E-PAYMENT REVIEW CHIJIOKE DOZIE, CO-FOUNDER OF PAYLATER ON HIS FIRM'S FOCUS ON EASY ACCESS TO CREDIT
Vol. 07. No. 03 September 2017
Unbundling the benefits of digital finance How delivering financial services via mobile phones changes the economic prospects of individuals, businesses, and governments + Interview: Tunde Ogungbade, CEO of Global Accelerex
E-PAYMENT REVIEW September 2017
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E-PAYMENT REVIEW September 2017
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E-PAYMENT REVIEW Vol. 07. No. 03 | | Sept 2017
BROWN N. UGBAJA Editor ONAJITE REGHA Projects Editor Sub Editor KUSHIMO OLUWAYEMI Editorial Assistant LUCY AKOKOTU
Published by E-Payment Providers Association of Nigeria
In This Issue September 2017 together to protect the retail payments system The Risk Report 30 | The smell of a data leak, Nigerian loan hacker takes on big firms, merchants flouting PCI DSS rules, global endpoint market soars, fraud by numbers
Cover
18 The new world of digital finance Digital technology has given people previously shut out of the banking system access to financial services. A look at how the widespread use of mobile devices and the proliferation of companies offering customers the ability to make payments, save money and take out loans via their mobile devices has has helped boost digital finance . Interview 24 The capabilities of the PoS systems Tunde Ogungbade Managing Director/Chief Executive Officer of Global Accelerex on how his company has transitioned the point-of-sale to the centre point of business itself.
HAPPIEST MINDS
4 | To Our Readers Pictures 6 | E-PPAN's cashless tour around Nigeria
by the numbers, Leading africa's ecommerce growth, non-bank BVN deadline, NIPOST keys into ecommerce
Talking Points 9 | When Google's CEO came to Lagos, digits 10 | Nigeria gets mVisa,
11 | Africa has more female entrepreneurs, in short, accelerating financial inclusion, Alipay in South Africa, numbers
E-Governance Summit 13 | Report from Nigeria's annual event in the arena of digital government reforms Startup Nation 14 | One Finance CEO on how Paylater provides easy loans to those who would normally not qualify for banks 16 | Quick Take One woman's experience with OLX do it for me NeFF Insight 28 | Fitting the pieces
NIBSS Fraud Report 34 | Second Quarter 2017 fraud situation Roundtable 36 | Digitalization can boost Nigeria's economic opportunity ahead if the digital transformation is accelerated
31 | Threat level, NotPetya ransomware impact costs Maersk hundreds of millions, infrared ATM skimmers
State of Payment 39 | Robots enter investment banks' trading floors, 'payment by vein' trialled, connected meal trays
Next Up 32 | Smartphone screens could soon repair themselves, brainwave reading headsets, soft foot robot grows like a plant, food from water and electricity
40 | Global wearables growing, children smartwatch payment, banks creating new digital cash, ATMIA plans new-gen ATMs, digits, Garmin Vivoactive watch
31 | Biofuel from sweat, app that screens for pancreatic cancer, AI will soon dominate the world, tech will soon tell pain levels, Petabyte hard drives are coming
40 | Battle for global payment domination hots up, contactless by numbers, NFC smart rings, fobs for payment, bitcoin backup Last Word 42 | Africa's fintech leaders
On the cover Unbundled color zipper Courtesy: Fotosearch
E-PAYMENT REVIEW (ISSN: 2360-9818) is published quarterly by E-Payment Providers Association of Nigeria, 1 Rachael Nwangwu Close, Lekki Phase 1, Lagos. Š Vol. 07 No. 03. September 2017. 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.
E-PAYMENT REVIEW September 2017
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To Our Readers
BROWN N. UGBAJA
A cyber-police academy RECENTLY, I WAS PART OF AN E-PPAN TEAM THAT FACILITATED A training programme for officers and investigators at the Police Special Fraud Unit (PSFU), the arm of the Nigeria Police tasked with awareness, detection and prevention of fraud while promoting personal accountability through recovery and prosecution. The exercise was designed to improve the digital understanding of PSFU officers especially by making them aware of the gimmickry employed by fraudsters in the perpetration of a multitude of their deceitful schemes. High profile players in the payment industry were present to share their expertise in support of law enforcement work. They include the likes of Uloh Kelechi, the soft-spoken Chief Operating Officer of Parkway Projects, Ike Nnamani, the brainiac with incarnations transcending many telecom services and startup engagements in Nigeria; Femi Fadairo, the energetic antifraud impresario at NIBSS and M. D. Sulaiman, the charismatic Director of FSS2020 whose tendency to speak quietly, to ask questions, and to listen to the answers, imbued the unusually strong atmosphere around policemen with a thoughtful sense of camaraderie. During the two-day programme, PSFU officers were taught the many features of digital payment in order to plug their skills gap and enhance their ability to investigate cybercrimes especially around payment. The aspects covered include digital payment itself, extant legislations/rules guiding its operations, the vulnerabilities within the payment system, basic fraud trends and what they should look out for when investigating a fraud case. Getting these points across involved the definition of terms, few broad strokes appraisal of the modus operandi of cyber criminals and an exploration of the arcane nature of the internet and the machines that facilitate the electronic movement of money. Adopting such a resource capability framework in this training was crucial especially as it was apparent that a majority of these police officers lack adequate technical expertise on cybercrime. The discussion was rudimentary because though the PSFU is already involved in the investigation and prosecution of internet crimes, the ONE OF THE MAIN personnel are not IT savvy. Most of their conCHALLENGES IS tributions show a disposition towards using THAT AS CYBERan analogue policing playbook for scrutinizCRIME INCREASES ing the cybersecurity environment. EXPONENTIALLY, Therein lies a big problem. The response to a LAW ENFORCEcybercrime is not the same as the response to MENT DO NOT HAVE a physical offense such as a burglary or a robCLEAR VISIBILITY bery. Policing in the digital age is at a turning OF THE SCALE. point and one of the main challenges is that as cybercrime increases exponentially, law enforcement does not have clear visibility of the scale. While IT has caused a remarkable transformation of every aspect of our lives, its increasing use, propelled by the Internet, has simultaneously given birth to innovative ways of committing crimes. The trend is changing from individuals operating for mischief or profit to organised crime groups carrying out criminal activities such as money laundering, cyber-based extortion and fraud. Hence, understanding the changes in these crime patterns has to become a critical aspect of today’s policing. Here is the truth: We do not have a good policing presence in cyber space, where so much crime is now taking place. While computers and the Internet have made the criminal a smarter criminal, law enforcement do not have nearly enough resources and expertise to catch him. This means agencies like the PSFU do not have sight of the scale of digital crime, and are therefore unable to take the steps necessary to police the system. In an article following the WannaCry malware attacks in May, The Economist likened the activities of cybercriminals to those of Britain’s 1930s gangsters who used the newly invented motor car to carry out robberies and get away faster than the horse-mounted police could pursue them. It did not take long, however, before the police caught on and equipped itself accordingly with police cars which they learned to drive as well if not better than the criminals. They got more help with legislation that empowered them to introduce road blocks and to search cars. Mirabile dictu! To offer a similar response to the threats in the cyberspace, the police need the electronic equivalents of road blocks and search warrants and the proverbial skilled drivers to chase criminals at the same velocity at which they move. To investigate and prosecute cybercrime, law enforcement agencies need skilled investigators, up-to-date computer forensic examiners and prosecutors with knowledge of cybercrime. We believe that the government 4
E-PAYMENT REVIEW September 2017
L-R: Onajite Regha is the CEO/Executive Secretary of E-PPAN; Ibrahim Lamorde, Commissioner of Police, Police Special Fraud Unit (PSFU) and Assistant Commissioner of Police, PSFU, Mike Dan Okoro at the training. should create a digital academy where a special corps of police officers can be equipped with adequate cybersecurity skills and IT capabilities. We are forced to make this case because the final part of the PSFU training anchored by the ebullient CEO of E-PPAN, Onajite Regha revealed a downside to using bootcamps to equip the police with cybersecurity knowledge. Many of the policemen pointed out that the rotation of officers in and out of police formations makes it difficult for the fraud unit to retain the technical manpower needed to fight internet crimes. The problem assumes its true proportion with another factor added in: Last year, during a courtesy visit by the Nigeria Electronic Fraud Forum (NeFF), the former Inspector General of Police, Solomon Arase made a commitment to establish a dedicated digital payment crime unit in the Nigeria Police. That plan is yet to come to fruition. At the moment, there is a request by the current Inspector-General of Police, Ibrahim Idris for the recruitment of over 155, 000 new policemen. This presents an opportunity to make the range of major changes that are needed to ensure that the Nigerian Police are fit to fight online crime. Attracting young people with a passion for information technology who can use their skills for the greater good is a start. Having them pass through a digital academy will mean that the pool of future police officers investigating or examining cybercrime will be filled with highly trained specialists, who have analytical, detective and technical skills, including proficiency in the use of various IT hardware, software, and forensic tools. One point to note is that cybercriminals are not sitting still; they are increasing the distance between themselves and the law by acquiring deeper know of the cybersphere. Law enforcement has no option but to do it better than them.
Brown N. Ugbaja, EDITOR
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E-PAYMENT REVIEW September 2017
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MANY FACES OF THE CASHLESS CAMPAIGN
E-PPAN
THE ELECTRONIC PAYMENT PROVIDERS ASSOCIATION OF NIGERIA, E-PPAN, has been on a grassroots campaign around Nigeria to build awareness about the cashless initiative. The team has visited Bayelsa, Ebonyi, Katsina, Ondo and Plateau states meeting traditional rulers, traders, transporters, students, artisans and many other segments of the society. They also participated in phone-in programmes on radio stations and answered questions about the promises of digital payments. Here, we bring you some of the encounters in pictures.
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Talking Points Google CEO Sundar Pichai takes a selfie in Lagos, which he posted to Twitter.
GOOGLE IN NIGERIA
SUNDAR PICHAI - TWITTER
The benchmark approach GOOGLE BOSS SUNDAR PICHAI was in Nigeria in July bearing gifts and making huge promises. The tour saw a Google for Nigeria event in Lagos where the online giant launched a range of new products, including YouTube Go, an offline version of the video sharing platform for users with slow internet connections. It has been enhanced to allow users essentially save on data costs by allowing them preview and download videos insteading of streaming. While here, he tweeted about his visit to the Computer Village at Ikeja, Lagos and his informal meetings with Nigerian IT professionals and took a bunch of selfies with some local startup founders. In a sense, Pichai's visit to Nigeria was hardly coincidental. He seemed to be following the examples of leaders of other global tech giants who visited the country before him. Recall images of Facebook’s Founder, Mark Zuckerberg visiting Yaba's tech hub, manoeuvring the ever-busy Lagos traffic on foot and jogging along the Lekki-Ikoyi Link Bridge. Pichai's visit
seems to be a further endoresement or recognition of Africa's rise as the future hub of global growth and a continent surfeit with potential. The rapid changes in the world of tech and growing consumer ability in almost all places make it too hard to predict the business environment of the future. These are causing some business leaders to do everything to avoid wrong choices amd to search for available opportunities. So, the important question of “What can we do to make our business survive and grow faster than competitors?” appears to be what Pichai (and other CEOs who have touched down in Nigeria) were here to find answers to. For Google, it is reflected in some of its programme benchmarks reeled off by Nigeria Country Manager, Juliet Ehimuan-Chiazor. Apart from YouTube Go, Google is deepening its product offering in Nigeria. It has improved its Maps service which has seen increased usage among Nigerians in the past year and added its Street View feature so users
DIGITS
can virtually view “10,000 kilometers of imagery” across Lagos. Over the next few years, the company will be commiting $20 million in grants to “high impact non-profits” in Africa to help plug the continent's crucial funding and skills gap. It will also provide $3 million in equity-free funding, mentorship, working space and access to expert advisers to more than 60 African startups and open its first Google Launchpad Space outside the United States in Lagos this year. While here Pichai announced plans by Google to prepare 10 million African youth for “jobs of the future” as well as training of 100,000 others as software developers. This follows a year-long programme to equip one million people with digital skills, which was completed in March. With these array of plans and programmes, Pichai and Google seem determined to help Africa realize its potential by affording its young people the skillsets that will empower them to start businesses, create jobs, and boost their respective economies.
N1.6 trillion Quarterly contribution of ICT sector to Nigeria's GDP, according to the Nigerian Communications Commission (NCC).
$68 billion
Value of private sector investment brought in by telecommunications to Nigeria since 2001.
91.6 million Number of internet users on Nigeria’s telecom networks as at June 2017.
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Talking Points A mobile-based alternative in emerging markets GLOBAL PAYMENTS LEADER VISA HAS MADE MVISA, ITS QR-BASED PAYMENT SERVICE, LIVE in Nigeria bringing the benefits of easy and secure digital commerce to financial institutions, merchants and consumers in the country. Diamond Bank, Fidelity Bank and First Bank are early partners offering convenience of the service to their customers through their mobile banking apps. Access Bank, Ecobank, United Bank for Africa and Zenith Bank will soon follow. MVisa is an agile solution that allows easy use of mobile phones to make cashless purchases, pay bills remotely and make transfers by securely linking Visa debit, credit or prepaid accounts to the mVisa application. It digitizes the underlying account and allows consumers to transfer funds by simply scanning a QR code. “Small and medium merchants in particular no longer have to invest in expensive [PoS] infrastructure as mVisa gives them the freedom to accept payments in a convenient, secure and affordable manner that their customers trust," said Andrew Torre, President for Visa Sub-Saharan Africa at the launch.
BY THE NUMBERS
N19.78 trillion
Total value of electronic payment transactions at the end of second quarter of 2017, according to the Nigeria Inter-Bank Settlement System Plc (NIBSS).
N13.36 trillion
Value of instant e-payment transactions in the second quarter of 2017.
N324
billion
Value of PoS transactions in Q2 2017, a N38 billion increase from Q1.
FUTURE TREND
Nigeria leads Africa's e-commerce market
ON THE BASIS OF ITS HIGH BUSINESS environment opportunity potential, Nigeria is in pole position to take advantage of the Africa’s e-commerce potential projected to reach $50 – $75 billion within the next 5-10 years, according to latest research by the Economist Intelligence Unit (EIU). The report which relied on data generated by the research and analysis division of the Economist Group, stated that the old informal structure of retail businesses is being replaced, as the number of malls being built increases and more people flock to benefit from a more engaging shopping experience. A newer trend however is the e-commerce model. Growing appetite for smartphones, mobile usage and wider network coverage are allowing many Africans to embrace the potential of e-commerce using their mobile devices. Using a metric of per 100 people, Nigeria scored 80.4 out of 100 to lead the entire continent as the country with the greatest potential opportunity within the wider African e-commerce market. In terms of internet usage, Nigeria’s mobile
internet subscription – at 91.9 million, is said to represent one of the highest rates of mobile internet usages in the world. Web analytics company Statcounter put Nigeria in the lead of countries with the highest percentage of online sites viewed on mobile phones, at 81 percent, compared with the global average of 50 percent. An expanding middle-class, EIU noted, constitutes a factor driving growth of e-commerce. The other is the rural-urban movement which is rising as people move in search of jobs, which eventually translates to increased disposable income. E-commerce sites are also evolving their strategies, moving their services to populations in the rural areas, leading to growth in sales. A growing consumer interest in fashion and apparel sector, accounts for majority of sales in the sector. Here again, Nigeria also takes the lead, as its online apparel market is projected to grow from $104 million in 2014 to around $1.1 billion in 2019, according to Euromonitor International, a market research firm.
187.8
million
98 million Number of bank accounts in Nigeria as at last December.
26.5
VISA / TIMILEHIN BELLO - TWITTER
million
17, 712
Total number of ATMs in the country as at June. 10
THE CENTRAL BANK of Nigeria (CBN) is giving OFIs (Other Financial Institutions) till December 31, 2017 to conclude registration into the Bank Verification Number (BVN) project. The decision followed appeals for extension by OFI stakeholders, like the Fianancial Inclusion Secretariat, National Association Of Microfinance Banks and Mortgage Bankers Association Of Nigeria. In a statement, CBN's Director of OFIs’ Supervision Department, Tokunbo Martins, warned that there may not be further considerations after the new deadline and customers without BVN would not be able to make withdrawals.
NIPOST gears up for e-commerce surge
Volume of transactions done at ATMs with a value of N1.54 trillion recorded in Q2 2017.
Number of accounts linked with the Bank Verification Number.
OFIs new BVN deadline
DIGITAL LITERACY BOOTCAMP A collaboration between public relations firm Media Panache Nigeria and web hosting company WhoGoHost provided over 100 Lagos youths with the critical skills needed to secure employment or start businesses in a new economy that is increasingly technology driven. The training featured sessions that ranged in scope from web design and development to how to increase business opportunities online using social media. The training was facilitated by WhoGoHost CEO Toba Obaniyi & Media Panache MD Timilehin Bello.
E-PAYMENT REVIEW September 2017
THE NIGERIA POSTAL Service, NIPOST, is adopting new strategies to better prepare it for Nigeria's predicted e-commerce expansion by setting for itself an ambitious target of increasing home delivery to 70% within the next 2 years and 90% by 2020 through a Mail for Every House Initiative (MEHI). It has also adopted What3Words system, that allows referring to locations by a series of threeword phrases instead of house numbers and street names. This will solve the often-ignored problem of people who have no mailing address, making it difficult to get a delivery.
