Digital payment platforms

Digital payment platforms
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Digital payment platforms
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Services
Consumer Services
Business Model Description

Provide digital payment services especially for healthcare and transport service providers.

Expected Impact

Improve financial inclusion across the country as well as drive financial literacy and economic growth.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
10% - 15% (in IRR)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
USD 100 million - USD 1 billion
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
Decent Work and Economic Growth (SDG 8)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Reduced Inequalities (SDG 10) Sustainable Cities and Communities (SDG 11)
Country
Regions
  • Nigeria: Countrywide
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Services
SV

Development need: Nigeria is currently lagging behind on SDG 8, with a score of 50.3. Steady and sustainable economic growth drives many sectors of the economy, because it allows for investment in infrastructure, human capital, innovation etc.(1) The service sector is necessary for economic growth and transitioning away from a resource-based economy towards social and economic development.

Policy priority: The service sector is the biggest contributor to gross domestic product (GDP) accounting for around 54.6% in Q1 2019.(2) The government has identified the need for better legal and regulatory frameworks to drive domestic and foreign investment and growth in the service sector. Policy measures include stimulating financial inclusion by providing open banks in rural areas.(3)

Gender inequalities and marginalization issues: Only 27.3% of women (females aged 15 and older) have an account at with a financial institution or a mobile money service provider in 2017.(13)

Investment opportunities introduction: Reflecting the country’s rich cultural diversity, the tourism and creative industries offer tremendous opportunities to create jobs and attract foreign exchange earnings. Cumulatively, the service sector has the potential to provide employment opportunities and increase revenue.

Key bottlenecks introduction: Legal and regulatory frameworks need significant reform around digital services to mobilize private investments.

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Consumer Services
SV.3

Development need: The low penetration of financial services (insurance) relative to other countries presents a huge opportunity for growth. The financial sector is highly vulnerable to external shocks (especially capital markets). Therefore, the government has prioritized strengthening institutions to build healthy financial systems.(2)

Policy priority: The service sector is the biggest contributor to gross domestic product (GDP) accounting for around 54.6% in Q1 2019.(2) The Nigerian Electricity Regulatory Commission's (NERC) order for all electricity distribution companies to migrate to cashless payment platforms in January 2020 has contributed to expanding the digital payment market.(4)

Investment opportunities introduction: The Nigerian e-payment ecosystem has gained significant traction and continues to expand. The Nigerian Electricity Regulatory Commission's (NERC) order for all electricity distribution companies to migrate to cashless payment platforms in January 2020 has also contributed to expanding the digital payment market.(4)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Professional and Commercial Services
SV-PS
Investment Opportunity Area

Digital payment platforms

Business Model

Provide digital payment services especially for healthcare and transport service providers.

Market Size (USD)Describes the value in USD of a potential addressable market of the IOA.
USD 100 million - USD 1 billion

Between 2012 and 2018, instant payment volume increased from 4.4 million transactions to 729 million.(5)

IRRDescribes an expected annual rate of growth of the IOA investment.
10% - 15%

Investments in financial technology can generate internal rates of return (IRRs) up to 12%.(6)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)

Investment in digital e-payment platforms typically generates cashflow in fewer than 5 years.

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Market - Volatile
Exchange rate volatility, lack of trust from consumers, fraud, lack of adequate information on the use of digital payment platforms, distrust of online payments, inadequate financing
Business - Supply Chain Constraints
Inadequate infrastructure especially in rural areas
Market - Highly Regulated
Lack of adequate legal and regulatory frameworks
Sustainable Development Need

Cash transfer remains the most common payment instrument, especially with a significant proportion of the population dwelling in rural areas with limited access to internet and mobile broadband connectivity.

The financial sector is highly vulnerable to external shocks (especially capital markets). Therefore, the government has prioritized strengthening institutions to build healthy financial systems.(5)

The low penetration of financial services (insurance) relative to other countries also presents a huge opportunity for growth.(5)

Gender & Marginalisation

Numeracy rates among rural dwellers are high, which makes digital payment solutions viable.(5)

Expected Development Outcome

Adopting digital financial services could increase Nigeria’s gross domestic product (GDP) by as much as 12.4% by 2025 through increases in productivity, investment and labor.(7)

Investments could increase financial inclusion, by promoting access to financial services, increasing cost savings through higher efficiency and speed, and increasing transparency by improving business accountability.

Gender & Marginalisation

Digital payment services can increase financial literacy among women and lower entry barriers for female and small businesses to digital market sales.

Primary SDGs addressed
8 - Decent Work and Economic Growth
Decent Work and Economic Growth (SDG 8)

8.3.1 Proportion of informal employment in total employment, by sector and sex

8.10.1 (a) Number of commercial bank branches per 100,000 adults and (b) number of automated teller machines (ATMs) per 100,000 adults

8.10.2 Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider

Current Level

Women accounted for 52.3% on non-agricultural employment in 2019 (compared with total employment in non-agriculture).(13) In 2019, Nigeria had approximately 54.6 million informal workers, accounting for 53% of the labor force.(14)

N/A

39.67% (15)

Target Level

One of the major avenues considered in the Economic Recovery and Growth Plan (ERGP) is formalizing the informal sector. This focus reflects Nigeria's high rate of informal employment and the enormous potential of this sector to absorb a large proportion of the working age population.

