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Digital Payments in Nigeria: Empowering Financial Inclusion in the Modern Era

In the modern era, financial inclusion is no longer a luxury but a necessity. Access to financial services, especially in emerging economies like Nigeria, plays a pivotal role in improving the livelihoods of the underprivileged and driving economic growth. As a result, digital payments have emerged as a potent tool in achieving these goals.

Understanding Financial Inclusion

To begin with, financial inclusion is the process of ensuring that individuals and businesses have access to affordable, convenient, and secure financial services. These services can range from simple savings and payment accounts to more complex financial products like loans and insurance. In the context of Nigeria, achieving financial inclusion is crucial due to the significant portion of the population that remains unbanked or underbanked.

To demonstrate this, the World Bank’s Global Findex Database reported that, as of 2017, only 40% of adults in Nigeria had access to formal financial services. The government and various stakeholders recognized this as an issue that needed to be addressed. Digital payments are seen as a means to bridge this gap.

The Rise of Digital Payments in Nigeria

MOBILE PHONE PENETRATION

First and foremost, Nigeria has one of the highest mobile phone penetration rates in Africa. According to the Nigerian Communications Commission (NCC), there were over 196 million mobile subscribers in Nigeria as of 2020. This widespread use of mobile phones serves as the foundation for digital payment systems.

GOVERNMENT INITIATIVES

Moreover, the Central Bank of Nigeria (CBN) has actively promoted financial inclusion through various policies and initiatives. The “Cashless Nigeria” policy and the “National Financial Inclusion Strategy” have played crucial roles in encouraging the adoption of digital payments.

FINTECH INNOVATION

Furthermore, the rise of fintech companies in Nigeria has introduced a wave of innovative financial products and services. These companies have leveraged technology to provide digital payment solutions that cater to the needs of a wide range of customers, including those in underserved and rural areas.

Key Digital Payment Methods in Nigeria

Digital payments have had a transformative impact on financial inclusion in Nigeria. Here are some of the ways in which they have empowered individuals and businesses:

ACCESSIBILITY:

In particular, digital payment methods are accessible to individuals regardless of their location. Rural and underserved areas have seen a significant improvement in access to financial services through mobile apps and USSD banking.

AFFORDABILITY:

Also, digital payments are often more cost-effective than traditional banking. There are fewer fees associated with maintaining digital wallets or conducting transactions through mobile phones.

SECURITY:

Digital payments provide a secure way to store and transfer money, reducing the risks associated with carrying cash.

INCLUSION OF INFORMAL SECTOR

Many individuals engaged in the informal sector, such as small traders and artisans, now have access to financial services, enabling them to save and grow their businesses.

FINANCIAL LITERACY

The use of digital payments has contributed to an increase in financial literacy among Nigerians. Users become more familiar with banking concepts and practices through regular use.

Challenges and Opportunities

While digital payments have made significant strides in Nigeria, several challenges and opportunities remain:

INFRASTRUCTURE AND CONNECTIVITY

Limited access to the internet and mobile network coverage in some rural areas can hinder the growth of digital payments. Investments in infrastructure are needed to address this issue.

CYBER-SECURITY

With the growth of digital payments, the risk of cybercrimes and fraud has also increased. There is a need for robust cybersecurity measures and awareness campaigns to protect users.

FINANCIAL LITERACY

Despite the increase in financial literacy due to digital payments, there is still a need for educational campaigns to enhance users’ understanding of digital financial services.

PARTNERSHIP

Collaboration between financial institutions, fintech companies like Vtpass, and telecom operators can foster the development of innovative solutions and improve financial inclusion.

CROSS-BORDER TRANSACTION

Enhancing the capabilities for cross-border digital transactions can facilitate international trade and the influx of remittances.

