example. It initially opted for the bank-led model, resulting in limited mobile money use. The country changed its policy in 2015, and allowed telecommunication companies to apply directly for a license from the central bank, rather than through their partner banks. The regulatory changes yielded exceptional growth in use of mobile money, contributing significantly to financial inclusion and the rise in electronic payments.

Mobile Agenda Mobile money accounts have spread more widely in SubSaharan Africa since 2014

1.7 billion Adults globally

who lack a bank or mobile money account

35 mi llion Nigerian

unbanked adults who have a mobile phone, including 20 million women

62% Percentage

of 20 million unbanked adults Nigerians who have a mobile phone but who receive agricultural payments in cash

Number of active mobile money customers and active agents in Ghana: 2012—2016

2012 2013 2014 2015 2016 Active customers Active agents

345,434 991,780 5,000 10,404

2,526,588 20,722

4,868,569 56,270

8,313,283 107,415

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Digitize routine cash payments Many unbanked Nigerians are paid in cash. Moving them into accounts could drive up both mobile money adoption and financial inclusion. Nearly one in 10 unbanked adults in Nigeria work in the private sector and receive wages in cash, including roughly four million who have a mobile phone. Also, 15 million unbanked adults are paid in cash for the sale of agricultural goods, including some 10 million mobile phone owners. By contrast, in Kenya and Uganda where MNOs are mobile money providers - almost one in six adults are farmers whose agricultural sales are paid directly into an account.

The government could also digitize all transfer, wage and pension payments. Digitizing these payments can deepen financial inclusion, increase security and efficiency, and reduce leakage and potential corruption.

For instance, the South African Social Security Agency cut fess by 54% after migrating social grant recipients to e-payments.

Strengthen consumer protection People won't use mobile money if they're worried about fraud and deception. That's why it's important to enforce strong consumer protection regulations for issues such as safeguarding client funds, mistaken and unauthorized payments, fee disclosure and transparency, data protection, fair treatment and dispute resolution.

Target women Financial inclusion helps tackle gender inequality.

Evidence from Findex suggests that mobile money accounts might be helping to narrow gender gaps in some Sub-Saharan African economies. But in Nigeria, while 51% of men have a financial or a mobile money account, only 27% of women do. That 24-percentage point difference is twice as large as the region’s average and almost three times as large as the average gender gap in the developing world.

Expanding financial services to all Nigerians is critical to ensure that Africa's largest economy benefits everyone. Sub-Saharan African countries that have successfully leveraged MNOs and agent networks to deliver financial services have been most successful in meeting their financial inclusion goals.

These countries offer lessons for Nigeria to identify opportunities, address potential risks and develop an appropriate regulatory and supervisory framework to leverage MNOs to expand mobile money and tackle the stagnating financial inclusion rate. These recommendations align with the World Bank Group's Universal Financial Access (UFA) goal to ensure that adults worldwide have access to an account by 2020.

Nigeria is among the 25 UFA focus countries.

Leora Klapper is a lead economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank. Courtesy of worldbank.org.

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