GIRL POWER
Africa leads rate of world's female entrepreneurs SUB-SAHARAN AFRICA HAS the highest number of female entrepreneurs in the world, according to a report that found women’s entrepreneurial activity globally is up 10 per cent, closing the gender gap by five per cent since 2014. The Global Entrepreneurship Monitor (GEM), a study conducted by a consortium of universities said in the 2016/17 Women’s Report that 25.9 per cent of the female adult population in Sub-Saharan Africa is engaged in early-stage entrepreneurial activity. Senegal was adjudged best performer with 36.8 per cent while South Africa has lowest number of women entrepreneurs active in the region at just 5.9 per cent. The majority of African women entrepreneurs – 61.8 per cent – said they started a business because they are taking advantage of opportunity, rather than out of necessity. Sub-Saharan Africa does however also have the highest discontinuance rate – at 8.4 per cent. Around 56 per cent of women entrepreneurs in the region cite either unprofitability or lack of finance as a reason for closing down their business. In the past year, 163 million women were starting businesses across 74 economies worldwide, while 111 million were running established businesses. “This not only shows the magnitude of impact women entrepreneurs have across the globe, but highlights the contribution they make toward the growth and well-being of their societies,” said Babson College professor and report co-author Donna Kelley. ”
In Short U.S. ecommerce giant, eBay, has opened up its platform to Africa through a partnership with MallforAfrica.com. Americans can now buy products on eBay from select vendors in six African countries, starting with merchandise categories of fashion, art, jewelry, and clothing. For the new program, MallforAfrica selects the sellers and handles payments on its proprietary platform. DHL is the shipping partner.
Safaricom is eyeing expansion across Africa, with the view of establishing its e-commerce and mobile payments solutions in untapped markets of the region. CEO Bob Collymore told Financial Times he wanted to take the company’s planned e-commerce platform, dubbed Masoko, “into the white space that no one is in at the moment.” 57 African fintech startups got over $92million in funding between 2015 and end of May 2017, according to Disrupt Africa's Finnovating for Africa report on the continent’s fintech space, which found almost 20 per cent of the 301 startups it tracked had raised money in the last 29 months.
FINANCIAL INCLUSION IN TANZANIA L to R: Bill Gates co-founder of the Bill and Melinda Gates Foundation and President Pombe Magufuli of Tanzania when Gates visited Dar es Salaam to support Tanzania’s financial inclusion agenda. Joining leaders from government, financial service providers and mobile network operators, he took part in roundtable discussions that explored the potential contribution of digital financial services. He also reviewed the progress of projects supported by the foundation that are geared towards financial inclusion. FINANCIAL INCLUSION
Connecting unbanked people to formal financial systems accelerated
CHINA, EGYPT AND MEXICO HAVE been picked to participate in the Financial Inclusion Global Initiative, a new global programme to advance research in digital finance and accelerate digital financial inclusion in developing countries. The programme which will run over three years leading up to 2020 is the brainchild of the World Bank Group, the International Telecommunication Union (ITU) , the Committee on Payments and Market Infrastructures (CPMI), and the Bill & Melinda Gates Foundation, which supported with a $12 million grant. The ITU said the countries were chosen based on specific criteria, including the potential for country programmes, the level of national government and privatesector commitment to financial inclusion, the number of people that could be reached through digital financial services,
as well as the potential for reforms to encourage innovation and digital technologies use. The World Bank Group will be leading operational work during this period while the ITU will handle activities related to telecommunications authorities. Houlin Zhao, Secretary-General of the ITU reiterated the positive impact that the programme will have through its broad focus on financial product design; financial literacy and awareness; diversified access points; and large-volume, recurring payment streams in addition to strengthening public and private-sector commitment and improving legal and regulatory frameworks, Findings from research and other activities as part of the initiative will be presented at annual symposia starting in Bangalore, India in November 2017.
CIO.CO.KE / CAPITALFM.CO.KE
SOUTH AFRICAN FINTECH COURTING ALIPAY INTO LOCAL MARKET MORE SOUTH AFRICAN FINtech companies are working with Alibaba's international mobile payment app Alipay. The latest partner is mobile payment platform Zapper, which believes the relationship will ease payment for the 450 million active Alipay users around the world when they visit South Africa. In June, Peach Payments, another fintech, also partnered with Alipay and ACI Worldwide to bring Alipay acceptance to Africa for the first time.
844,977
This partnership will enable South African businesses to accept payments from Chinese visitors via their Alipay wallets. While visiting Kenya in July, Alibaba founder Jack Ma (pictured left) indicated Alipay might debut in Kenya but only through a partnership with a local company. Zapper is initially targeting Chinese tourists coming to South Africa but will expand to include an in-app discovery module so users can search for locations such as restaurants,
theatres and parks. Tourists will use their Alipay app to settle payment at 10,000 Zapper-affiliated merchants across the country. “This cross-continental alliance is in line with the series of expansions into new verticals that Zapper is currently undertaking to diversify its service range, and further strengthen its position as South Africa’s mobile payment and loyalty rewards app of choice,” said Will Heygate, General Manager of Zapper South Africa.
Number of POS terminals distributed among merchants by Iranian payment service provider, Beh Pardakht Mellat, constituting the largest volume among Middle Eastern and African PSPs, according to the Nilson Report, which surveyed merchant acquirers in Middle East and Africa in 2016. Mellat also registered the biggest number of active merchants at 862,970. E-PAYMENT REVIEW September 2017
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Attendees registering at the summit.
The singing of the national anthem.
Minister of Communications, Adebayo Shittu.
E-PPAN trustee, Senator Ayo Arise
A cross-section of participants at the summit
Regha while moderating the first session.
Smart card manufacturing company, Cardstel had exhibited its products at the summit.
Minister of Communications , middle, staff of E-PPAN and other attendees at the summit.
Dipo Fatokun, CBN director of banking and payment system (middle) moderating a session of digital finance.
SUMMIT REPORT
But as the tax burdens rise, so also do the citizens expectations for their governments to reinvent public service processes to be more responsive, transparent and accountable. Thanks to technology, these expectations can become reality. For Nigeria, which is recovering from a recession (due to plurality of factors, top of which was corruption and the fall in oil prices), there is a necessity to look towards a better tax system in order to fill the government’s coffers. But how to do this in a way that ensures accountability, that is the rub. Experiences in the past have shown that government’s revenue fails to reach its bank account as it is diverted to the pockets of vested interests. To help change this scenarion and improve transparency and reduce corruption in public administration, the E-Payment Providers Association of Nigeria (E-PPAN) organized the sixth E-Government Summit at the Shehu Musa Yar’Adua Centre Abuja in July. It was done in collaboration with the National Information Technology Development Agency (NITDA), VISA, Parkway Projects, VoguePay, Nigeria Inter-Bank Settlement Scheme (NIBSS), Keoun Technology Ltd and the Central Bank of Nigeria (CBN). With the theme: “E-Government: Catalyst for Economic Recovery and Sustainable Development.” The objective of the summit was to show how ICT can be leveraged for effective public service delivery; to showcase how data analytics can help drive up government revenue and to introduce smart technologies that would be decisive in the building of cities of the future. Nigeria’s Minister of Communications Technology, Barrister Adebabyo
GOVERNANCE IN A DIGITAL AGE: AN AGENDA FOR SMARTER PUBLIC SERVICE DELIVERY The 2017 e-government summit brought digital services specialists, academics, government and payment providers together to analyse innovations, issues, ideas and challenges in Nigeria's society of the digital age.
BY LUCY AKOKOTU
AROUND THE WORLD, GOVERNMENTS ARE having a hard time adjusting to a climate of slow economic growth. Countries are being forced to increase taxes in order to derive more revenue. 12
E-PAYMENT REVIEW September 2017
Shittu, admitted that these goals were in tandem with government’s desire for a better way to run the affairs of the country. In a speech to declare the summit open, he said Nigeria is presently depending on digital technologies to enhance national productivity and economic restructuring. “The role of ICT and telecommunications is significant and crucial in any society, particularly Nigeria, which is striving to be a new nation by leveraging on ICT,” Adebayo said while reiterating the federal government’s belief that technology is a key element towards achieving its Economic Recovery and Growth Plan, ERGP. “The time has come to fully embrace ICT to enhance transparency and good governance if we really are to fully embrace the change mandate that Nigerians voted President Buhari to bring about.” ERGP is an ambitious plan launched in April by President Muhammadu Buhari with the goal of a seven per cent economic growth by the year 2020 through strategies that include macroeconomic stability, economic diversification and the elimination of obstacles hindering the competitiveness of Nigerian businesses. To achieve the plans intents, the minister said, will require innovation, a clear digital strategy combined and a leadership willing to drive transformation at the local, state and federal levels. Senator Ayo Arise, a member of E-PPAN’s board of trustees, in his welcome address said that achieving such lofty goals is the summit’s raison d'être. For five years the event, he said, has lived up to its ambition of serving as an interactive platform for key policymakers, thought leaders,
L-R: Senator Arise; Dr. Mohammed Tumala, Director of Statistics, CBN; Mac Atasie, E-PPAN President/ CEO Nextzon; Minister of Communications, Barrister Shittu: Regha, CEO of E-PPAN; Ben Ewah, Consultant, Corporate Planning & Strategy Department, NITDA; Babtunde Akinwa, Customer Relations Manager; NIBSS, Uzo Eziukwu, CEO of Packway Projects and Inye Kemabonta, the Summit's compère.
Brown N. Ugbaja, editor of E-Payment Review, right, during the session on e-government’s futuristic outlook.
A participant from the Nigeria Police asking a question.
Uzo Eziukwu, CEO, Packway Projects
L-R: Joy Obaji, Lucy Akokotu, Minister of Communications, Shittu and E-PPAN CEO Regha at the summit.
Participants having refreshment at the summit.
E-PPAN CEO Regha giving the vote of thanks.
Summit session
strategists, academics and experts from the public and private sectors to dialogue and set a proactive course for technology’s intervention in government’s processes. One of such courses was set by Uzo Eziukwu, CEO, Packway Projects during a breakfast session to highlight his company’s work with Kaduna that contributed to the state being ranked number one in Nigeria for ease of doing business. Parkway built a solution that enables easy online access for Kaduna residents to obtain business permits, vehicular registration, compliance processes, levies or fees payments and lots more across government ministries and agencies. Eziukwu maintained that micro, small and medium enterprises remain the engine room of most national economies but wasn’t functioning so well in Nigeria. He touted his solution as capable of aiding government's efforts to reengineer its processes in order to offer the same quality of service as the private sector. The truth is there is a considerable limit to what government can do especially as bureaucratic bottlenecks force it to often play catch up when it comes to new technologies. The summit was well aware of this fact and that was why there was widespread call for the government and technology companies to collocate services in a way that would be of value to both the public and private sectors. “The essence of e-government is to realize processes and structures for harnessing the potentialities of information and communication technologies at various levels of government and the public sector and beyond, for the purposes of
enhancing good governance,” said Onajite Regha, Executive Secretary/CEO of E-PPAN. She underlined a few difficulties experienced by payment providers due to the failure of governments at all levels to fully integrate digital payment into their processes. According to her, after six years of an intensive campaign on the cashless initiative, mostly driven by the Central Bank of Nigeria and E-PPAN, Nigeria is still seeing poor adoption rate for e-payment, lower numbers of POS terminals and inadequate use of mobile money. Onajite reiterated her belief that information technologies have the ability to transform government relations with citizens, businesses, and other arms of the government. She pointed out that e-payment should be a key factor for driving public service processes like payments for goods or services and efficient revenue collection. This and other efforts, she saiid, will increase transparency and accountability. The summit had panel sessions on opportunities and threats of new digital technologies like blockchain, mobile, big data analytics and their futuristic role in e-government. While citing examples from other parts of the world, speaker after speaker espoused ideas on how these innovations can transform Nigeria’s government systems. They spoke of how Estonia using blockchain-based systems to secure healthcare records; of Rwanda using robotics to launch the world’s first national drone delivery system for supplying blood to patients in remote areas of the country and the Dutch using text mining and machine learning for detection of child abuse. These technologies are
forcing governments to rethink their traditional development and management models. Most presentations highlighted the value of using data insights to make sound decisions on how best to utilize scarce resources. The verdict was that data-driven decisions would trump politics and assumptions, ensuring government programmes and services address identified needs. They pointed to a future where analytics from unstructured data around government activities will be essential for solving problems. Meanwhile, speakers allayed the fears that reinventing governance with IT will require a lot of infrastructure investment and agreed that the way to go is mobile. One example cited was how Estonia allows citizens to use their mobile phone as a form of secure digital ID. This can be adopted in Nigeria especially as almost the entire adult population that would have need for an ID already have access to a mobile subscription. A session on e-government’s futuristic outlook, anchored by Brown N. Ugbaja, editor of E-PAYMENT REVIEW suggested the incorporation of a broader definition of e-government to include its four key dimensions, which reflect the functions of government itself: e-services, e-democracy, e-commerce and e-management. The panel highlighted that since Nigeria is not bogged down by legacy technology, that government should take advantage of the high mobile tele-density and demographics in the country to design citizen-friendly e-government strategies for efficient and seamless data exchange and e-service delivery. E-PAYMENT REVIEW September 2017
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Startup Nation
Quick Loans, Fast Cash Exploring the mind of Chijioke Dozie co-founder of One Finance, the company behind Paylater, on the fintech race in Nigeria and what microloans can do for Nigerians. BY BROWN N. UGBAJA
CHIJIOKE DOZIE - TWITTER
WHAT MOTIVATED YOU TO START ONE Finance? We founded One Finance because we felt that there was a space in consumer lending that the banks were not filling. In 2003, when I was an investment associate in South Africa with the International Finance Corporation, we had to evaluate a company that was into consumer lending. They were lending to miners and teachers in Zambia and Ghana. This opened my eyes to the facts that there were pockets of consumers that banks were not lending to. I went to the mines in Ghana and Zambia and met miners who told me that they could not walk into the bank in their overalls to get loans but this company was coming to their place of work to sell loans to them. I thought it will be interesting to start something similar back home here in Nigeria. Our idea with One-Finance is to give consumer loans to salaried employees and we did that in Lagos using an agent network. Our agents went to offices and tried to sell loans and of course we had an online presence but towards the end of 2015, we realized that was not a scalable model. We were not a bank and we didn’t have the resources to hire thousands of agents, so we decided to use technology to scale. We created the Paylater app in 2016 which allows us to easily disburse loans to anyone within five minutes. The idea of a fintech micro-loans marketplace is something extremely interesting. Could you explain how it works in practice? What is required to obtain a loan from the app and how much time does it takes to get the loan? It’s a very simple process. On Android phone, download the Paylater app from the Google Play Store then register. To register you need to provide your bank account number, BVN and your debit card details. We ask some basic questions like where you leave, where you work, if you are married, how much you want to borrow. At the back end, we will review your application and come up with what we can give you. We might reject your application for a loan or give you an offer which may be more or less of what you want. Our criteria might change from month to month. You may be rejected this month and accepted in the next month. For example, you may want a hundred thousand naira but what we will be willing to give you is seventy thousand. I have personally completed an application in four minutes so it depends on how comfortable you are in applying on the phone but generally it shouldn’t take more than ten minutes to complete the application. You mentioned your experience with a company that was lending to miners in Ghana and this was about catering to the needs of a market that had been overlooked. Even at that, 14
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why would a customer choose Paylater over traditional incumbents? They will choose us over traditional incumbents because we are doing something different. We are a regulated finance company but we do not take deposits. Our requirement is that you must be banked and our loans are as low as ten thousand naira. How many Nigerian banks can you go to and get a loan for ten thousand naira? Very few if any at all. Our biggest loan amount is one million naira and that is the minimum banks were willing to give to consumers though they have started doing lower but not as low as ten thousand naira. I think that’s why people will come to us. Anyone in Nigeria can take our loan within twenty-four hours. You may think ten thousand is small but needs vary and it might be worth more to people outside Lagos who incidentally are doing a whole lot more than those in Lagos. Using mobile technology to give loans isn’t common in Nigeria. How do customers repay your loan? When you apply for a loan, you register your debit card on the platform. If I give you a loan today, 30 days later the loan has to come back. Once the money is there, the system automatically deducts the funds from the account. In a situation where our customers, could not pay on the due date may be because they did not receive their salaries on time, they have two options. They can either do a transfer to our account or they can make a card payment in the app to repay our loan. What happens when a customer simply refuses to pay back? What do you do? First of all, prevention is better than cure so we try to make sure that we give the right loan to the right people. We have a call centre here from where we call loan defaulters and send them SMS. If that is still not successful, we outsource the debt collection to a third party. It’s amazing the caliber of people taking a loan of even ten thousand naira; people with salaries of N200,000. In the last few months, we have had about five incidents where customers have called us to say that they want to make instant payment on all their debts. We later found out that they wanted to travel outside the country and the embassies of the countries they want to visit did a credit check on their accounts and saw a negative mark because of the loan. The BVN has made our business model valuable because we can easily run a check before approving a loan. Prior to BVN, it was very difficult to think about lending to anyone outside Lagos. For us, if your BVN is not tied to the account, we reject you. So with the BVN and the credit bureau, this business is getting more sophisticated in Nigeria because it is now possible to do these checks in-
stantly. There is more awareness and traceability making it hard for debtors to hide. How have you been able to grow transactions on the platform? So far we, on Paylater alone, we have done transactions valued at a billion naira. We do about 400 loans a day. How do you intend to scale? It’s about awareness and education. People are geared towards going to a bank to get a loan so the idea of opening their phones to get loans seems crazy. When we first started, people thought it was a scam especially since it was around the time of the explosion of MMM. Even though we are regulated by the CBN, we are not a household name so we are engaged in gradual awareness creation. We have been doing a lot of online marketing but in Nigeria, a lot of people don’t believe you are real except they see you in a newspaper, or on a billboard. We started doing adverts on BRT buses and we also intend to advertise in newspapers. We will be doing a lot of them because through them
Chijioke and Mark Zuckerberg, Facebook founder and CEO at F8, Facebook's annual global developer conference, in April. Chijioke on Twitter: "Trying to get Mark to take Paylater loan but he claimed he didn't need the money."
