The widespread uptake of new digital and real-time payments services in Nigeria has helped to unlock $3.2 billion of additional economic output last year, representing 0.67 per cent of the country’s gross domestic product (GDP) last year.
This boost from digital payment adoption is also forecast to rise to $6 billion by 2026 (1.01per cent of the GDP, thus driving growth and financial inclusion at unprecedented levels for the largest African economy, the third Prime Time for Real-Time, published by ACI Worldwide, in partnership with GlobalData, a leading data and analytics company, and the Centre for Economics and Business Research (Cebr) released yesterday showed.
The report, however, showed that payments fraud remained high as one in four consumers in Nigeria was a victim of fraud last year. 27 per cent fell victim to a confidence trick, 14.3 per cent had their card details stolen
The report, which tracks real-time payments volumes and growth across 53 countries – includes an economic impact study for the first time, providing a comprehensive view of the economic benefits of real-time payments for consumers, businesses, and the broader economy across 30 countries.
The report showed Nigeria as Africa’s undisputed real-time and digital payments leader. The country recorded 3.7 billion real-time transactions in 2021 – ranking sixth in the league table of the world’s most developed real-time payments markets – behind India, China, Thailand, Brazil, and South Korea. The widespread uptake of new digital and real-time payments services in Nigeria helped unlock $3.2 billion of additional economic output in 2021, representing 0.67 per cent of the country’s GDP.
In 2026 real-time transactions are forecast to rise 8.8 billion in 2026, a five-year Compound Annual Growth Rate (CAGR) of 18.6per cent. This will help unlock $6billion of additional GDP in 2026, representing 1.01per cent of the country’s GDP. This means Nigeria ranks in fourth place among the world’s economies realizing the maximum economic benefits of real-time payments.
Speaking on the report, Head, Middle East, Africa, and South Asia, ACI Worldwide, Santhosh Rao, said: “Nigeria is fast becoming a poster child across Africa for the successful digital transformation of the country’s economy.’’
Accelerated by the COVID-19 pandemic, Nigerians expect higher speeds, greater simplicity, and modern thinking from financial service providers.
While cash is still being used widely, the shift towards greater adoption of digital and real-time payments services is testament to the success of government regulators in fostering rapid growth in digital openness, particularly payments.”
The rapid growth has also been propelled by key players in the country’s payments industry. One of these players, Interswitch Group, a leading payments technology company, has been actively driving revolutionary payment innovation in Nigeria for 20 years.
In recent years, Interswitch has partnered with ACI to deploy cutting-edge technologies that are changing the face of payments in Nigeria. These innovative products include single- issuing platforms for all payment types, digital payment acceptance for acquirers, enterprise payment platforms and secure omni-channel payment processing platforms, among others.
Also speaking on the development, Managing Director, Digital Infrastructure and Managed Services, Interswitch Systegra, Jonah Adams, said: “As more Nigerians continue to adopt real-time and digital payments, we have seen a commensurate increase in the need for backend infrastructure that enable these transactions. Interswitch and ACI are committed to driving digital transformation across Africa via the deployment of relevant digital, innovative Infrastructure and solutions that optimize business efficiency and drive customers’ growth and profitability.”
Rao said: “Our research shows that governments that advance the real-time modernization of their national payments infrastructure create a win-win situation for all stakeholders in the payments ecosystem. Consumers and businesses benefit from fast, frictionless and hyper-connected payments services, financial institutions future-proof their business in a highly competitive environment by speeding up cloud-first and data-centric modernization, and national governments boost economic growth, reduce the size of their shadow economy and create a fairer financial system for all.”
Nigeria’s real-time scheme – NIBSS Instant Payments (NIP) – was launched in July 2011. The system is supported by all commercial banks, micro-finance banks and mobile money operators, and can be used via a number of channels, including internet and mobile banking, bank branches, kiosks, mobile USSD, POS terminals and ATMs, which helped NIP to achieve today’s high adoption and usage rates.
There is now an ongoing drive within Nigeria to extend this momentum to cross-border use cases – a logical next step that will simplify and reduce the cost of international business, while removing exchange rate-related surprises on returning home or for remittance payments. And more and more nations across the continent are positioning themselves to replicate Nigeria’s success as Africa as a whole remains a continent of untapped potential.
Rao said Africa is in an ideal position to capitalise on the lessons learned from other countries and continents and maximise the impact and benefits real-time payments provide.
He said: “There is a renewed appetite and enthusiasm across the continent to increase financial inclusion and use real-time payments to build the continent’s future digital economies. Banks should look at the market as entering a new phase of high opportunity and assess whether the technology they currently use is fit for purpose. Banks that want to succeed and successfully compete in the future need to embark on a long-term digital transformation strategy that allows them to both connect to new schemes easily and innovate quickly using the real-time rails.”
Other key findings of the report showed that in 2021 – 55per cent of the value of payments transactions in Nigeria were real-time, 37.7per cent via other means of electronic payments, and 9.3per cent in cash – the value of real-time transactions as a percentage of total transactions is set to rise to 64.4per cent in 2026 (whereas the value of electronic and cash transactions is set to fall further, to 30.7per cent and 4.9per cent. It also said 64.7 per cent of consumers in Nigeria own and use a Mobile Wallet.
The theoretical impact of all payments in Nigeria being real-time could add 4.4 per cent of formal GDP by 2026. This does not suggest that there is no longer a place for non-instant electronic payments or paper-based payments.
Real-time payments have substantially contributed towards the formalization of Nigeria’s shadow economy – the size of the shadow economy was estimated to be 47 per cent of formal GDP in 2021, equivalent to approximately $228 billion – in the absence of real-time payments, Nigeria’s shadow economy would have been 1.4per cent larger.
Banking Modernisation: Banks look at the Cloud to help with their digital transformation strategy – 80 per cent of banks in Nigeria are planning to transition to a cloud-based management platform, 70per cent are looking actively at Software as a Service (SaaS) Model.