N/A

100% (15)

Secondary SDGs addressed
10 - Reduced Inequalities
Reduced Inequalities (SDG 10)
11 - Sustainable Cities and Communities
Sustainable Cities and Communities (SDG 11)
Directly impacted stakeholders
People
Entrepreneurs
Corporates
SMEs, industries, hospitals, transport terminals (bus and train terminals)
Indirectly impacted stakeholders
People
Entire population
Outcome Risks

Inequalities may widen if low income earners in rural areas lack access to financial services.

Impact Risks

Efficiency risk given current poor infrastructure and limited technical know-how.

Execution risk if activities are not delivered as planned and do not result in the desired outcomes given weak regulation.

What

Likely to generate positive outcome through increased access to financial services, improved transparency of business, increased efficiency, contribution to gross domestic product (GDP).

Who

Healthcare providers, transport operators, consumers

Risk

Poor stakeholder management and lack of regulatory frameworks could slow progress. Security threats are also a major risk.

Impact Thesis

Improve financial inclusion across the country as well as drive financial literacy and economic growth.

Policy Environment

The Central Bank of Nigeria (CBN) has issued several policy and regulatory frameworks to guide the development of payment systems in Nigeria.(7)

Digital financial services (DFS) pilot: Nigeria recently started transitioning to a cashless economy by 1 January 1 2021, with an initial DFS pilot in Lagos state. The policy aims to reduce the amount of physical cash circulating in the economy, and encourage more electronic-based transactions.

The Nigerian e-payment ecosystem has gained significant traction and continues to expand. The Nigerian Electricity Regulatory Commission's (NERC) order for all electricity distribution companies to migrate to cashless payment platforms in January 2020 has contributed to expanding the digital payment market.(4)

Financial Environment

Financial incentives: A 3-month incubation program - Startup Nigeria - is designed to support innovative idea-staged companies across Nigeria with funding, mentorship and training. The curriculum is designed to move companies from ideas to viable products/services.(10)

Fiscal incentives: The Report on Fintech Laws and Regulations (2020) found no specific investment incentives targeted the financial technology sector.(11)

Regulatory Environment

Central Bank of Nigeria Act of 2007: This Act serves as the regulatory guide for National Payment Systems.

Central Bank of Nigeria Act of 2007: This Act mandates the Central Bank of Nigeria (CBN) to promote and facilitate the development of efficient and effective systems to settle transactions, including developing electronic payment systems.(7)

Electronic Commerce (Provision of Legal Recognition) Bill of 2008: This Bill is modelled on the United Nations Commission on International Trade Law (UNCITRAL) Model Law of 1996 on Electronic Commerce. It incorporates some of the provisions of the UNCITRAL Model Laws on Electronic Commerce and Electronic Signatures, and outlines legal recognition of electronic commercial transactions.(8)

Additionally, the CBN issued regulation for bill payments in 2018 and regulation on electronic payments and collections for the public and private sectors in 2019. These regulations document minimum standards for payment transactions.(9)

Private Sector

Helios, Partech, Global Accelerex, Interswitch, Opay, Flutterwave, Visa

Government

Central Bank of Nigeria (CBN), Nigerian Deposit Insurance Corporation (NDIC)

country static map
urban
Nigeria: Countrywide
Entire country with a higher potential in urban centers with existing infrastructure.
Sector Sources
  • 1) SDG Center for Africa and Sustainable Development Solutions Network (2019). 2019 Africa - SDG Index and Dashboards Report. 2) Nigerian Bureau of Statistics (2019). 3) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning. 4) Energy Mix Report (2020). NERC orders DisCos to go cashless over billing. https://www.energymixreport.com/nerc-orders-discos-to-go-cashless-over-billing/
IOA Sources
  • 5) Nibss-plc.com.ng. (2020). Instant payments mid-year analysis 2019. https://nibss-plc.com.ng/data_image_central/2019/08/INSTANT-PAYMENTS-MID-YEAR-2019-ANALYSIS-min.pdf 6) UNDP/PwC Interviews (2020). 7) USAID (2020). Enabling market conditions for pay-as-you-go solar - Executive summary. https://www.usaid.gov/sites/default/files/documents/1860/Enabling_Market_Conditions_for_Pay-As-You-Go_Solar_Executive_Summary.pdf 8) Oxford Business Group (2015). The Report: Nigeria 2015. https://books.google.pl/books?id=CvRrDQAAQBAJ 9) Elias, G., Jikenghan, E. and Edojariogba, N. (2020). International Legal Business Solutions - Global Legal Insights. https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/nigeria 10) Startup Nigeria (2021). Startup Nigeria is here. https://www.startupnigeria.ng/ 11) The International Comparative Legal Guides (2021). Nigeria: Fintech Laws and Regulations 2020. https://iclg.com/practice-areas/fintech-laws-and-regulations/nigeria 12) Kazeem, Y. (2019). 'Everything you need to know about African fintech right now', QuartzAfrica, https://qz.com/africa/1751701/everything-you-need-to-know-about-african-fintech/ 13) United Nations Development Programme (2020). Human Development Report 2020. https://www.ng.undp.org/content/nigeria/en/home/library/human_development/the-2020-human-development-report.html 14) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf 15) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/profiles/NGA 16) Dada, B. (2020). Carbon reports ₦112.6 million PAT and 2.2 million active customers. https://www.benjamindada.com/carbon-financial-result/