Knowing all the issues that do make succeeding at this very difficult, what is giving you the confidence to push ahead with asking people to come take your money? I think it’s a couple of things. But particularly the business case. It is genuine; it shows we bring real value. In one year we did one billion naira worth of lending while two other banks, I won’t mention their names, with about 250 branches across the country did fifteen billion naira worth of lending. It shows us that if we are focused, we can grow and we can help people. There is so much opportunity and we recognize it. People need access to credit and eighty percent of the banked population don’t have that access. That is something we want to change.
Nigerian fintech industry? I try not to dwell on that because when you look at the United States of America, Silicon Valley is the hub. Yes, we are based in Lagos and we have built a product that people are using outside Lagos so I don’t see it as too much of a problem. I personally think that companies that win are the ones that are thinking more about how the consumer outside their operation area can access their product or service. This is one of the issues with e-commerce players. You have this platform that is great for getting television, phones, clothing around Lagos but do you have the infrastructure to provide same to someone in Port Harcourt? That is something I think they have to think about. Our product can be easily offered to people because all they need is a working Android phone and internet to access our product.
I found that one of the peculiarities of Nigeria is a highly-centralized fintech ecosystem. Lagos is a big tech hub, but other cities are not playing important roles. Do you see this as an issue or strength for the development of the
I asked this question because we [E-PPAN] are involved in the cashless Nigeria awareness effort and what we have seen outside Lagos is that a very large percentage of Nigerians are not aware of the versatility offered by their
we can scale and do more transactions.
phones in terms of available opportunities they can exploit. How are you going to reach such people and educate them about Paylater? What people don’t understand is that when you are selling a product that people really need and can’t access, they will change their behaviour for you. Yes we have consumers who struggle with technology but no one else is giving them a twenty thousand naira loan. They call us and ask us how to use the app and we walk them through it. They are doing that because they need the money. We had a woman who makes beads and runs a Betnaija office. She wasn’t sophisticated but because she needed a twenty thousand naira loan, she said I’m going to learn how to use the app. They are learning because we are giving them something that is completely different. We exist because there is a vacuum. What we have seen is that most of our credit customers do not have a credit history. Since we are giving them something they have never had, they are willing to do something they have never done. You were previously an investment analyst E-PAYMENT REVIEW September 2017
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at the International Finance Corporation and you said you were responsible for sourcing investment opportunities in Sub-Saharan Africa. What did you learn from that experience that you’ve applied to One Finance? I learned many things but what applies here is the focus on the paying point and the actual customer. Sometimes people demonize credit; they believe credit is bad but I think the way we understand it here in Nigeria that has fuelled the stories we hear. Abroad, the case is different. In these countries, their economies flourish because people leverage on credit to keep it growing. Imagine you didn’t have to pay upfront to buy a car; you can use the rest of the money to do something else. Unfortunately, Africans only like to see the bad side of credit. All these development agencies don’t encourage consumer credit, they rather focus on SMEs, women entrepreneurs and that is good but I think consumers should get credit if they want as long as they can afford to pay it back. What should we do to change that attitude towards credit? It’s by really promoting the credit culture. Personally, I think that the credit culture should be engrained in our daily life. People should be able to have a knowledge of their credit worthiness and the generated credit report should be a factor. When you are looking for a job or want to rent an apartment it would give you an idea of what you should be looking for. Credit bureaus should make it easy for people to check the credit reports. We are a people who like to borrow a lot of things from the West and over there getting credit reports is not expensive. In Nigeria we can do a USSD code to check a credit report. If people know that those they have a business with or want to rent a house from will check their report, then they will be committed in repaying what they owe and banks will be more willing to lend. A lot of people who pay us back are those who want to travel out of the country because the embassies look at the credit score before letting them into their countries. We need to spread that around so that banks and other financial institutions can see that the cost of lending has reduced. We need this in Nigeria especially as payment is becoming more digital and more traceable.
OLX
Apart from concerns about defaulting customers, what other challenges are you facing in doing this? The major thing for us is financial literacy. If people are more literate in terms of being more conversant with financial products, it will be easier. In Europe there is a new protocol called PSD2 which is going to make all the banks open up their data. This simply means fintech companies can have access to all your financial record with your permission in other to give you cheaper loans, insurance, better savings plans which makes it more competitive. As a customer, you can decide to share your data with whomever you want. Once that is applied here, it would mean people will be more involved in managing their data and all the information can be integrated into one platform that can be useful in building a credit history. By its nature business involves risks and this business particularly have them in all areas but we have ways to mitigate them. What excites you most right now and what do you see next for Fintech? Do you believe the hype about blockchain and artificial Intelligence? I do believe that artificial intelligence is not a hype, it’s already here. Some countries are already utilizing machine learning and the same goes for blockchain. It is being used in Africa, I have personally used bitcoin. On what is next for fintech in Nigeria, I know that the Central Bank of Nigeria is working with NIBSS to open dialogue with fintech players on granting them access to data. Though one thing fintech companies are weak on is licensing. Finance is an engaging entity because you are dealing with sensitive data from customers like bank accounts and bank verification numbers. The CBN needs to know whether they have the right tools to safeguard these data but at the same time, it should not involve overburdening them with a lot of regulation. Fintechs have to solve problems and provide solutions that banks are either not doing or cannot or will not want to do. 16
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Quick Take
A Do-It-For-Me success story Majekodunmi displaying various cakes in one of her shops.
THE ESTIMATED VALUE OF UNUSED YET GOOD QUALITY ITEMS STORED in Nigerian homes is about N512 billion. Many Nigerians do not realize that the items in their homes could be sold for cash and most do not know how to go about selling them. Some people are known to hoard items with the hope of using them in the future. In order to help Nigerians sell their used items conveniently, OLX launched Do-It-For-Me (DIFM), a premium service that helps busy people with offloading their items with the help of OLX Champs, sales experts who handle transactions on behalf of users on the platform. They manage the entire selling process on the site from posting the item to closing the deal. This service addresses the needs of users who have no time to post or meet with potential buyers but want to sell quickly and conveniently. An interested seller wishing to use the service is matched with an OLX champ who links up with the seller and agrees on a selling price within which the champ will get his commission. One of OLX users who recently availed the DIFM service was Nike Majekodunmi, an “I ESPECIALLY extremely busy wife, mother of three and the LOVED THAT THE CEO of Nuts About Cakes, a full service bakery with four branches in Lagos. She was featured in PROCESS WAS VERY an DIFM OLX TV commercial. According to her, SEAMLESS AND THE she heard of the OLX Do-It-For Me Service on TV CHAMP DID ALL THE NEGOTIATING ON MY and decided to give it a try when she needed a bigger oven for her bakery. BEHALF.” “Due to my extremely tight schedule, I knew I needed help selling off my old oven very quickly NIKE MAJEKODUNMI, as I had to buy a new one. This prompted me to CEO, NUTS ABOUT CAKES visit the OLX website, to book a champ," she said. “The thought of receiving calls from strangers was not appealing to me. I especially loved that the process was very seamless and the champ did all the negotiating on my behalf." Majekodunmi also added that it has been an amazing and very profitable experience using the OLX platform especially after she was featured on the OLX TV ad. "My revenue increased by over 21% a couple of weeks after the TV campaign was launched and this helped accelerate the opening of a fourth store,” she said She encouraged users to follow the OLX safety tips when using the platform adding they should always inspect the items before making payment. OLX is the world's leading online classifieds platform present in more than 40 countries across six continents. It is a connection point for people looking to buy or sell used goods or purchase services. OLX’s online marketplace makes it fast and easy for millions of people in local markets around the world to find and sell a wide range of products, including vehicles, electronics, phones and much more through a mobile phone or on the web.
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E-PAYMENT REVIEW September 2017
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COVER
Two billion people lack access to banking services, and 200 million businesses can't get the credit they need, a gap estimated at N789 trillion. The solution can be summed up in two words: digital finance. BY BROWN N. UGBAJA
WAY BACK IN 1994, BILL GATES CO-FOUNDER OF THE Microsoft Corporation famously made the provocative and still controversially discussed statement that in the future banking would remain a necessity, but banks themselves would not be needed. With every passing day, the context of that assertion seems to gain importance. While banks still exist - and it is certain they will continue to do so - recent developments have shown that new non-bank actors are just as capable of providing bank services. And that is due to the mammoth strides made in the field of information and communications technology (ICT), which are opening up whole new worlds of possibilities for designing and distributing financial services. Aside finance, ICT brought massive transformations to the way we work, rest and play. Human conduct and attitudes have been dramatically altered through the digitalization of virtually everything. Over the course of the last 23 or so years since Gates made that declaration, technology, disruptive innovation and payments have fused in a dramatic way. The resulting disruption is happening globally. Digitalization has forced virtually every industry to fundamentally revise its business model or even define new ones. Inspired by everything innovative and new: companies and industries built on a global workforce, networks and business, Gates’ foresight of what banking would be like - global, inexpensive, instantaneous and convenient - have become the world’s prevailing reality. These days, the entire banking system’s approaches to providing financial services is characterized by strong technological awareness and the intelligent utilization of the interplay of social media, mobile IT, analytics, cloud computing and blockchain. In order to stay relevant, almost all the banks in the world are being forced to innovate, to harness the digital revolution and to completely re-imagine their roles and their impact on customer experience. This paradigm shifts are the outcomes of a number of key trends like technological advances, new market participants, an eclecticregulatory environment, and demographic and behavioural changes in a new generation of consumers. In a 2014 report titled "The Future Shape of Banking - Time For Reformation of Banking and Banks?" the second largest professional services firm in the world, PWC, identified global megatrends whose impacts, intersections and collisions are re-shaping the business world. "The demographic and social change, creating new customer demands and stakeholder expectations; and technological breakthroughs changing everything from customer relationships to business models," the report said. Added to these megatrends could be psychographics, the quantitative methodology used to describe consumers based on such psychological attributes like interests, opinions, buying/spending 18
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habits, hobbies and values. While demographics explain “who” a set of consumers are, psychographics explain “why” they consume what they consume. Both, in hindsight, make it easy to discern how Gates envisioned the future more than two decades ago especially with his iteration of that belief in his 2015 Gates Annual Letter. It is apparent that demographics and psychographics played into his analysis of the persona of the consumer of the future. As he saw it then, catering to the needs of the young and the poor wasn't a major plank of many banks business agenda. Gates, in his position as a purveyor of technology products, believed that new commercial entities deliberately designed to conduce banking opportunities for these neglected consumer segments were needed especially as life in the modern world was reflected largely in financial transactions: income, bills, fees, taxes, donations and expenses to name just a few. Each transaction allows conclusions to be made about our habits, preferences, movement patterns or our personal constitution. Banks, Gates believed, were ineffective in doing this for the poor because the financial services they offer were harder and more expensive to access. “The reason poor people face these agonizing choices is not just that they don't have enough assets. They also don't have access to a bank to help them use their assets effectively,” Gates wrote in his 2015 annual letter. “Traditional banks cannot afford to serve the poor because of their costs. That's why 2.5 billion adults don't currently have a bank account. In villages where people borrow or save in tiny denominations, building and maintaining a bank branch just doesn't make sense.” But does recounting their experiences mean that there is hope for the 2.5 billion mostly poor and low-income adults who today transact in cash outside the formal financial system? To find an answer we need to delve a little into the history of banking. In the time the concept of money was formulated, saving, lending and borrowing came into existence. But the idea of banking was not a real thing then. Organized lending and borrowing happened when the prototypes for modern banks were established the moment the Bank of England issued the first permanent banknotes in 1695. By the 18th century, services offered by banks increased as clearing facilities, security investments, and overdraft protections were introduced. Cheques were invented in the 1600s in England and banks settled payments by direct courier to the issuing bank. Around 1770, bankers began meeting in a central location, and by the 1800s a dedicated space was established, known as a bankers' clearing house. Thus, what the banks do viz., receiving and holding deposits, managing withdrawals, facilitating credit, cash management, remittances, wealth management, currency exchange and safe deposit boxes came to be known as banking. Banking is
STARLINGBANK
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Unlocking the power of digital financial services The impact of telecommunications
$3.3 trillion Contribution of the mobile industry to Global GDP. The amount is likely to grow to $4.2 trillion by 2020.
At the end of 2016 there were a recorded
4.8 billion
2 billion adults do not have access to a bank account but 1.6 billion of them have a mobile phone.
unique mobile subscribers in the world. This represents 65 percent of the global population.
Fintech would bring $4.2 trillion in new deposits and $2.1 trillion in new credit to emerging economies.
$110 billion
JUSTONE DATABASE
Amount that could saved from government leakage through digital finance. what a bank does. Or banks are those who do banking. But the mega trends mentioned above have redefined banking and banks. As stated by Rama Subramaniam Gandhi, the former Deputy Governor of the Reserve Bank of India, "banking is no longer what a bank does; it is also what a non-bank does. Banks are no longer those entities who do banking exclusively; now others, the nonbanks also do banking." Gandhi assertion is that there is now a new way of managing money without physically having to go to a bank. Digitalization is enabling newcomers to mount a challenge against incumbent players in the banking space. There now exists a vast network of companies, of all shapes and sizes - who undertake the chunks of what banks used to do as a collective concern. Payment service providers, mobile money operators, crowd funding websites, deposit alternatives, and card companies are some of the specialist entities using technology to chip away chunk after chunk of banking. Is there a component of banking that remains the exclusive preserve of banks? The short answer is no. That's why Gates said what he said - “We need banking but we don’t need banks anymore. Do you think someday we can open bank account or ask for loan without physically having to come to the bank?” Technology, which constantly undergoes an unending cycle of innovation, has become the engine forcing rapid and irreversible changes to banking, consumer behaviour and regulation. Technological developments are changing the way the banks and their customers interact. The internet, mobile phones, apps and algorithms are creating opportunities for new entrants to disrupt traditional business models and penetrate new markets. They have enabled the emergence of financial technology companies or fintechs who charges lower prices to traditional banking services. They are setting up online-only banks that don't incure overhead costs for things like branches and tellers and can afford to offer higher interest rates on savings while charging lower fees. Social media companies such as Facebook, Twitter and Google have a huge customer fol20
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lowing and are entering into the financial sector, bringing new sources of competition. What is more. They are being egged on by a new generation of young people (known as millennials) who have different expectations of financial services. They prefer not to go to banking halls to carry out their transactions instead preferring to avail services through online and mobile based platforms. They use social media not just to connect among themselves, but to also communicate with their banks. Even to complain, they prefer online and social media and they do not have traditional customer loyalties. But banks have reacted to these developments in a way that has proved decisive - urging the aggressive deployment of digital sales capabilities, and employment of the skills required to deliver an experience that meets the expectations of the sort of customers mentioned above. Today, there is hardly any bank not offering internetenabled banking services. Each is trying to upsell the other on the many benefits that can accrue to account holders who download and use their apps, majority of which are available for digital account opening, transactions management and payment. Some are even progressing towards becoming digital-only banks. “Core to our digital strategy is both our understanding that the future of banking is digital, and our determination to lead that future,” said Segun Agbaje, Managing Director and CEO of Guaranty Trust Bank. “We know, because digital technologies have dissolved the boundaries between industry sectors, that our competition is no longer just banks. It now includes fintechs, telcos and tech companies that can provide speed and flexibility to customers as we can. This creates tough challenges for the banking sector, but it also creates ample opportunities to extend our footprint.” Extending that footprint for some banks has meant investing or collaborating with fintech firms, telecom operators, and other banking-adjacent services. According to a joint report from KPMG and CB Insights, banks and financial institutions helped drive up fintech startup funding.
Global funding reached $13.8 billion in 2015, while the value of fintech deals and the number of investments hit all-time highs as investors clamored to invest in budding startups. Collaboration had to happen because fintech firms and banks actually have a symbiotic relationship. While banks are still the major reservoirs of financial assets, fintech startups have shown an agility for speedily innovating mobility for those assets. An example is the Bank of Industry (BOI), which recently joined forces with Co-Creation Hub (CcHub), and venture capital firms Venture Garden Group and Omidyar Network to launch a N1 billion Social Innovation Fund to young entrepreneurs who are focusing on “next generation infrastructure.” Fintechs, firms that are adept at putting together some exceptional pieces of technology with digital payment algorithms and making them work on phones, which is cheaper and easier to access than bank branches have become the new digital bankers. They have unbundled the services offered by banks and even fused them together to be their verticals, focusing on simplifying the experience for users through easing how money is stored, managed, sent and received. Their efforts are evolving in response to the needs of the unbanked; the 2.5 billion people who do not have traditional bank accounts or access to formal banking services. They struggle with a lack of money, inability to bank account opening requirements, high banking fees and general distrust of the banking system. An additional reason why they remain unbanked is because banking infrastructure is less widespread in areas where they live. According to the World Bank’s 2014 Global Findex, countries in Asia and Africa have some of the highest rates of unbanked populations. Without steady access to a financial institution, the unbanked carry and store their savings in cash currency and rely on cash only transactions. This makes them susceptible to street crime, loan sharks and fraud. Even in some developed markets, the very low issuance of credit cards keeps segments of the population from being able make purchases. They are unable
Why it's certain digital finance will impact emerging economies
JOBS FOR THE FUTURE
$3.7 trillion
In 2015, the World Bank, IMF, public and private sector partners issued numeric commitments to achieve Universal Financial Access by 2020.
