Five years after Nigeria’s Central Bank (CBN) launched its Cash-less Nigeria project to reduce the amount of physical cash circulating in the economy, it is finally catching on.
Data from Nigeria Inter-Bank Settlement System (NIBSS) showed a significant uptick in the use of Point of Sale (PoS) terminals for payments last year. Total transaction volume from January to November 2016 increased 65% against all of 2015. The value of PoS transactions have doubled between 2014 and 2016.
CBN hopes its cash-less policy will curb the “negative consequences” of frequent use of cash—the high cost of handling cash for banks and enabling corruption. Given Nigeria’s long-running problems with corruption, the cash-less policy is focused on creating electronic paper trails to make fraud-related payments easily detectable. While catching corrupt bad guys is great, the long term goal is to create an economy with fluid payment methods, in line with modern trends.
Beyond PoS payments, other signs suggest the CBN is on track to achieve its goal as Nigerians are embracing alternative payment methods. Last August, Paga, a mobile money operator, said it had reached 5 million customers, 20% of whom were active. The operator said it handled almost $800 million worth of transactions between July 2015 and July 2016 compared to the three previous years in which it handled $1 billion worth of transactions. The service allows customers to receive and send money, pay bills, and purchase airtime through its platforms, whether or not they have a bank account.
The future for electronic and online payments in general looks bright. Over the past year, several start-ups have explored technology to enable Nigerians make more payments online. Paystack, one of those payments-focused start-ups, recently closed a $1.3 million seed investment round led by Chinese investment holding giant Tencent, Comcast Ventures, the venture arm of the US largest cable company, and Singularity Investments.