CONCLUSION

Digital payments in Nigeria have emerged as a powerful tool in advancing financial inclusion. The widespread adoption of mobile phones, coupled with government initiatives and fintech innovation, has enabled millions to access affordable and secure financial services. While challenges remain, the future looks promising as the digital payments landscape continues to evolve, making strides in improving the financial well-being of Nigerians and propelling the nation towards greater economic growth. Financial inclusion is not just a buzzword but a tangible goal within reach, thanks to the modern era of digital payments.

To conclude, as Nigeria continues to develop its digital payments ecosystem, it is imperative that all stakeholders – government, financial institutions, fintech companies, and consumers – work together to overcome challenges and seize opportunities to ensure that financial inclusion becomes a reality for all. The journey has begun, and the destination is a more prosperous and financially inclusive Nigeria.

5 Statistics About Utility Bills Payment in Nigeria.

It’s no secret that utility bills payment is an unavoidable part of the adult human life. They have grown to become an integral part of the human life. Although everyone pay bills, it may differ in size and price. Utility bills are a necessary expense because they provide access to services that are essential for modern life, such as electricity, gas, water, among others. Without these services, it would be difficult to maintain a comfortable quality of life.

Facts.

According to the NIBSS, 19.4 trillion Naira was transferred via mobile in 2022, which is 141% more that the amount carried out in 2021. This means that Nigeria have embraced the digital method of paying bills, as opposed to paying with cash.
Nigerians spend over 60% of their monthly income servicing utility bills.
Nigeria is one of the top 5 countries in Africa for utility bills payments. This is reflective of the country’s large population and high rate of economic growth.
About 70% of utility bills in Nigeria are paid by individuals, with the remaining 30% paid by businesses.
The average Nigerian spends approximately 5% of their monthly income on utility bills. This is an important expense for households in Nigeria, as it can have a significant impact on their budget.

These 5 surprising stats about utility bills payment in Nigeria show just how important this type of expense is for people in the country. From cash payments to direct bank transfers, utility bills are a necessary part of life in Nigeria. It’s important to be aware of the payment options available and various means that makes bills payment easier, faster and more accessible.

Vtpass is an online utility bills payment platform.

Conclusively,

As always, VTpass remains the number 1 utility bills payment platform that offers you seamless payment experience. It also priomises swift delivery of the value for which you pay for. This is one of the tools we have built in place to aid you always get prompt value, irrespective of any irregularities that may arise.

In conclusion, bills payment with vtpass.com is superfast, easy and very convenient. In addition, you get 24/7 access to our support team to help you through any glitch you might have. Why don’t you try us today?

VTPASS CONVERSATIONS: BRIDGING THE GAP BETWEEN THE BANKED AND UNBANKED

2023 have been a torrid year for Nigerians. Events hit an abyss when new notes were rolled out, and the federal government stopped the old naira notes from circulation. Wait, what?? Let us retrace our steps and examine where this declaration started from.

In October 2022, the Central Bank governor, Godwin Emefiele, announced the recall and redesign policy. This was to encourage a cashless economy, stave-off cash hoarding, and lower kidnapping rates and terrorism. The House of Assembly doubting the sanity of this decision, summoned the CBN governor to explain this policy. He was excused because he was away from the country on medical grounds and personal engagements. In his absence, Aisha Ahmed assured Nigerians that the naira redesign was not politically influenced. The implementation date was set for 31st January 2023.

Nigeria’s push to replace its paper money with newly designed currency notes has created a shortage of cash, leaving people unable to buy what they need and forcing businesses to close across the West African nation, experts and business groups said.
African News, 2023.

RESULT OF THE POLICY

This policy had negative results. Naira notes became scarce; the old ones were no longer legal tenders, while the new notes were not fully in circulation. A total mayhem ensued in society as a result. People couldn’t access cash and major businesses came to a standstill. This was due to the lack of preparation for the policy, and failure to put in place adequate measures to ensure that the transition was smooth. People and businesses were unable to access the cash they needed, leading to the chaos and disruption that occurred. Analysts accused authorities of poorly implementing the policy in Africa’s largest economy. where digital payment services are usually not reliable and only 45% of adults have a bank account, according to the World Bank.