Amount it will create in growth for emerging economies by 2025, according to the McKinsey Global Institute.
95 million
Number of new jobs that will be created by digital finance adoption.
Ethiopia, India and Nigeria are some of the countries with the most potential.
to participate in online commerce or receive payments directly. The easiness of managing finance and banking digitally means these set of consumers that live outside the construct of traditional banking can be lassoed into the formal financial system. Digital finance - payments and financial services delivered via mobile phones and the Internet - could transform the lives and economic prospects of these individuals. Even at global agencies where financial decisions with far-reaching impacts are made, there is a general consensus that digital financial services are best suited to customers’ needs, if delivered responsibly, at a cost both affordable to customers and sustainable for providers. The July 2017 E-Government Summit had a special session on Digital Finance, moderated by Dipo Fatokun, Director, Banking and Payments System Department at Central Bank of Nigeria, where panelists highlighted the ability of digital financial services to turbocharge financial inclusion. The Banking Association of South Africa defined financial inclusion as a development that would improve the “range, quality and availability of financial services and products focusing on the unserved, under-served and financially excluded. Principles of financial inclusion include: access, affordability, appropriateness, usage, quality, consumer financial education, innovation and diversification, and simplicity.” India provides an interesting glimpse of what might happen when digital finance is designed for impact. A combination of digital identity, a mass campaign to open bank accounts to give the poor access to a range of financial services, and an ambitious programme to directly transfer not just salaries and pensions, but also social security payments, has resulted in the emergence of real financial inclusion in the country. Three years ago, India made a commitment to expanding financial access to its poorest people through the Pradhan Mantri Jan Dhan Yojana (PMJDY) - the world’s largest financial inclusion scheme. The PMJDY has seen tremendous success in reaching those who have lived on the fringes of
A digital pathway to digital finance
But as computers become smarter, jobs whose basis is in transactions will be disrupted by machines -- and it will happen fast.
the formal economy for decades. The number of such bank accounts in India more than doubled, from just over 120 million in January 2015 to 300 in July 2017. Even more encouraging is the decline in the number of zero balance accounts – bank accounts that have no money or transactions through them – from about 77 percent in September 2014, in the initial days of the PMJDY, to just over 20 percent in July this year. Alongside India’s ambitious biometric unique identification system, Aadhaar, and the deep penetration of mobile phones and networks, PMJDY, represents a pioneering effort to ensure financial inclusion. In Nigeria, a combination of regulation (in the form of the Bank Verification Number), the adoption of machine-learning technology by an assortment of innovative startups and the mining of smart data is making the country one of the most promising marketplaces for retail financial services. A few examples of the fintech startups that are impressing consumers with their products include Alat (an app-based bank that boasts account opening “in just a few minutes, with no need for branches or paperwork"), Paga (Nigeria's fastest growing mobile payments service) and Paylater (a company that provides smart loans to consumers in a speedy manner). Alat is Nigeria’s first wholly digital bank launched recently into the financial services marketplace to offer a do-it-yourself experience through a user-friendly app that allows the conduct of complete banking transaction – from account opening to controlling debit cards use – on a smartphone without the user ever setting foot in a bank branch. “Alat is the only app where you can setup your account, upload your documents, and perfect your account without any contact with a bank staff,” said Dele Adeyinka, Chief Digital Officer of Alat. “You can control what channel (ATM, PoS or Web) and location (country) where your card can be used.” The service involves a simple, stress-free onboarding process. Account opening is tied to a customer’s BVN, which he inputs into the app after download alongside a date of birth for validation using a one-time password that is sent to
the mobile number and email address attached to the BVN. All his details captured during BVN registration are displayed and once they are confirmed, a bank account is created. Customers can deposit money into this account using the various payment gateway options or at Wema bank branches. Paga, launched in April 2009 as a direct consumer mobile payments service, has a mission to deliver universal access to financial services across Africa. The platform turns any mobile device into an electronic wallet. Its customers are able to send cash, purchase airtime credit, pay bills and and more. Using simple aggregation of service providers, this platform can provide for transactional sets like subsidy distribution, donations, and micro payments. Paylater is a unique story. It is a peer-to-peer lending platform that uses the internet to cut out the banks entirely. It offers both consumer and SME loans over fixed periods of 15 days to six months without the need for a collateral. Paylater’s uniqueness is made more prominent by the well-known national fact that it’s hard to get a loan in Nigeria even from family or friends. The way it operates differs in many ways from banks and other lenders. To start, borrowers do not pay fees or deposit a percentage of the required loan amount. The company makes its money solely on interest from repaid loans. If a loan defaults, Paylater uses a combination of phone calls and SMS messages to try to recover the funds. If that fails, it sends in a collection agency. Loan selections are also diverse. The app-based service uses unique algorithm to score loan recipients through their BVNs and if it determines that you are eligible for a loan, your account will be credited instantly. Paying back loans works exactly like receiving loans. On the due date, Paylater automatically debits your account by the amount you owe. The firm targets everyone with a bank account regardless of their earning power. It offers loans between N10,000 to N1,000,000. Interest rates range from 4% to 26%, depending on grade. The accomplishments of these fintech firms show that more promising signs are beginning E-PAYMENT REVIEW September 2017
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to emerge in the Nigerian financial markets and this is good for the country's development. According to the World Bank, digital solutions and new technologies offer great potential to overcome massive development challenges and will help the international financial institution to achieve the goal of universal access to financial services by 2020. “The benefits of digital finance extend well beyond conventional financial services: This can also be a powerful tool and an engine for job creation in developing countries,” said Jin-Yong Cai, International Finance Corporation executive vice president and CEO. His point is that delivering financial services through technological innovations is a catalyst for the provision and use of a diverse set of other financial services – including credit, insurance, savings, and financial education. Those who are now excluded can enjoy expanded access to money-transfer services, microloans, and insurance. “With digital finance, as many as 1.6 billion unbanked people – more than half of whom are women – could gain access to financial services, shifting about $4.2 trillion in cash and savings currently held in informal vehicles into the formal financial systems,” wrote Laura Tyson, a former chair of the US President's Council of Economic Advisers, and a professor at the Haas School of Business at the University of California, Berkeley. “This would allow for an additional $2.1 trillion to be extended as credit to individuals and small businesses. Businesses could also save on labour costs, to the tune of 25 billion hours annually, by swapping cash transactions for digital payments. And governments could take in an additional $110 billion every year – to invest in growth-enhancing public goods like education – because digital channels make tax collection cheaper and more reliable.” These benefits are already an everyday reality for people in places like Brazil, China, Ethiopia, India, Kenya, Mexico, Nigeria, Pakistan, Rwanda and Tanzania. A report published by the McKinsey Global Institute last year, found that widespread adoption and use of digital finance could increase the GDPs of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025. This is the equivalent of adding to the world an economy the size of Germany, or one that’s larger than all the economies of Africa. This additional GDP could create up to 95 million new jobs across all sectors of the economy. “Lower-income countries such as Ethiopia, India, and Nigeria have the largest potential, with the opportunity to add 10 to 12 percent to their GDP, given low levels of financial inclusion and digital payments today,” the report said. Financial service providers have a big opportunity as well. They could cut costs by up to $400 billion annually by 22
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“THE BENEFITS OF DIGITAL FINANCE EXTEND WELL BEYOND CONVENTIONAL FINANCIAL SERVICES: THIS CAN ALSO BE A POWERFUL TOOL AND AN ENGINE FOR JOB CREATION IN DEVELOPING COUNTRIES.” JIN-YONG CAI, EXECUTIVE VICE PRESIDENT AND CEO, INTERNATIONAL FINANCE CORPORATION.
evolving from bricks and mortar to digital strategies. And because they can expand their customer base at relatively low cost, they could collect more than $4 trillion in new deposits - money that can be converted into loans. Savings that are currently stored under mattresses can be put to work, adding more activity and liquidity to the economy. Fatokun’s panel agreed that digital payments and financial services were key ingredients of a modern economy, enabling individuals, businesses, and governments to transact cheaply and efficiently. The opportunity to accelerate inclusive growth could be addressed rapidly and without the need for major investment in costly additional infrastructure. Mobile phones are the game changer that make this all possible. Governments benefit, too. Digital payments could improve their finances by reducing opportunities for corruption, targeting spending more precisely, and improving tax collection. However, digital finance faces a variety of challenges, on both the supply-side and demand-side. There are several building blocks that need to be in place for digital finance to take off. One is the right infrastructure, which includes smartphone ownership and network coverage at an affordable price; a digital payments system that does not necessarily require owning a bank account; and an identification system that is not linked to the BVN. What is also needed is the right business environment where a range of providers can compete on a level playing field and innovative new digital finance products and services. This requires regulations that strike a balance between prudence to avoid undue risk and innovation. Despite their technological advantage, innovation should stoke competition within the financial system and raise the contestability of financial markets. Foreign giants like Alipay, Apple Pay, and Samsung Pay are going up against local incumbents and are showing they have ambitions far beyond their own home countries. Another challenge is that digital finance is generally designed to help consumers manage their financial affairs in a way that leads them to a more secure financial position. But some fintech products have proven to be of less or no benefit to consumers with little or no earning power. Financial and digital literacy also remains an area of concern, especially in rural areas. Although the digital revolution has brought benefits to millions of people the basic understanding of various financial services is limited across segments of the population. Despite the downsides, there is global optimism that innovations in fintech can make people to live more secure, empowered and included lives and that digital finance will be the only way to achieve universal access to finance.
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INTERVIEW
FINTECH IN AFRICA IS A CONTINUOUS STORY CEO of Global Accelerex Tunde Ogungbade on how he excels in the way in which he does business, the challenges of Africa fintech and the benefits that await merchants and consumers
BY BROWN N. UGBAJA
YOUR PROFILE SAYS THAT YOU CONSULTED FOR VARIous global companies and worked in areas that included banking and financial services. Can you walk us through your journey to how you started your venture. What sparked your interest in fintech? I started my career as an entrepreneur and then moved into management consulting, which I did for over a decade. It gave me a well-grounded exposure to various businesses. I left that and came into payment because, at that point in time, I was excited about the opportunity of going cashless in Nigeria. That was at the end of the beginning of the second decade of the millennium. There was that desire to promote a cashless agenda in Nigeria and that formed into what we now all call fintech. Back then, it was really about automating and improving retail payment processes for consumers. While working in the utilities, one of the things I was tasked with was how to collect utility bill payments using automated cashless processes to connect to the people who used our services. I found out working on the project that payment was a profitable problem to solve if you know how to do it well. I also worked as a management consultant with the US Department of Treasury and its apex depositor, the Federal Reserve, which is like our own Central Bank on the development of the largest cash management system at the time. The experience gave me exposure to banking and financial services. The system we developed has some similarities in function to what Remita does for the federal government in Nigeria. How did all these experiences help in the design of Global Accelerex and the services you provide? In management consulting, you focus on three things: business process improvement, strategic change and the application of technology solutions to achieve both. That helped in how I approached the problem in Nigeria. We came in first to augment the financial services offered by banks by helping them address
We don’t know everything but we know the people who do – the consumers and the merchants. They are the ones that struggle with the experience of network failure or any other issues in the field and we are always listen to make sure that we innovate our products and services to meet their needs. 24
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the merchant acquiring gap. What we do is primarily merchant acquiring services for POS solution development and implementation as well as solution deployment operation and management services. People used to go to the ATM to withdraw cash, take it to the merchant to make payment for goods or services and the merchant then turned around to take that same money back to a bank to deposit. We learned that cash management would cost the industry an estimated N240 billion annually by 2014 if nothing changed. At Global Accelerex we thought of how to partner the banks and the industry to solve this problem. We designed our business model to partner with merchant acquiring banks that specialize in card acceptance or any type of payment acceptance at retail merchants. In delivering the value that we provided to banks, we discovered it was not cost-effective for banks to continue to build branches. We needed to be there to enable banks to make cashless payment happen and promote remote banking through the POS channel. We have been successful in providing our products and services to tens of thousands of merchants across Nigeria enabling them to accept retail payments from consumers in a seamless and frictionless way. We continue to solve the problem for the merchant with goods or services to sell and consumers who want it but do not want to have to queue at an ATM or go to a bank that may be closed on a weekend to withdraw cash. The card has become the common denominator to make that happen at retail. Consumers don’t need to have a special phone or know how to do a special mobile key entry, they just dip and enter their pin exactly what they have been doing at the ATM more than a decade and they carry out their transactions. We take over originating the financial transaction through the payment systems in Nigeria so that the merchant can be happy when the money gets to his account. We designed our solutions to make it seamless for mass market usage anywhere in Nigeria. We simply take that same thing a consumer does at an ATM and move it to the merchant location and make it affordable for them to do so. What makes Global Accelerex different from other fintech companies? What is your competitive advantage compared to other companies in the field? We are a licensed PTSP focused on mass market delivery of service to where it matters most – consumers and merchants. What differentiates us from other service providers is our customer service. We are very responsive to our merchants and our banks. The second thing is innovation. We don’t know everything but we know the people who do – the consumers and the merchants. They are the ones that struggle with the experience of network failure or any other issues in the field and we always listen to make sure that we tailor our products and services to the needs of our customers. We are able to quickly come up with bespoke solutions to meet various needs. How do we know what customers need? From our partner banks. For instance, they can tell us about customers who want to be able to generate reports on the backend to reconcile all their PoS transactions for the day. That way they don’t just see one amount in their account the following day and start wondering which transaction is which? Some others want a barcode printed on the receipts in other to help them with reconciliation so that the person doing the accounting can just scan the receipts instead of entering the figures manually. The third one is making sure that we are very responsive in our sales and marketing. We have a partnership with a publicly traded company in China and we have heavily invested in establishing its brand locally in Nigeria. The Global Accelerex NEXGO PoS terminals and our Accelerex PoS app are specifically designed to deliver a brand message to the customer so that when they go to the bank for merchant acquiring, they can request for our products bearing by our brand name. The fourth thing is that we are focused on building a competent and knowledgeable workforce. We invest and train our in-house and field staff. The mix of staff, brand, innovation and customer experience is what really differentiates us. So far, what are your impressions concerning fintech in Africa?
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LIFE.GUARDIAN.NG
Fintech in Africa is a continuous story and it has been very remarkable. With innovation and lower entry cost, it is easier to introduce technology when you don’t have to replace legacy infrastructure. The good news about Africa is that up until about the year 2000, we didn’t have a lot of infrastructure or assets for retail financial technology adoption new technology as such coming up with innovative financial technology solutions was easier than for established markets. This made it attractive for Fintech because we now must think about innovative ways of delivering financial services despite inadequate or nonexistent infrastructure, the high cost and risk of using cash on the side of both the consumer and merchant. In Nigeria, the challenge of deploying ATMs in riverine areas or the high cost of building more brick and mortar branches are a few of the challenges driving fintech to innovate ways for financial inclusion and lowcost digital services delivery. It makes you think of how to turn a PoS terminal into a branch where people can check their account balance, cash in and cash out and do other types of basic banking services. Fintech has been providing financial services everywhere and in a way that makes them affordable for consumers. People outside Africa are now looking at all the innovation happening in Africa and thinking of how they can take some of the lessons we have learned and replicate them in their own environment. A lot of people always say fintech will disrupt banks, I don’t believe in that. Fintech has stepped in to work in partnership with banks to help reach new markets and create new opportunities. What new opportunities do you see for fintech startups on the continent, and how can they be accelerated? Accelerating requires a lot of rethinking of various problems and business models. It is not always about the technology. The right technology may solve a problem but it may solve it in a wrong way or may prohibit a solution. I will give you an example. Some products being launched for fintech with all the great marketing behind them are not being adopted by the market or consumers. One of the reasons why payments cards are still here is because they are practical, which means that utility is important. The opportunity or problems that are addressed in fintech must be addressed for utility. If you build exotic stuff and expect people to buy expensive phones that have NFC 26
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capability before they can use them then you’ve created a problem and not a solution. How many people can afford a N300,000 phone? If you say I have to go to the web before making payments, how many people have access to the web? So when you talk of accelerating adoption, it has to be about utility. When you bring out cash, you are not thinking about the cash but what you want to buy. That is how it must be in anything that we offer for fintech. Fintech platforms tackle specific services or improve them in partnership with banks and
this has been the case with payments, lending, and remittance. Which financial services do you think will be targeted next? It may not necessarily be services but innovation around processes. For example, with payment, there was no innovation around money or the nature of money. The innovation was in the channel, which included how to solve the problem of change and how to make the velocity of payment faster for the consumer and the merchant. Automating business processes should be an area of interest for fintech. Delivering new services
should be another. When NIP launched, it was disruptive in the sense that it eliminated the need for cheques. As NIP started to get adopted, cheque usage began to decline. As we look at the different services, some will be about improving them or reducing cost, or eliminating paper or introducing new products. We have not done anything about insurance-technology. A lot of ideas are flowing around every day. Personally, I think the biggest ideas will be the ones that target the mass market. How do you address the distribution and collection of revenue by government? Government is the highest spender in any economy. Introducing new processes for complementing insurance with technology is another idea. There is a belief that the adoption of new fintech services is being held up by the multiplicity of firms offering almost similar services. Do you agree with this? And what can be done to make fintech more robust in the longterm? I disagree. How many fintech companies are in Nigeria? I can’t count up to fifty. How many are in a comparable economy like Brazil? I’m talking about a third world country with comparable economy GDPwise and similar national revenue sources. We both produce oil and have similar national issues. We need more fintechs solving different problems. I think what will happen is that sooner or later there will be more fintech services but each will have a specialization. There will be fintechs that focus on agriculture or hotels or looking at the problems in those sectors and trying to bring specialty products and solutions to them. You have to understand the problem before complementing it with fintech. I believe the more fintechs that can come to solve more problems, the merrier. If we have more banks are in the country, will it stifle deposits? I doubt it. The problem is understanding the needs of the mass market, segmenting those needs, and then tailoring solutions and services to them. But adoption rate is not changing as fast as we would all wish it to. How can we get the numbers up? The numbers are going up. Take the mass market for merchants using PoS terminals, year-on-year, it has seen double-digit growth and it continues to grow. Between 2011-2012, the value of the entire card transaction in Nigeria monthly was
about N17billion. Today, I know some major fintech companies that are doing that amount in one month and they don’t handle the entire card transactions in Nigeria. The entire card transaction value is about N120-130 billion monthly according to NIBSS and I don’t believe we have hit the end of the growth curve yet. Our PoS density per capita comparable to an economy like Brazil is still low. For every 100,000 people, Brazil probably has about 1400 PoS terminals. When you think about that, you will see that we don’t have enough endpoints for payments. So how many more PoS terminals do we still need to properly enhance transactions? How many more would be specialized models or require specialized applications? Can PoS terminals become bank branches in every local government? We can build new digital financial service on the PoS terminals so that you don’t just go there to top up airtime but to buy insurance or send an airline ticket to someone. The POS can then become a sweet spot because we will have agents in villages who can become the bank in that place. When the government wants to pay social allowances to citizens it can use these channels because they are like mini banks with reach and presence. The agents can identify people and even enroll BVN for financial inclusion. Some people have said policies are not enabling fintechs but I disagree. The Central Bank of Nigeria must be commended for its efforts in laying the foundation that made fintech possible for the Nigerian banking and payment ecosystems. Of course, what E-PPAN is doing in the industry as well, where ideas are engendered to continue to drive innovation should be commended. That is what we need to continue to focus on and not saying too many fintechs are the problem because I am certain we can use more. To what extent do you think fintech is hindered by regulation, and what needs to be done to allow innovation to flourish? In terms of adoption, I don’t think policies are hindering us in Nigeria. I think policies are going to be an evolving agenda for fintech, just like they are in any other industry. We need to understand the evolving needs of the market, understand the changing business environment, both locally and globally, and adjust or improve our policies in a manner tailored to the best interest of Nigeria. The CBN has really helped with policy and regulation in shaping our story today. What Global Accelerex has been able to achieve is partly based on the establishment of a policy to license payment providers to compliment what the banks were doing in merchant acquiring and to help expand the retail cashless footprint. Hence our work with PoS terminals and building of solutions to originate retail transactions on the PoS device. The outcome is that it is reducing cash in transit, increasing retail commerce and helping merchants with revenue cycle management. Take a look at the stories of companies like Interswitch, Unified Payments, eTranzact etc. They were enabled because of the policy to license transaction processing companies to aid banks with issuing and merchant acquirer processing, thereby driving electronic payments irrespective of channel. Policies have enabled mobile money operator licenses to be issued. Policies are never going to be perfect, they are on-going never-ending work that must be done for the welfare of Nigerians. The CBN continues to review
existing policies and guidelines to identify areas that require updates or improvement. CBN also solicits the industry through E-PPAN or other channels to see if new changes are needed and how proposed changes may impact or inhibit the present state of affairs. We in the industry need to engage more with policymakers; having a forum like E-PPAN is one great avenue for engagement among others. The industry needs to start visualizing what payment would look like five years from now and identify what we need to be doing policy-wise to prepare for that future. I disagree with the assertions that policy inhibits innovation or the acceleration of adoption. The industry has to find the right business models that will solve real problems and if a model is not working quickly pivot to practical consumer needs that the market is willing to pay for. If I decide to build a bus with gold seats to convey people from Lagos to Ibadan at N3,400 per trip when there is a Danfo that will take them for N350, which one do you think people will choose? People don’t want gold seats, they just want a journey and will do it for the right price. Each player should factor in what I call WTP, the ‘willingness to pay’ because that is what determines utility. If you have two hundred buses with gold seats and there is no willingness
PROBLEMS MUST BE ADDRESSED FOR UTILITY. IF YOU BUILD EXOTIC STUFFS AND PEOPLE HAVE TO BUY EXPENSIVE PHONES THAT CAN DO NFC BEFORE THEY CAN USE THEM THEN YOU’VE CREATED A PROBLEM AND NOT A SOLUTION. to pay, nobody will patronize your business. How has your leadership style evolved? Because a lot of my career was in different continents, I have a blended leadership style. I believe that if you are a leader and you don’t have people following you, you are going on a walk. You should be able to mentor people and give them a reason to believe. Everyone wants to connect to a purpose and reason and if you can help them understand where you are going and why it’s a worthy cause or journey, maybe they will enlist and come onboard. I won’t say I’m an authoritarian leader though some will say that style of leadership is required; I feel a responsibility to mentor people, help them discover their potential and find their place in life by connecting the right vision with what they do so that no matter how long they are there with me, they will always remember humbling privilege I had to be used by God to chart a course for their life, career or personal aspiration. I’m more of a leader that makes leaders, I impact people and get people to challenge themselves to believe they can achieve more than they have ever desired or dreamed of. How do you stay abreast of all the emerging trends in the payment space - the evolving needs of young people, blockchain, and all the
other paradigm shifts in payment especially as consumers alter their behaviour to embrace mobile banking as their primary channel? Our industry is always changing and one thing I do is to engage with other thought leaders. I am part of a network of people in Nigeria that share ideas on WhatsApp. Though there is a lot of information disseminated, I try to read what everybody shares. I also go to payment conferences to know what is happening in other industries or regions of the world. I go to other countries or continents to find out what they are doing and how I can network and collaborate with companies with similar interests. I’m an avid reader, so I read a lot and challenge myself to stay on top of what is going on because of where I seat. I have to talk to legal, finance, operations, technology, sales and other departments, so I seek to understand them. Fortunately, we live in the 21st century that has democratized knowledge which is a good thing but the other side of it is that it has also democratized entertainment. I tell people you have 24 hours a day, you can either use it wisely or choose to entertain yourself to death. I also have mentors from whom I learn how they are thinking about life and the world. I also learn by just spending time with my staffs. I ask them what is going on because there are so many things that they know that I don’t know. You mentioned E-PPAN a few times in your answers earlier. Are there other areas you feel the association should turn attention to? One of the primary reasons E-PPAN was set up was to highlight the needs of participants within the payment ecosystem by organizing conferences, fostering knowledge among members, and of course, advocating for the interest of payment service providers with regulators and policymakers. Trying to meet the needs of members in an impartial way that moves electronic payment industry forward in Nigeria should be the primary objective of E-PPAN. I like how we get the newsletters from E-PPAN that is keeping members and the industry appraised of what is happening in the payments industry globally. Another thing E-PPAN can help with is discounted group access to payment research and development for members from major research and advisory companies specializing in payment. Finally, let’s fast forward five or ten years and imagine that Global Accelerex has increased its revenue by a billion dollars. Where would that revenue come from? What kind of clients? What kind of services? Where do you see the money in all of this? Global Accelerex will continue to grow. As stated on our website, our focus is to take our learnings from Nigeria to West Africa and beyond. That is an ambitious objective but we believe in it and know it is possible and that’s perhaps one way we can get to your suggested target revenue. Nigeria is the largest market in Africa and the lessons we have learned here so far can be taken to other smaller markets. If we continue to impact on the lifestyle of consumers and merchants, we can be rewarded with a continuous revenue stream at a cost structure suitable and acceptable to the market. At Global Accelerex, we will continue to seek new ways to expand our business to other areas that are complementary to payment and digital financial services. E-PAYMENT REVIEW September 2017
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NeFF Insight
Practical advice for the mitigation of payments risk by the Nigeria Electronic Fraud Forum.
L-R: Mohammed Suleiman, Director of FSS 2020, Adebayo Adelabu, CBN Deputy Governor, Operations, and Dipo Fatokun, Chairman of NeFF, at the the NEFF stakeholders’ workshop on cybercrime.
Deputy Director and Head of Share Services, Governor's Department, CBN, Chidi Umeano at the the NEFF stakeholders’ workshop on cybercrime.
Panel discussion at the the NEFF stakeholders’ workshop which was held to address some of the impediments to the enforcement of the cybercrime act.
Babatunde ChukwumaAjiboye Secretary of the Nigeria Electronic Fraud Forum (NeFF) at the NEFF stakeholders’ workshop on cybercrime.
The constant of change The payment landscape is littered with potential landmines that can cause major damage if the industry doesn't move intentionally and carefully
NEFF
BY BABATUNDE CHUKWUMA AJIBOYE LIKE EVERY SYSTEM KNOWN TO man, the payment system in Nigeria has evolved over the years from basic methods of exchange which barter represents, to a reliance on technology in creating one of the best and most secure payment platforms known to the world today. The retail payments system in Nigeria can thus be defined along the following channels which help in facilitating. One, purchase of goods and services: One-time payment for goods or services using a variety of payment instruments, 28
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including cash, cheques, debit cards, credit cards or prepaid cards. Two, payments for previously acquired or contracted goods and services for which payment can either be recurring or non-recurring. Examples include utility, telephone, mortgage/ rent and medical bill payments. This is P2P Payments, which involves the transfer of value from one consumer to another. Nigeria has seen an upward increase in the use of electronic person-to-person payment systems. The fourth is cash withdrawals and advances or
the use of retail payment instruments to obtain cash from bank branches and Automated Teller Machines (ATMs). Consumer withdrawals from their bank accounts using the Personal Identification Number (PIN) based payment cards to withdraw cash at an ATM. The growth in the use and adoption of the above channels are evidenced by the table on the nest page, which shows how since 2012, the payments system in Nigeria has deepened. The impact of security in these retail payments which now
leverages on technology, has great consequences on public confidence and acceptance of payment instruments. It therefore was no surprise that, as one of the strategic pillars in securing the Nigerian retail payments system, the Nigeria electronic Fraud Forum (NeFF) was created in December, 2011. NeFF was set up with the objectives of educating and informing all banks and other stakeholders on various electronic fraud issues and trends (both locally and globally; facilitating the proactive sharing
of fraud data/information amongst banks and service providers, to enable prompt responses to prevent and/or limit fraud losses and; formulating cohesive and effective fraud and risk management strategies, and defining key requirements in relation to e-payment security on behalf of the industry. The NeFF has of course used its platform to advance fraud mitigating policies like the Two factor authentication for internal banking processes, Regulation of card present fraud in Non-EMV environment and the Creation of fraud desks for effective e-fraud control. However, these measures need to be supported still with additional information security compliance that will tackle the threats that emerge as a result of the ever increasing changes in our payments system. Securing the payment system in Nigeria has equally evolved from basic signature verification to complex security algorithms. However, the payments industry cannot possibly wave a magic wand to instantly solve all the security challenges we face. The answer would seemingly lie with a detailed analysis of all systems, processes and practices in place. The question basically is how these new systems will deal with the issues of information security, money laundering and terrorist financing. The belief is that information security will continue to be an area of increasing concern to consumers, merchants, financial institutions and regulators in the coming years. Mark Fajfar et al, in their remarks prepared for The International Monetary Fund (IMF) Institute Seminar on Current Developments in Monetary and Financial Law, defined the basic levels of information security threats to include individuals breaking into an electronic system in order to initiate unauthorized transactions on another individuals legitimate account, thereby stealing money. It also means that an individual could steal customers' personal data, enabling the wrongdoer to set up illegitimate credit card accounts, bank accounts and other accounts this is called identity theft. A further definition is that an individual could attack or corrupt the data in the electronic system, either as a form of vandalism or to extort money from the sponsoring financial institutions. And that an individual could take advantage of the convenience and speed of the electronic system to mask illegitimate or illegal transactions - i.e., money laundering. That an individual will take advantage of the
efficiency of the electronic system to facilitate funding of illegal activities, particularly terrorism. Here the author cannot but agree with Fajfar and co on the information security compliance steps to be taken in order to ensure that security of our payment system always remains resilient against imminent modern-day threats. These steps include making security efforts riskbased, meaning that the company or financial institution must evaluate the threats to its information assets and concentrate on counteracting those that involve the highest risk. Security efforts must also be continuous. Compliance measures must be periodically tested, reevaluated and modified to maintain their effectiveness. For example, errors may arise when a company or institution hires new employees, opens a new branch or enters a new business without updating its security controls to account for the new activities. Similarly, when employees leave, branches close or businesses wind-up, the information systems devoted to those past
tion system tasks are subcontracted (or “outsourced”) to third party service providers which are able to perform these services more efficiently. However, the responsibility for information security cannot also be subcontracted. On the contrary, these arrangements require close attention to the subcontractor's performance. In particular, the subcontractor should be subjected to a written obligation that it would meet all of the information security compliance standards of the hiring company or financial institution Another issue of thought is the security of mobile payments. Mobile has become a major channel of expression, particularly in the 21st century. Due to its ubiquitous nature, the mobile phone has pervaded our everyday lives, increasing dependability and reliance. Today, very few (if any at all), can do without this piece of technology as a channel for payments.
fraud mechanisms. In addition, they should consider the assessment of the relevant risks to be encountered in the introduction of new ways of effecting mobile payments. Considering the growing trend of adoption of mobile payments in Nigeria and more importantly the role of customer awareness, education and communication, I believe the aforementioned recommendations should be adopted. The provision of a secure channel for ongoing communication (including reporting of suspected fraudulent transactions, suspicious payment incidents and anomalies in the course of payment transactions) and response has become imperative. This secure channel can be created jointly by the payment industry and utilized as a shared service for optimal cost utilization and effective customer engagement. Alerts on significant emerging risks should also be provided by this se-
The European Central Bank in its draft document for public consultation (November, 2013) made some recommendations for the security of mobile payments which were based on five guiding principles. Firstly, Mobile Payment Solution Providers (MPSP) should identify, assess and mitigate the specific risks associated with providing mobile payment services. They should give due consideration to, and factor in, risks resulting from reliance on third parties, such as Mobile Network Operators (MNOs), Trusted Service Managers (TSMs) as well as Secure Element and other component manufacturers. Actors involved in the provision of the mobile payment service (e.g. MNOs, TSMs) should define relevant procedures for collaborating on incident monitoring, handling and followup, including security-related customer complaint management. They should also consider the mobile device as inherently vulnerable to security issues in view of the speed of technological advances, the evolution of security threats and
cure channel for example, warnings about attempts by potential fraudsters to extract customers' personal financial information. It is important that customers of e-payment channels are made to understand that at a minimum, they need to protect their passwords, PIN codes, personal details and other confidential data. Customers also need to be constantly informed about updates to security procedures regarding payment channels. Security in payments will be a never ending challenge in either Nigeria or the rest of the world. Conversations around this therefore, must continue to be encouraged. NeFF as a platform for this engagement has always been available; the Payments Industry is encouraged to continue in its support of the Forum so as to continue to benefit from the results thereof.
The payments industry cannot wave a magic wand to instantly solve all the security challenges we face. The answer seemingly lie with a detailed analysis of all systems, processes and practices [currently] in place.
activities must be properly cleansed. Thirdly, security efforts must cover the entire organization. Specific practices and the compliance culture must be overseen by the Board of Directors and extended to the lowest level of employee with operational responsibility. In particular, the compliance program must take into account that “human error” (whether negligence or willful misconduct) is the greatest threat to information assets. There must be rigorous training of employees. Furthermore, information systems must permit later auditing in order to detect efforts to alter or compromise information. Just as the “black box” is crucial to the investigation of a plane accident, there must be some means of reviewing how the information systems have actually been used, and what they have been used for. If not, the organization will be unable to determine whether information security breaches have occurred, let alone determine how to prevent them. Besides, third-party service providers must be held to the high standards. Many informa-
Ajiboye is a manager on the Shared Services Office in the Central Bank of Nigeria and Secretary of NeFF. Culled from 2016 NeFF annual report. E-PAYMENT REVIEW September 2017
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The Risk Report TRANSACTION
Gaps found in merchants compliance with PCI DSS
NETWORK SECURITY
WHAT DOES A DATA LEAK SMELL LIKE? YOUR SENSES DO A GREAT JOB OF PROTECTING YOU from physical danger, imagine if they could keep you out of harms way online? That is what Leanne Wijnsma and Froukje Tan, the Dutch team behind the Smell of Data, is trying to achieve with their little device. “The Smell of Data is a new scent developed as an alert mechanism for a more instinctive data,” explains a video on the project’s official website. “Smell data? Beware of data leaks. They can lead to privacy violation, behaviour control, and identity theft.” To make people aware of their data leaking on the internet, the team built what is basically an air-defreshener. It’s a hexagonal resin block with a perfume reservoir inside. It connects over Wi-Fi to your computer, and when it notices a possible data leak (like the user connecting to an unsecured Wi-Fi network, or browsing a webpage over an unsecure connection) — puff! It releases the smell of data.