Nigeria, like many developing nations, has a significant gap between the banked and unbanked population. According to a 2018 survey by the Enhancing Financial Innovation and Access (EFInA), only 36.8% of Nigerian adults have access to formal financial services. This means that the majority of the population operates on a cash basis, with no access to traditional banking services.

The recent cash scarcity in Nigeria highlights the need for bridging this gap between the banked and unbanked population. This has left many Nigerians stranded, with limited access to their funds. Without access to banking services, they are unable to access their funds, and this has caused them significant financial hardship. This highlights the need for financial inclusion initiatives that can bridge the gap between the banked and unbanked population.

FINTECH IS THE WAY FORWARD

However, technology can be a game-changer in this regard. Recently, financial technology companies have emerged in Nigeria, offering innovative solutions to address the gap between the banked and unbanked. These companies leverage mobile technology to provide financial services to the unbanked, allowing them to make payments, save money, and access credit.

One such company is Vtpass, which provides a mobile wallet that allows users to pay bills, and buy airtime. These fintech companies are disrupting the traditional banking industry by providing convenient, accessible, and affordable financial services to the unbanked population.

To bridge the gap between the banked and unbanked in Nigeria, there needs to be a concerted effort by the government, and fintech companies. The government can play a role by creating an enabling environment for fintech companies to operate. Further assistance could include providing regulatory oversight, and promoting financial education. Financial institutions can partner with fintech companies to offer digital financial services and expand their reach to the unbanked population.

In conclusion, the recent cash scarcity in Nigeria has highlighted the urgent need for bridging the gap between the banked and unbanked population. With the right partnerships and support from the government, fintech companies can help Nigeria move towards a more financially inclusive society where everyone has access to formal financial services.

Vtpass, as a fintech is ensuring that bills payment is simple, convenient and smart. Click here to pay electricity bills, recharge your cable TV, and buy educational pins.

WHY FINTECH IS THE KEY TO FINANCIAL INCLUSION

The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity. Fintech is key to financial inclusion which will open up banking services to all and sundry. Fintech has the potential to make banking services more accessible to those who would otherwise not have access to them. It can help to reduce the cost of financial transactions. It makes it easier to access credit, savings and other financial services.

The primary goal of financial inclusion is to ensure that unbanked and underserved individuals and communities have access to useful and affordable financial products and services that meet their needs –payments, collections, credit, savings and insurance – delivered in a sustainable and responsible way.

A look at the opportunities for financial inclusion

Financial inclusion is essential to the community’s progress as access to monetary touchpoints facilitates day-to-day living, and helps families and businesses plan for everything from short-term goals to long-term goals and unexpected emergencies. As account holders, people are more likely to access other financial services, such as credit and insurance. This is to start and expand businesses, invest in education or health, manage business risk, and weather economic shocks. This can improve their lives.

In Nigeria, financial inclusion has spread across Nigeria over the past few years. This includes job creation, Foreign Direct Investment, private sector innovation, and a push to open low-cost accounts, including mobile wallets and digitally-enabled payments.

Impact of Financial Inclusion on the Nigerian Economy in the Last Five Years

Employment: The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity. This view can be deemed credible based on its effect on the Nigerian economy. According to the Shared Agent Network Expansion Facility (SANEF) there are 1.4M number of financial access points/Agents nationwide. This translates into employment opportunities for over 300,000 Nigerians (excludes operators – MMOs and Super Agent employees). The employment opportunity covers a wide mix of agents, agent aggregators, agent shop handlers, licensed MMOs and their employees as well as licensed Super Agents and their employees.