MALWARE CAMPAIGN
How lone Nigerian hacking operation infiltrated networks of international firms A NEWLY UNCOVERED INTERNATIONAL HACKING campaign that targeted more than 4,000 organisations in the oil and gas, mining, construction, and transportation sectors has been found to be the work of a 20-year-old Nigerian who uses the 50 Cent saying “Get Rich or Die Tryin'” as his social media motto. The lone attacker successfully penetrated the networks of at least 14 organisations, including a marine and energy business in Croatia, a transportation firm in Abu Dhabi, a mining outfit in Egypt, a construction company in Dubai, an oil and gas group in Kuwait, and a construction organisation in Germany. Using a remote access Trojan and a keylogger, the attacker stole login credentials and financial information from these companies. The companies' financial staff were targeted via phishing emails that claim to be from oil and gas giant Saudi Aramco. This initially led researchers to believe the campaign was the work of a well-organised group. But researchers at Check Point found this wasn't the case. "Because of the technical analysis of the malware and the C&C communications, we realised it was a criminal, not a
nation state conducting espionage," Maya Horowitz, head of research for Check Point, told ZDNet. Victims end up infected with Netwire, a remote access Trojan that allowed the attacker to gain full control of infected machines, and Hawkeye, a commercially available form of keylogging software. Both forms of malware enabled the attacker to steal banking credentials, and swipe thousands of dollars from accounts. While he managed to infiltrate a number of large organizations, the perpetrator is far from a cybercriminal mastermind. Indeed, he has not even made much of an effort to cover his tracks and has even discussed his actions on Facebook. "He's not very techie, but he's on a Facebook group of several Nigerian hackers where they exchange tactics and techniques," said Horowitz. Attacks using phishing to infect machines with malware are gaining in popularity, she added, and are replacing the infamous 419 scams of old. Check Point has shared its findings with Nigerian police and international agencies in order to stop future attacks and arrest the culprit.
Fraud by Numbers
LEANNE WIJNSMA
$71.42 $9.36 €1.8 90.2% billion billion billion Amount that retailers stand to lose $71 billion globally from fraudulent Card-NotPresent transactions over the next five years, Juniper market study has found. 30
Worldwide spending on tools to detect and prevent online payment fraud will rise to $9.3 billion by 2022, according to a study from Juniper Research.
E-PAYMENT REVIEW September 2017
Total card fraud losses by 19 European countries in 2016, according to analytic software firm, FICO. With losses of £618 million, the UK saw the biggest losses.
Penetration of card-present transactions made with EMV chip card in Africa and Middle East in 2016, according to standards body EMVCo. By June, the total number of global EMV cards was 6.1 billion.
THE 2017 VERIZON Payment Security Report shows how organizations' failure to comply with the Payment Card Industry Data Security Standard impacts their ability to defend against cyberattacks. Of all payment card data breaches Verizon investigated, no organization was fully compliant at the time of breach. There was lower compliance with 10 out of the 12 PCI DSS key requirements. However, PCI compliance has grown among global businesses, with 55.4 percent of those Verizon assessed passing their interim assessment in 2016. This means that nearly half of businesses that accept card payments are still failing to maintain compliance from year to year. HACKING BOOM
Global endpoint security market to skyrocket THE STREAM OF BAD information security news, from data breaches to ransomware to state-funded hacks, is fueling a virtual gold rush for companies developing security software. A new report from research firm Forrester expects the endpoint security market - which focuses on defending individual computers and mobile devices from cyberattacks to hit $4.7 billion this year. It's expected to grow to $5.9 billion by 2021, a compound annual growth rate of 4.5 percent. The report covers subcategories of endpoint protection software, including application integrity protection; application control, or whitelisting; endpoint visibility and detection and response; and application execution isolation.
THREAT LEVEL ALMOST 500 A DAY // Identity theft has reached "epidemic levels" in the UK, as crooks use people's details to get loans or buy stuff online. Fraud prevention service Cifas revealed 89,000 identity frauds have been recorded in 2017 so far -- a record rise of 5 percent over last year. Cases of fraudsters targeting bank accounts or plastic cards have fallen, but scammers are now better at finding people's details online and using that information to spend their money without their knowledge. TROJAN CREATION KIT // Chinese malware developers have created a specialized Android application that allows anyone to generate a fully-working Android ransomware just by filling in a form and pushing a few buttons. This app discovered by Symantec's resident Android security expert Dinesh Venkatesan does not require any coding, and works using a simple GUI. The app generates a fully-weaponized Android APK file infected with the user's custom ransomware. The user is then responsible for finding a way to infect his victims. HITTING BACKDOOR // Hackers broke into the servers of NetSarang - a South Korean software maker - and hid a backdoor in its software packages. NetSarang is one of the premiere software suppliers for a number of large organizations. Though it doesn't list customer names on its website, its remote management software is installed on the networks of companies in all industry sectors such as banking, finances, insurance, energy, media, IT, , transportation, telecommunications, manufacturing, retail, logistics, and others. PHISHING UBER // Kaspersky researchers have found an Android trojan that collects payment card data from taxi & ride-hailing apps. This creates a worrisomes situation as most ride-hailing apps don't let users sign up if they don't enter payment card details. The first such banking trojan to phish mobile taxi apps is named Faketoken, which supports overlaying fake login and phishing screens for about 2,000 financial apps.
PAYING WITH YOUR FACE A KFC restaurant in Hangzhou, China is testing a new facial recognition payment system that lets people pay for their meal by simply smiling at a camera. The new payment method called "Smile to Pay" was launched in partnership with Alipay, the popular mobile and online payment platform created by Chinese conglomerate Alibaba. The company says the facial recognition technology only takes about two seconds to scan someone's face using a 3D camera and a “live-ness detection algorithm” to combat fraud.
DATA BREACH
Maersk NotPetya Impact: undocked cargo ships and a $300m loss In June, a cyberattack snarled shipping terminal operations worldwide and briefly shut down the Port of Los Angeles’ largest cargo terminal. Danish shipping giant A.P. Møller - Maersk faces a loss of up to $300 million as a result of the NotPetya global malware outbreak. After the worm infected systems at Maersk, the world's biggest shipping firm had to reroute ships and was unable to dock or unload cargo ships in dozens of ports. Workers were forced to improvise with social media as they struggled to get goods moving from ships to shore again. "In the last week of the quarter we were hit by a cyberattack, which mainly impacted Maersk Line, APM Terminals and Damco," Maersk CEO Søren Skou, said in an interim report. "Business volumes were negatively affected for a couple of weeks in July. We expect that the cyberattack will impact results negatively by $200-$300 million." Maersk’s revelations were part of an interim second-quarter earnings report in which the Copenhagen-based global transport and energy
3D ADEPT / KITGURU
Scammers using infrared to move data from ATM skimmers A greater number of ATM skimming incidents now involve so-called “deep insert skimmers,” wafer-thin fraud devices made to fit snugly and invisibly inside a cash machine’s card acceptance slot. New evidence suggests that at least some of these skimmers transmit stolen card data wirelessly via infrared, the same communications technology that powers a TV remote control. In June, four Oklahoma City metropolitan area banks experienced rash of ATM attacks involving insert
company gave investors a preview of expected costs from the malware attack. The worm, dubbed NotPetya, locked access to systems that Maersk uses to operate shipping terminals all over the world and took two weeks to fix. NotPetya, which has been traced to compromised tax-accounting software widely used in Ukraine, began spreading in late June. While it looked like ransomware on screens, its function appeared merely to be wreaking havoc on systems. Maersk was just one of about 7,000 companies it affected globally. Ukraine and Russia were hit especially hard in the attack, but the worm also reportedly struck operations of a British advertising agency, a maker of skin-care products, a German broadcaster and U.S. pharmaceutical giant Merck. But unlike some, however, Maersk has been ultra-transparent about its NotPetya disruptions and cleanup efforts. The company first warned on June 28 that it had been hit by NotPetya and has continued to issue regular updates.
skimmers. Police said the skimmer contains an antenna which transmits card information to a tiny camera hidden somewhere outside the ATM. Deep insert skimmers (pictured left) are different from typical skimmers in that they are placed in various positions within the card reader transport, behind the shutter of a motorized card reader and completely hidden from the consumer at the front of the ATM. In such an attack, the hidden camera has a dual function: To record time-stamped videos of ATM users entering their PINs; and to receive card data recorded and transmitted by the insert skimmer. E-PAYMENT REVIEW September 2017
31
Next Up SOLAR ENERGY WITHOUT PANELS A team of renewable energy researchers from the University of Exeter have developed an opaque glass block that harnesses solar energy and converts it to electricity. The blocks are designed like traditional bricks and fit seamlessly into the outer sides of buildings. The blocks contain "intelligent optics" that concentrate incoming sunlight onto small cells, creating on-site electricity for powering the building or can be stored or used for other functions.
INTENET OF USELESS THING
Smart desk that reminds you to stand up
UPGRADE
Self-healing smartphone screen material could come to market soon TECH COMPANIES ARE THINKing about a day where phones can heal their own cracks and are doing something about it. Leading the effort are Apple and Motorola, which recently got a patent for a phone display that repairs itself when it gets cracked. Of course, this is just a concept and may not hit markets yet, but Apple already has a market-ready product. By the end of this year, the iPhone maker will have placed machines that can mend cracked screens of its iconic phone in roughly 400 third-party repair centres in 25 countries. Pilot testing for these machines were done in Miami, London and more. Motorola's patent description shows how a phone could identify cracks on its touchscreen and then apply heat to the area in an effort to slightly repair the damage. The process relies on something called "shape memory polymer," a material that can apparently become deformed and then recovered through thermal cycling. This material could be used over an LCD or LED dis-
BUILD SOLAR / DEZEEN / HOCHU RAYU
Meeting of the minds
The BBC and tech company This Place, have developed a way people can select programmes using a cheap, brainwave-reading headset. The device works with an experimental version of the BBC's iPlayer on-demand platform. Users can turn on and operate the app by concentrating or relaxing their minds. 10 BBC staff tried out the app and were able to launch iPlayer and view a programme via the headset. 32
E-PAYMENT REVIEW September 2017
play with a capacitive touch sensor layered in, as well. And there may soon be another solution to cracked phone screens in the coming years. A researcher at Queens University has created a material that may prevent smartphones from cracking. It was done by combining semiconducting molecules C60 with layered materials like graphene and hBN, a type of boron nitride. In April, Business Insider reported the developement of a new self-healing material by chemists at University of California, Riverside. The material, which can stretch to 50 times its original size, is made of a stretchable polymer, an ionic salt and a special type of bond called an ion-dipole interaction, which is a force between charged ions and polar molecules. This means that when the material breaks or has a scratch, the ions and molecules attract to each other to heal the material. There have been some applications of self-healing materials in smartphones like LG’s G Flex, they have been mostly limited to the back of the device
Fast-moving vine
A completely new type of robot has been developed at Stanford University. Rather than using legs to navigate through different environments, the soft robot grows like a plant. Akin to natural organisms that can grow to cover vast distances, the robot takes the basic shape of the soft material folded in on itself, almost like an inside out sock and moves forward by pushing the material out in front of itself.
Light for food
Researchers in Finland created food using electricity, water, carbon dioxide, and microbes as part of a project called Food From Electricity. A collaboration between Lappeenranta University of Technology and the VTT Technical Research Centre of Finland, this process can create food anywhere it is needed, which has huge implications for world hunger and climate change.
US FURNITURE BRAND HERMAN Miller has teamed up with designer Yves Behar on a range of intelligent, networked office furniture called Live OS whose primary purpose is to encourage physical activity in workspaces that are mostly sedentary. The furniture automatically reminds users when they've been sitting for too long, either through gentle vibration or by lighting up a small module attached to the surface. The system also incorporates sensors that capture what Herman Miller says is anonymised data on how the furniture is being used. An accompanying dashboard crunches this data and presents insights based on it to employers.
Helmet for living in your microworld HOCHU RAYU DESIGN BUREAU, a creative firm from Ukraine who specialize in designing “Microworlds“, have created the Helmfon, a really clever oversized helmet that allows the user to block out unwanted noise and distractions, while maintaining personal space and privacy. The Helmfon also blocks out all sound coming from inside, such as that from headphones or the onboard smartphone speaker system and is customizable in a variety of colors and designs. designed according to the client’s wishes, Helmfon is equipped with a system board, microphone, speakers, accumulator, magnifier and special inside place for the smartphone.
BIOFUEL POWER
Energy worth sweating over A TEAM OF ENGIneers from the University of California has developed stretchable fuel cells that extract energy from sweat and are capable of powering electronics, such as LEDs and Bluetooth radios. The biofuel cells generate 10 times more power per surface area than any existing wearable biofuel cells. The devices could be used to power a range of wearable devices. They achieved this breakthrough thanks to a combination of clever chemistry, advanced materials and electronic interfaces. The biofuel cells are equipped with an enzyme that oxidizes the lactic acid present in human sweat into a source of power the could meet ondemand power. The researchers face the challenge of increasing the biofuel cell's energy density, meaning the amount of energy it can generate per surface area.
EMERGING TECH
Mobile app screen for cancer with a selfie
THIS COULD SOMEDAY REPLACE BIG HEALTH MONITORS Health sensors that measure heart rate, blood pressure, sweat and a host of other health indicators are often bulky and uncomfortable. But scientists are working to create a super thin wearable that can record data via the user's skin. The technology developed by scientists at the University of Tokyo looks like a gold temporary tattoo and it's so comfortable, patients have forgotten they are wearing it.
VIEW FROM THE MARKETPLACE
TAKAO SOMEYA GROUP, UNIVERSITY OF TOKYO / UNIVERSITY OF WASHINGTON
Artificial intelligence could dominate the world sooner than most people think Despite warnings from scholars and industry leaders that automated robots will soon be taking over the world, developments in artificial intelligence are still being actively pursued on a global level. Latest report from the World Economic Forum suggests that more than half a million construction jobs will be replaced by robots by the end of the next decade. Just recently, Elon Musk, himself an OpenAI founder, told American policy makers that AI is a "fundamental risk to the existence of human civilization". With that said, when will this AI take over actually happen? How soon before humans are superseded with fully automated robots? A group of researchers from the Future of Humanity Institute at the University of Oxford conducted a study to gauge when exactly AI will outperform humans in terms of different skills and jobs. Their conclusion is that AI take over is going to happen sooner than most people think
At the early years during the third decade of the second millennia, artificial intelligence will most certainly supersede human skills when it comes to language translation (2024), writing secondary level essays (2026), and operating and driving trucks by 2027. More specific jobs which require a deeper interaction with humans will take a while for artificial intelligence to master. And it won't be until 2031 when AI robots could serve as retail assistants or write highly acclaimed novels (by 2049). Moreover, despite numerous breakthroughs in the use of automated tools in the field of surgery, it will take more than three decades before AI robots could function as autonomous surgeons (by 2053). Asian researchers believe that "high-level machine intelligence" will take over specific human jobs in 30 years time (from 2016). Whether it's 30 or 74 years, artificial intelligence or HMLI will inevitably dominate the world.
RESEARCHERS AT the University of Washington are working on an app that can allow people to easily screen for pancreatic cancer and other diseases - by snapping a smartphone selfie. The app, BiliScreen, works by analyzing the amount of yellow discoloration in the whites of the eyes, which is a sign of bilirubin buildup in the blood, a.k.a. jaundice, before it can be seen by the naked eye. Jaundice, often seen as a discoloration of the skin in infants, is a tell-tale symptom of pancreatic cancer. Using the app involves putting on paper glasses printed with colour squares to help calibrate colour,
and a box accessory over that, which blocks out ambient lighting. The user snaps a selfie of his eyes with his smartphone camera, and the app runs the colour of his sclera into a color descriptor, which then translates the how white his whites are into an estimate of his bilirubin levels. The diagnostic app correctly identified “cases of concern” in just under 90% of the 70 subjects in its initial clinical study. The team is conducting more tests on a wider range of people at risk, and it is also working toward making the BiliScreen easier to handle by nixing the need for the box and the glasses.
AI / Predict your pain level RESEARCHERS AT THE MASSACHUSETTS Institute of Technology have developed an artificial intelligence that can predict how much pain a person is in by looking at their image. Called “DeepFaceLIFT,” it is a machine-learning algorithm that was trained on videos of people wincing or showing other signs of discomfort. It could help doctors know if their patients are faking it. The system can be honed according to age, sex, and skin complexion, and turns out to be more accurate than previous one-size-fits-all research projects.
Storage / Petabyte server rack INTEL IS TRANSFORMING THE DATA CENTRE storage market with a new form factor for SSDs that could push server capacities into the petabyte range. Long and skinny, the “Ruler” eschews the legacy 2.5 and 3.5-inch chassis limits of current consumer SSDs. The company is being a coy about specifics on capacity and interface, but it says that slotting Ruler SSDs into a server can get a 1U server to more than 1 petabyte of space. That’s enough to store 300,000 movies in HD resolution. The drives are likely to be a significant improvement when it comes to space and power efficiency. E-PAYMENT REVIEW September 2017
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Fraud Report Industry Fraud Report, Second Quarter 2017 DMBs Q2 2017 Fraud Summary
INTERNET BANKING -- VOLUME - 484, VALUE - N44 MILLION
FRAUD VOLUME The 2nd quarter has a fraud volume of 6,212 which depicts a 17% and 14% increase when compared to Q1, 2017 and Q2, 2016 respectively. Out of the 6212 fraud count for this quarter, the industry recorded 3,211 as count for complete or partial loss in volume. This indicates that the industry was able to save about 48% of the attempted fraud volume. Based on the increase in fraud volume and value for first and second quarters of this year, there is a need for more synergy amongst stakeholders.
6, 212 5, 495 Fraud Volume
3, 211
Individual Accounts
Corporate Accounts
Q2 2017 Vs Q1 2017 Comparison
Q2 2017 Vs Q2 2016 Comparison
17%
Actual loss Count Volume
9
14%
increase
N791 million
increase
ATTEMPTED FRAUD Q2 2017 Vs Q1 2017 Comparison
4%
Q2 2017 Vs Q2 2016 Comparison
23%
increase
N501 million
decrease
ACTUAL LOSS VALUE Q2 2017 Vs Q1 2017 Comparison
Q1 2017 Vs Q1 2016 Comparison
33% 19%
increase
decrease
Internet banking recorded an increase of 169% and 69% in both volume and actual loss value respectively. Actual loss was reported at N44m showing a noticeable increase in comparison to Q1's N25.6m figure. Also seen this quarter, was the rise in the amount of attempted fraud by over N106m, while fraud count surged to 484.
WEB -- VOLUME - 1, 185, VALUE - N41 MILLION
The web channel recorded 1,185 in fraud volume which represents 19% of the total fraud volume for Q2. Although attempted fraud was over N62m, there was still an increase of 80% in the actual loss amount when compared with Q1.
CHEQUE -- VOLUME - 5, VALUE - N14 MILLION
Cheque channel increased from a count of 2 in Q1 to 5 in Q2. There were also gross increase in the value of both attempted fraud and actual loss recorded. The actual loss increase was over 5,000% when compared to Q1.
ECOMMERCE -- VOLUME - 137, VALUE - N930, 000
In comparison with Q1, there is a visible increase in fraud volume and decrease in actual loss value. While Q1 had 105 fraud count, Q2 went up to about 137. The attempted value also increased to over N5.4m, however, only 17% of the attempts were losses.
ACROSS COUNTER -- VOLUME - 62, VALUE -- N105 MILLION
Reported volume and attempted fraud value for across the counter transactions increased in comparison with Q1. Fraudulent transactions count in Q2 stood at 62 while attempted amount exceeded N128m with N105M of it completely lost.
Summary
Despite consistent efforts in monitoring these channels as well as several parameters being put in place to guard against fraudulent activities, we still experienced an upsurge in reported fraudulent transactions when compared with Q1. Similarly, both ATM and Mobile channels recorded very high number of attempts as well as actual losses. This can once again be attributed to social engineering tactics- compromised details by customers, which when gotten; can be used in transferring funds before eventually being withdrawn via ATM.
FRAUD BY DAY Fraud Volume Comparison by Day (Q2 Vs Q1 2017)
Both attempted and actual loss value increased when compared to Q1 2017 but decreased when compared to Q2 2016.
37%
Percentage of the attempted fraud value the industry was able to save. FRAUD BY CHANNEL
ATM -- VOLUME - 2, 619, VALUE - N123 MILLION
Fraudulent transactions perpetrated via ATM represented the highest volume, which stands at 42% of the entire fraud volume for Q2. With the count at 2,619, it easily topped the fraud channel chart with an attempted fraud amount of over N210M as well as taking the second position in actual loss value at N123M.
MOBILE -- VOLUME - 1, 490, VALUE - N129 MILLION
The mobile channel recorded the highest fraud loss in terms of value. With a loss value of N129m mobile represents 35% of the actual loss value for Q2. The volume and value also increased by 24% and 46% respectively when compared to Q1.
POS -- VOLUME - 193, VALUE - N36 MILLION
Attempted amount for POS transactions in Q2 was over N47m. This also translated to the actual loss figure being over N36m, an increase of 195% when compared to Q1. Fraud volume also increased from 146 in Q1 to 193 in Q2. 34
E-PAYMENT REVIEW September 2017
Fraud Value Comparison by Day (Q2 Vs Q1 2017)
Wednesday recorded the highest volume in Q2 2017. Tuesday and Thursday represent second and third position respectively. Mondays recorded the highest loss in terms of value for the quarter. Saturday and Tuesday represent second and third position respectively
FRAUD BY DAY Fraud Volume Comparison by Day (Q2 Vs Q1 2017)
OFIs Q2 2017 Fraud Summary FRAUD VOLUME The OFIs reported 113 fraud cases and ironically, all the fraud cases were either completely or partially lost in Q2. Also, with the 113 fraud volume, there was a decrease of 57% and 17% when compared to Q1 2017 and Q2 2016 respectively. On the attempted fraud, we see a decrease of 62% and 29% when compared to Q1 2017 and Q2 2016 respectively. Only N2m was saved from the attempts.
113
113
0
Fraud Volume
Individual Accounts
Corporate Accounts
113
Q2 2017 Vs Q1 2017 Comparison
Q2 2017 Vs Q2 2016 Comparison
57% 17%
Actual loss Count
decrease
N22 million N20 million
decrease
ATTEMPTED FRAUD Q2 2017 Vs Q1 2017 Comparison
Q2 2017 Vs Q2 2016 Comparison
62% 29% decrease
decrease
ACTUAL LOSS VALUE Q2 2017 Vs Q1 2017 Comparison
Q2 2017 Vs Q2 2016 Comparison
64% 33% decrease
decrease
The OFI report shows a consistent decrease in all parameters used to measure. Although, only 9% of the attempted fraud value were salvaged within the quarter, there was a decrease across board.
9%
Fraud Value Comparison by Day (Q2 Vs Q1 2017)
Percentage of the attempted fraud value the industry was able to save. FRAUD BY CHANNEL
ATM -- VOLUME - 24, VALUE - N2.8 MILLION
For the OFIs, ATM recorded 24 fraud cases in Q2 which shows a decrease of 40% when compared to reported fraud cases in Q1. Although there were no salvaged amounts in attempted fraud on ATM in Q2, there was a noticeable decrease when the volume and value were compared with that of Q1.
MOBILE -- VOLUME - 78, VALUE - N16.9 MILLION
Fraudulent transactions carried out via the mobile channel, represented the highest count with 68% of reported fraud cases in Q2. With an attempted fraud figure of N18.9m and actual loss of N16.9m representing 86% and 85% of the entire attempted fraud value and actual loss respectively, mobile easily tops the fraud by channel chart in Q2.
WEB -- VOLUME - 10, VALUE - N807, 000
With over N800,000 lost through the WEB channel and a count of only 10 transactions, the industry experienced a sharp decline in fraud via this channel when compared with the over N8m lost and over 70 counts recorded in Q1.
ACROSS THE COUNTER -- VOLUME - 1, VALUE - N100, 000
Only 1 fraudulent transaction count was recorded for across the counter channel in the second quarter. Both attempted fraud as well actual loss remain the same with a value of N100,000.
Wednesday recorded the highest volume in Q2 2017. Monday and Saturday represent second and third position respectively. Friday recorded the highest loss in terms of value for the Q2. Monday stands at second position.
FRAUD INTEREST INDEX [FII] 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. "Mobile and ATM emerged again as channels with the greatest interests for fraudsters. However, ATM decreased while mobile increased significantly when compared to last quarter's FII. Banks need to heighten watch on mobile channel as it has become very much, high risk."
85
BVN WATCHLIST REPORT No of reported fraudulent BVNs in the quarter
40
No of BVNs sent for watch listing in the quarter
This quarter records an improvement in the watchlisting of fraudulent BVNs. Although, only 37 BVNs was reported fraudulent by DMBs about 93 BVNs were placed on the watchlist within the quarter.
BANK VERIFICATION NUMBER FOR INVESTIGATION The Bank Verification Number (BVN) has been an effective tool in the fight against fraud. Apart from solving identity issues, the BVN has helped the industry tremendously in the area of fraud investigation and recovery. Within this quarter, banks have sent a total of 726 BVNs to NIBSS to aid their investigations. Out of the 726 BVNs investigated for various fraud cases, only 37 BVNs was reported on the AntiFraud Portal and 93 BVNs was sent for watchlisting. Banks should ensure all fraudulent BVNs are reported on the Anti-Fraud Portal and also sent for watchlisting. NB: The investigations here are not limited to electronic fraud. APRIL -- 203 BVNS AMOUNT - N74M
MAY -- 240 BVNS AMOUNT - N239M
APRIL -- 283 BVNS AMOUNT - N2.3B
In April, banks sent 203 BVNs to NIBSS to provide accounts linked to these BVNs. The amount involved for the fraud was estimated at N74m.
NIBSS received 240 BVN requests to aid ongoing investigations in the banks for the month of May. The fraud cases were valued at N239m.
A total of 283 BVNs were received to provide account details. The amount involved in these investigated BVNs was valued at N2.7B.
Courtesy of Nigeria Inter-Bank Settlement System Plc (NIBSS). E-PAYMENT REVIEW September 2017
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Roundtable
Accelerating Nigeria's digital economic opportunity
Oluwatoyin Albert Group Head, Operations at Xpress Payment Solutions
ers or farmers who need access to loan at little or no interest. This was usually facilitated by group savings locally known as ‘esusu’ but the system involves significant cash handling with its inherent risks. Today, Diamond Bank has digitized the process eliminating any form of risk or default. Quality education irrespective of literacy level is also key to encouraging digital innovation in Nigeria. We are in dire need of solution thinkers, and the opportunities for those who wish to take up this role are endless. Value can only be created through innovation. KUSHIMO: I see innovation as the application of better solutions to new requirements and unarticulated or existing market needs. This is accomplished through more-effective products, processes, services, technologies, or models that are readily available to markets and societies. To encourage digital innovation in Nigeria, the government has to provide infrastructure, innovation friendly regulations and money to fintech’s entities. ALBERT: For Africa, innovation is about delivering value to people and communities using new and improved ideas, products or methods. Examples include offering farmers a simpler way of getting commodity prices for the upcoming harvest, or pregnant women getting healthcare services via a mobile phone. The key to digital innovation in Nigeria is enhancing existing technology to deliver additional value to both consumers and businesses. We also need to encourage entrepreneurship, provide basic infrastructure and improve our education system.
What do you believe innovation in Africa’s context is and what do you think is the key to encouraging digital innovation in Nigeria? OLUBIYI: Innovation in the African context is simply creating and applying new and better solutions to improve the average African’s quality of life and addressing the issues we face as a continent in the process. The quest to provide solutions that meet the human need taking affordability, usability and simplicity into consideration is the key driver to encouraging digital innovation. An example is meeting the needs of trad-
How would you summarize your outlook for innovation and economic growth, both domestically and globally? KUSHIMO: In in my view, innovation and economic growth in Nigeria and elsewhere are both on the rise. With the way we are going both locally and globally, I see greater integration of the world societies via digital transformation. ALBERT: When we create innovative ways of delivering services to the people, they manifest in the form of values like increased economic activity, job growth, improved citizens’ lifestyle and reduction in economic waste. But innovation itself involves
In an era impacted by digital technology, many countries are on a journey to becoming economic superpowers. Their broad agenda is a unique mélange of measures that emphasize augmenting economic drivers such as infrastructure, BFSI (banking, financial services and insurance), among others, while accelerating the growth of digital payments. This Roundtable looks at how the tech industry and the government should double-down on strengthening Nigeria’s digital ecosystem.
RESPONDENTS Olukayode Olubiyi Head, Financial Inclusion at Diamond Bank
DIGITAL ENCODE / PAYSTACK
Oluwayemi Kushimo Head, Strategic Planning and Projects at E-PPAN
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Kushimo meeting certain requirements. One of them is money. For ideas to succeed, they need to be funded from concept stage to market readiness. Another key driver of innovation is education and adoption of new technologies. The evolution of machine learning, big data, Mobile adoption are changing the way demography of our society and the way consumer needs are being met. OLUBIYI: I am cautiously optimistic. Advances in technology have placed information at our fingertips and the right application of this information can galvanize incredible potential for economic growth. The right questions are being asked and answers are being provided at the speed of thought but technology is ever-changing, always improving so we need to act fast. Yesterday’s update is already obsolete as we speak. An example is what has happened with bank account opening. Currently, you can do that from the comfort of your homes leveraging digital financial services and mobile solutions. That sort of innovation need to be applied to solving many other problems we face. Convenience is the new currency and digital thinkers who are pas-
sionate about providing convenient solutions are in high demand so our tertiary education system should be deliberately designed to produce these thinkers. Then there is data and our ability to interpret it correctly. Globally there is a new trend on the tremendous impact data analytics and insight offer (I call it the new oil). We should be taking advantage of this to introduce new ideas pivotal to economic growth in Nigeria. What role does digital infrastructure play in the development of a nation? How important would it be to Nigeria’s prosperity? ALBERT: Digital infrastructure such as Internet has become pivotal to modern living. Internet penetration in Nigeria has enabled e-commerce, mobile payments, automated public service delivery, etc. Easier access to digital devices and reduced data costs will result in a larger portion of the population migrating to the digital space. For Nigeria to be successful in the 21st century, the delivery of services and access need to migrate to online platforms. The outcome will be a reduction in waste, increased social engagement, transparency, improved citizen well-
being and economic growth. OLUBIYI: Digital infrastructure’s role is very vital and there is evidence in nations like Japan, Singapore, India and others to support this. It is important to note that an effective data collation system is a basic requirement for building digital
jobs as well as future economic and social growth. Everyone is excited about digital start-ups but many policymakers are challenged with how to nurture innovation and how to regulate. What advice can you
existing policies. Policies that drive economic growth encourage a level playing field and equal opportunity for all existing and intending stakeholders a given space. We need policies that foster inclusive participation, protect intellectual property, encourage regulatory guidelines and
Albert infrastructure. This will provide the basis for projection, validation and implementation during development of digital products. It also brings me back to the need for quality education irrespective of literacy level. An enlightened society usually demands the best of itself and builds a structure to meet these demands. KUSHIMO: It has taken less than two decades for the internet to go from innovation to indispensable, fun and now fundamental. Continuous access to information, commerce, communication, friends and entertainment – among myriad other things – has become a daily fact of life. But as the internet makes its full weight felt in more highimpact areas such as healthcare, education and government services, access to digital services will become essential for everyone. That means we will require adequate digital infrastructure to meet that need. Which means we need investment in efficient broadband connectivity and production of internet-enabled devices with some kind of local sensibility. These would require foresight, planning, investment and management capacity. They would have real impact on creating and sustaining
a cash-less society. We are witnessing tremendous growth in adoption of alternative payment channels because digital financial service is no longer an abstract concept. Simply put, the other means of transferring value other than cash is gaining traction with introduction of digital plat-
Olubiyi offer to policymakers to help create an ambitious digital economic agenda? KUSHIMO: Policy makers should revamp government’s procurement policy especially as it concerns the tech hub, strengthen local content initiatives and encourage tax incentives for angel investors and venture capitalists to ease funding for startups. Long term plans should include remodeling the education system to be future facing, closing up the digital divide, designing our local communities using a smart city agenda. OLUBIYI: Regulations and policies are the bedrock of the enabling environment for a digital economic agenda. In our local economic climate, the drag in having a leap on nurturing innovation is directly linked to
TO DRIVE THE RIGHT POLICIES, REGULATORS NEED TO UNDERSTAND THE REQUIREMENTS OF THE DIGITAL ECONOMIC AGENDA AND THE AMBITIONS OF THOSE DRIVING IT.
drive adoption/usage. They need to encourage collaboration in driving digital financial services for financial institutions and telecom. ALBERT: The advent of many digital start-ups is indeed exciting in terms of the opportunities they are tapping into. Sometimes, regulation can be antithetical to the progress of innovation. However, the right economic policies and regulatory framework are needed to create structure and mitigate risks. Accountability, tax management, protection of intellectual properties, are a few of the key areas where appropriate policies are required. Easier access to funding for start-ups is also essential. To drive the right policies therefore, regulators need to understand the requirements of the digital economic agenda and the ambitions of those driving it. For us to become a digital economy, cash is the real competition more than any other instrument. Do you think a decade from now paying for something in cash in Nigeria will be seen as peculiar? OLUBIYI: Cash has been here for a while but in recent time more people are adapting to the idea of
forms for funds transfer. With the ongoing financial inclusion efforts, the next decade we see us getting closer to a society inclined to limited cash use. ALBERT: Cash has a cost for everybody but financial institutions bear the bigger burden. It is in our very best interest to sustain the cashless policy by encouraging innovation in electronic payments. This will reduce the existing grey economy; which experts have indicated is even bigger than the formal economy. With the aggressive advocacy on financial inclusion in the country and continuous education of small ticket transaction owners, we should be able to as a nation, make the attitude of paying with cash 80% close to peculiar in another decade. KUSHIMO: In as much as some people still believe that cash is king today, I see a global transformation in the payment industry in the next 10 years. There will be a time that paying for some certain things will appear strange. Payment is a way of life and I see that transformation happening just in the same way Nigeria and Nigerians were changed by the introduction of the GSM telephony system. E-PAYMENT REVIEW September 2017
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State of Payments AUTOMATION
Rise of the Machines
McKinsey report sees cognitive agents take over 30% of bank jobs within two years ROBOTS, ARTIFICIAL INTELLIGENCE AND OTHER forms of automation could take over almost a third of investment banking jobs within just a few years, according to a recent report from consultant McKinsey. Cognitive Technologies in Capital Markets, examined which jobs and processes within the corporate and investment banking world are most suited to automated technologies. It concludes that 60% of jobs will face a big impact from artificial intelligence and robotics while 30% of jobs could be performed entirely via automation. While this may be disturbing news for investment bankers worried that they will become surplus to requirements, the report states that this shift in work practices will not just lead to job cuts but should also free up staff to perform more high-value tasks. "The application of cognitive technologies to capital markets functions can reduce budgets and free up capacity for teams to focus on highervalue activities such as research, idea generation and client relationship management," said the report. In terms of those processes most ripe for automation, the report picked out trade allocation as its number one, stating that the auto-population of trade details is already being piloted by a number of investment banks. It separatesdmiddle office, finance and operations tasks in
its examination of what is most appropriate for automation and stated that the latter group will enjoy greater employee capacity from the use of cognitive technology, especially a number of post-trade processes such as settlement/payments, confirmations and reconciliations. The report said that "pockets of value will be delivered across the business, from risk management to compliance and HR". However there is little focus on the front office and the role of traders and dealmakers. In terms of the technology, it stated that machine learning will have the greatest impact, while consumer-facing robots will have the lowest overall impact. The report states that the technology will be ready to move to "centre stage" within two or three years but it also warns that it will not magically produce double digit growth for banks. It will though make banks more efficient and better able to respond to technology changes and recommends that they establish internal departments or centres to track emerging technology and encourage greater innovation. Majority of investment banks have already set up a number of so-called innovation centres and started to pilot the use of cognitive technologies for some processes. And a number of bank heads have also sought to assure staff that the introduction of machine learning, robots and the like will not necessarily result in headcount reduction.