Financial service touchpoints: To bridge the gap between unbanked citizens and financial services, financial service touchpoints are important. Financial Inclusion has brought to fruition the availability of financial services touchpoints in areas/locations previously unreached and deemed under-served communities. There has been growth in the number of agent touchpoints and volume of banking inclusion services such as POS cash out, G2P Disbursements and payments (e.g. Tradermoni, GEEP etc.), funds transfer and wallet creation in under-served or rural communities. These have improved these communities’ economic development.

As a result, investment in advertising and brand identity has increased. The huge investment in this area has created an avenue for state governments to earn internally generated revenue from operators and agents alike. However, this poses a disincentive for Super Agents & operators as it impacts startup capital and agents’ available trading capital respectively.

Foreign Direct Investment (FDI):

There is growing evidence that inclusive financial sector development can reduce poverty and inequality. When previously unbanked citizens save and

By mobilizing these savings for investments, banks and other financial institutions mobilize these savings for investments that, in turn, help grow the country’s productive sector and spur foreign businesses. In addition, Nigerian Fintechs in the digital financial services space have received multiple rounds of funding and seed capital through foreign direct investments. This has been done by donors and investors across the globe in the past five years.

International donor organisations e.g. Bill and Melinda Gates Foundation also drive Foreign Direct Investment through their partnership with EFInA to sponsor projects on raising financial inclusion rates across the country.

All these highlight the potential and need for a wider-scale promotion of financial inclusion for Nigerian society.

Financial inclusion is key to providing financial services to the unbanked.

Harnessing the Buying Power of the Financially Excluded

Financial inclusion has as much potential to help financial institutions lend to even poorer communities and reach rural clients. This is as they do to help commercial banks reach the lower middle class.

Only 40.1 million of the adult population have no access to formal or informal financial services. Mobile money uptake and awareness in Nigeria remain low at about 1% and 16% respectively. In addition, EFInA Access to Financial Services in Nigeria 2018 Survey highlighted that out of the 100M bankable adult population in Nigeria, 39.7 have bank accounts, 8% have formal sector employment, 16.7% own business (non-farming), 11.2% own business (farming), 23.4% rely mainly on farming for income and about 53.4% save regularly.

Based on this data, we can broaden our understanding of the population of adults who do not have access to any financial service (formal or informal) in Nigeria, their savings and credit patterns, remittance behaviours, payment channels and their potential to use formal financial services to manage their finances.

We can say that the financially excluded have enormous buying power. Based on economic and social metrics, transactions from this segment are low value and high volume.

Harnessing buying power of the unbanked

• Deployment of products & services that meet the lifestyle of the unbanked and rural dwellers: Despite limited access to banking services, Nigerians have long practised traditional

This unbanked sector also relies on micro-loan services from credit associations that serve their interests. By offering access to the financially excluded, they have additional access to a wider range of services. This can boost the collective standard of living in those rural communities. This can improve financial literacy and awareness.

• Retail-based pricing considerations: Inefficient pricing isolates consumers who would otherwise sign up for a product or service. This is especially true for the financially disadvantaged who earn below minimum wage. By ensuring retail prices for financial services and other products are pocket-friendly, it would encourage customer loyalty and repeated use of the available services.

Deployment of Technology-driven Solutions:

As history has shown, technological innovations are one of the major drivers of economic adoption. For example, USSD is a mobile-based service that requires no onboarding for users and has gained widespread adoption. USSD offers the best available communications technology to deliver mobile financial services to low-income customers. This shows how technological adoption drives financial inclusion.

In addition, research from other countries where mobile money adoption is high has shown a positive correlation between increasing mobile money adoption and significant levels of formal financial inclusion. In Nigeria where the financially excluded population remains high at 40.1 million adults, an expansion of mobile money adoption and usage in the country presents a real opportunity to provide the poor with access to financial services as well as other social benefits and services.

Vtpass, as a fintech is ensuring that bills payment is simple, convenient and smart. Click here to pay electricity bills, recharge your cable TV, and buy educational pins.