FINGER-VEIN BIOMETRIC PAYMENT SYSTEM NETS, A NORDIC PAYMENT PROVIDER is exploring the possibility of trialing 'Fingopay' a biometric payment method that utilizes a finger-vein reading system to eliminate credit cards and pin numbers while enhancing personal security. An infrared light scans users' prints, creating a '3D map' of the veins in the user's finger. Customers can then register their unique vein pattern as a preferred payment method, essentially linking their bank account to their finger tips. At cash points, customers will scan their finger -- if the vein pattern from the device matches the registered vein pattern, the sale is authenticated. This biometric payment method would offer users a more secure alternative to easily compromised credit cards while also providing an efficient and potentially lineeliminating system.
AUTOMATED TABLETS
YANKODESIGN / FINGOPAY
Order and pay for meals seamlessly
THE AUTOMATION WITHIN THE restaurant industry is really going to change the experience for diners in the near future, which is something that the conceptual 'Bellder' restaurant tablet identifies. Designed as a kiosk device for diners to use for their entire experience, the tablet works by enabling guests to order their meal or drink and pay without having to wait for a server. The device also enables them to notify their server that they need service, while also offering a way to see meals visually rather than relying on titles and also providing advanced payment conveniences such as NFC and beyond. The 'Bellder' restaurant tablet shows us the potential future of dining technology and is the design work of Dain Kim, Taejung Kim, Seyeom An, Myungi baek and JaeSuk Kwon. E-PAYMENT REVIEW September 2017
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State of Payment Blockchain / blɒktʃeɪn / Global banks creating new digital currency
DIVE BRIEF
PSOB/GARMIN
Wearables market to grow 17% in 2017
THE GLOBAL wearables market is poised for a decent 17 percent growth in 2017, reveals research firm Gartner in a report. Over 310 million wearable devices are likely to be sold, that would amount to $30.5 billion in worldwide revenues. Last year, 266 million devices were sold. The biggest revenue generator would be smartwatches accounting for $9.3 billion in sales, while Bluetoothenabled headsets are likely to account for maximum devices (150 million) sold. As for smartwatches, 41.5 million units are likely to be shipped in 2017. By 2021, sales of smartwatches are estimated to total nearly 81 million units, representing 16 percent of the wearable device market. 40
PUPIL PAY
School children test wearable payments in Singapore SINGAPORE’S POSB BANK HAS provided 6,000 primary school children with smartwatches equipped with fitness tracking and mobile payments capabilities in a bid to teach pupils how to save and spend wisely by helping them track their savings and spending habits digitally. The POSB Smart Buddy programme has been undergoing testing for the last twelve months and is now live at a total of 19 primary schools. “The watch helps children take an early step towards digital payments and also monitors their activity levels,” the bank said in a statement. “Parents can in turn remotely pre-set their child’s daily allowance, send them emergency money, and monitor their kids’ spending, savings, eating habits and activity levels — all with an accompanying app.” The programme further creates a
DIGITS
$11.4 trillion
Value of China's third-party payments growth from 2010 to 2016, rising from $155 billion. 56 per cent was in the form of peer-to-peer transfers.
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digital payments ecosystem within the school where the school’s canteens and bookstores are set up with digital payment terminals. Pupils can simply tap and pay with their watches. Kiosks are also set up on school grounds, allowing the children to scan their watches so they can instantly check on their remaining allowance for the day. Daily transactions are tracked on the app, with a three-month history provided, so parents can monitor their savings and spending patterns over time. The bank plans to add an in-school locator, which allows parents to track their child’s location within the school compound and a school bus locator so parents can track the realtime location of the bus and be notified when their child boards or alights from the school bus. Both features are currently in the testing phase.
SIX OF THE WORLD’S BIGGEST BANKS have joined a project to create a new form of digital cash that they hope to launch next year for clearing and settling financial transactions over blockchain. Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street are workon on the “utility settlement coin” which was created by Switzerland’s UBS to make financial markets more efficient. “Digital cash is a core component of a future financial market fabric based on blockchain technologies,” said UBS Head of Strategic Investment & Fintech Innovation Hyder Jaffrey. “The coin is focussed on facilitating a new model for digital central bank cash.” UBS and Clearmatics floated the model in 2015 to validate its potential benefits for capital efficiency, settlement and systemic risk reduction and as a harbinger for central bank backed digital cash issuance. The virtual coin acts as a proxy for physical currency assets held in deposit at the central bank.
ATM / eɪ.tiːˈem / ATMIA gets blueprint for next-gen ATMs BANKS, ATM DEPLOYERS, VENDORS, suppliers and service-providers have signed off on an industry blueprint for next generation ATMs. In 2016, an ATMIA subcommittee of banks and independent deployers formulated a vision for the future from an ATM operator's perspective, producing an industry RFI for next-generation ATMs. According ATMIA, the RFI incorporated the requirements and expectations of global operators, and the converging consumer technologies shaping the ATM industry — biometric authentication, cardless ATM access, the cloud, mobile banking apps, nearfield communication and others. ATMIA commissioned a banking consultant and an ATM security expert to check the draft blueprint for compatibility with ATM access and end-to-end security requirements before the document was ratified.
WEARABLE
Garmin blurs line between fitness and payment With smartwatches putting a greater emphasis on fitness features, Garmin is taking a page out of the smartwatch playbook. In the case of the Vivoactive 3, Garmin is adding smartwatch-like features like a touchscreen, support for mobile payments and even some apps. The watch will offer a built-in GPS antenna, heart rate sensor, thermometer, compass, barometric altimeter, and more. A built-in payment option was something Garmin users had been asking for, according to Phil McClendon, the lead product manager for the Vívoactive. It is features Garmin Pay, a mobile wallet feature powered by the FitPay platform and will support Visa and Mastercard debit and credit cards from major banks. Payment card accounts are managed from the Garmin Connect mobile app, which, like other services, gives the you the ability to update or delete an account if your wearable gets stolen or is no longer in use.
PAYMENT METHODS
Fight for global domination of payment systems hots up NEW RESEARCH HAS shown that the battle for global domination is hotting up in both payment cards and in omni-channel solutions. Mastercard and Visa are losing market share to UnionPay when it comes to the global cards market. That’s according to research from RBR, which announced in July that the global card market increased by 8% in 2016 to 14 billion cards. With a billion new cards issued in the space of a year, the global market remains buoyant. The fastest growth is in Asia-Pacific, driven by financial inclusion initiatives, with China contributing by far the most to the rise in card numbers. The continued rapid expansion of the Chinese cards market has helped UnionPay to increase its share of cards to 43% in 2016, and extend its lead over Visa and Mastercard. The three collectively control 80 percent of the market with American Express, Diners
Club and JCB, Discover and domestic-only private label cards making up the rest of the market. UnionPay has been the largest scheme globally for card numbers since 2010 and, by the end of 2016, there were more than six billion UnionPay- branded cards in circulation. However, UnionPay remains a predominantly domestic scheme. Less than 1% of its cards are issued outside China, mainly in other Asia-Pacific countries, but also in Europe. The scheme will eventually face greater competition in China, with Visa and Mastercard continuing to await clarification from the Chinese regulators before submitting applications to operate domestically in the country. By 2022, the number of cards worldwide is forecast to rise to 17 billion as many people, particularly in parts of AsiaPacific and the Middle East and Africa, still do not hold a payment card.
Contactless By Numbers 1 in 2 POS / A new study from Juniper Research has found more than half (53%) of global transactions at POS will be contactless within five years, compared to just 15% this year. Adoption in the US would rise sharply over the periodfrom less than 2% of transactions this year to 34% by 2022.
TOKENISE/AS AUTOMOBILE / COLDTI
Killing the cash cow / Australia has become a nation of tappers, with official figures showing contactless overtaking cash as the most-frequently-used payment method. Around one-third of all PoS payments are made using tap-and-go. The Reserve Bank attributes that to several factors, including the widespread rollout of tap-and-go Eftpos functionality. Give me more / More than half of UK retailers that accept contactless payments would like to see the spending limit raised above the current £30 cap, with 37% opting for £50 and one in five hoping to see a £100 ceiling, said research released by Barclaycard ahead of the tenth anniversary of contactless payments in the UK.
POLISH TAP & GO
Poland is one of the world's leaders in contactless payments with more than two-thirds of transactions done through that method.
38 million
Current population of Poland according to latest United Nations estimates.
29.4 million Number of contactless payment cards Poles carry in their wallets, which accounts for nearly 78% of all cards, according to the National Bank of Poland.
514,000
Number of contactless terminals in Poland, which represents 91% of all terminals accepting cashless payments.
Token - One ring to access everything TOKENIZE HAS UNVEILED Token, a smart ring that packs NFC and Bluetooth connectivity that allows it to serve as house or car keys for keyless entry systems, can store passwords for software and provide Mastercard card holders a personalized lifestyle accessory to make contactless transactions at millions of merchant locations in 96 countries and over 50 transit systems worldwide, with another 30 going live in 2018. It scans your fingerprint when you put it on to activate it and unlock your credentials and locks it once you take it off, so you don’t have to worry about losing it.
Barclaycard - Car key payment device FRENCH AUTOMAKER DS Automobiles is turning the car key fob into a contactless payment device that will be linked to the car owners bank account. Supported by Barclay's bPay platform, it enables users to add stored value that may be ideal for making small, on-the-go purchases when running errands in one's car. Customers will also be able to track their spending, top up their balance, and take control to block or cancel the contactless payment element using the dedicated bPay app available on iPhone or Android devices. The key system is exclusively available to customers who order the DS 3 Connected Chic vehicle from DS Automobiles.
Coldti - Cryptocurrency recovery backups AN ARIZONA ENTREPRENEUR has created a storage system called ColdTi that essentially protect recovery seeds for cryptocurrency funds. The device works by implementing an indestructible titanium design that enables users to etch the information regarding their cryptocurrency account to prevent it from being lost in an emergency. The 'ColdTi' boasts a melting point of over 3,000 degrees Fahrenheit, which means it will survive just about anything you can throw at it. ColdTi promises to protect and preserve any recovery seed “for generations”. E-PAYMENT REVIEW September 2017
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Last Word What kind of business leaders does Africa need?
LYNDA.COM
BY HISCHAM EL-AGAMY A QUOTE NELSON MANDELA ONCE SAID with regards to leadership made me think about the kinds of qualities that are needed by leaders of business in Africa to drive economic growth. “A leader”, Mandela said, “is like a shepherd. He stays behind the flock, letting the most nimble go on ahead, whereupon others follow, not realising that all along they are being directed from behind”. It has become fashionable to use short slogans to describe Africa’s potential. One week the continent is the last frontier of globalisation. A week later it’s the new China. Then it’s the land of opportunity. And so on. Although I’m bullish about Africa, this constant search for an elevator pitch is too simplistic. With 54 countries and nearly 1 billion people, the continent is too diverse and complex to be treated as a single entity. A more interesting question is to ask what kind of skills business leaders need to help stimulate growth and improve people’s lives in Africa. Managers and business leaders create and stimulate the growth; they are the engine of growth. While there are proudly successful African business leaders and managers in each country on the continent, they remain limited in their numbers and with the lack of specialised institutions to develop these kinds of leaders, the continent is facing one of its most critical challenges. Developing more business leaders is crucial if Africa is to address big challenges such as poverty, economic volatility, poor infrastructure, corruption and weak public governance. The ILO recently estimated that 28% of Africa’s 392 million-strong labour force has a wage-paying job (not counting informal and temporary jobs). That’s about 110 million people. It is estimated that Africa will need around 10 million managers to manage this labour force. To train young executives and sharpen up seasoned ones, Africa needs more specialised business schools, not just universities, adjusting their curricula to meet managers’ learning needs. According to a recent report by African Management Initiatives (AMI), Africa has roughly 90 business schools offering an MBA, or one for every 11 million people. India, by contrast, has more than 1,500 MBA schools. African enterprises and business leaders should be the catalysts in developing business schools that not only expose executives to international best practices, but also adapt these to African business realities. To drive their companies’ long-term growth in Africa while also achieving quick wins, business leaders need several specific skills. I would highlight four. One, Critical thinking is crucial for innovation and for sustaining African resources for the generations to come. Managers who can analyse and evaluate differing views could make the differ42
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ence between success and failure for a business in Africa. They are most likely to learn these skills on the job and at business school, given the poor state of many African countries’ primary, secondary and higher education systems. Top executives, in African enterprises, also need to encourage critical and collaborative thinking among employees who have less privileged educations. This is not an easy task, but it could be the difference between success and failure for the enterprise. Two, managing complexity is another must for executives in Africa. Besides running complicated businesses, they also need to manage multiple stakeholders such as communities, clients, suppliers and employees. Africa’s business climate is getting better, but it remains complex and challenging. This is partly because much of the continent still lacks the basic infrastructure that developed countries take for granted. Take power supplies. Managers of African operations need to ensure that their business has backup electricity and even in some cases a backup of the backup. In addition, Africa is still a fragmented market. Managers must navigate very different rules, regulations and dynamics in different countries. This can make it complex, inefficient and expensive to do business across African borders. Good stakeholder management is also vital in Africa, where factories and supply chains tend to have stronger ties to communities than they do in developed countries. Managers of enterprises in Africa’s villages, towns or even cities are often responsible for ensuring the nutrition and healthcare of their employees (and possibly their families too), as well as the good functioning of local schools. They might sponsor local sporting activities too. There is also an expectation, from the local communities, that companies should continuously create job opportunities for people entering the workforce, either directly or at other points in the supply chain.
"Developing more business leaders is crucial if Africa is to address big challenges such as poverty, economic volatility, poor infrastructure, corruption and weak public governance."
Expecting the unexpected is skill number three. Managers in Africa must be able to deal with disruption—not only from competitors, but also from political uncertainty and social unrest. Businesses pretty much anywhere in the world have a yearly budget and a plan for the next three to five years. African companies have these too, but their top managers also need to have additional scenarios for when external events don’t go as planned. They must be aware of social, political and economic trends in each country and try to anticipate events and risks that could affect business performance. This requires talented managers with very deep knowledge and understanding of the realities around them. This management style is not always understood outside the continent, and there are sometimes tensions when a multinational firm’s headquarters asks an African subsidiary to follow standard procedures without taking local or regional realities into account. Fourth, developing execution capabilities is becoming increasingly important. Managers everywhere need to identify problems, decide on a possible solution and put this into practice. The specific challenge for business leaders in Africa is ensuring that plans get executed from top to bottom within an organisation. This is no easy task, since poor education systems have resulted in big skills gaps between upper management and the workforce. African business leaders not only need to be role models in executing projects; they also need to mentor their teams to apply these disciplines and cascade them further down the company. Despite its challenges, the African continent has enormous potential, and business leaders have a big role to play in unlocking it. While there are a lot of lessons that could be learned from successful business leaders and managers in Africa, the upcoming ones will have to be critical thinkers who can manage complex businesses and multiple stakeholders, handle unexpected events and execute crisply. In addition they need to be excellent mentors and inspire the staff and labour force to achieve great results in, sometimes, very challenging contexts. Dr Hischam El-Agamy is the founder of Tharawat Family Business Forum in MENA and publisher of Tharawat magazine for family businesses.
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