78% of Payments Transactions Conducted on Mobile Devices –NIBSS
Source: Nigeria Inter-Bank Settlement System Plc

78% of Payments Transactions Conducted on Mobile Devices –NIBSS

Some 78% of total banking payments transactions were conducted via mobile devices in 2020, Nigeria Inter-Bank Settlement System Plc. (NIBSS) said in a report, noting that younger generation continues to drive instant payment adoption.

According to NIBSS, COVID-19 pandemic has forever changed the ePayments landscape as the pandemic accelerates the adoption of instant payments, noting the population has transitioned to electronic channels for funds exchange in the wake of Government imposed lockdowns.

It said the younger demography continues to boost the adoption of instant payments as customers between 25-34 years carried out 34% of all interbank transaction in 2020.

“We also observed 97% increase in adoption among customers age 15-24 years, with 12% of transaction initiated by this cluster”, NIBSS added.

On a larger scale, 79% of instant payment transactions were initiated by customers between 15-44 years. NIBSS said this demographic are those more likely to adopt electronic payments.

However, it added that the cluster is representative of the Nigerian population distribution, which is heavily skewed to younger age bracket.

On transaction channels, it stated that mobile remain the preferred channel with 43% of total transactions, while USSD remains a close second with 35% of transactions.

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“These remain largely unchanged from 2019. This indicates that 78% of total transfer transactions were carried out using a mobile device”, it explained.

Additionally, NIBBS spotted a significant spike in Internet Banking transactions, as they grew to 10% of the total transactions.

It attributed this development to the move away from physical channels, and the branch closures experienced in key commercial hubs in the wake of the pandemic.

Mobile payments and USSD continued to experience steady growth, growing by 84% and 80% respectively year on year, it also noted.

With about 49.5% smartphone ownership and an estimated 97 million mobile internet users, there are strong indicators that mobile and USSD payments will see significant growth in the short-medium term.

Recall that after a massive drop during the COVID-19-induced lockdown, the volume and value of online transactions in Nigeria hit new heights in Q3 2020, pointing to improved economic activities following the relaxation of the lockdown.

Despite an increase in online activity during Nigeria’s lockdown in April 2020, there wasn’t a commensurate increase in financial transactions online.

While Internet users increased by 2.5 million and Instagram Live became the new television for most Nigerians, online transactions dropped by $10 billion (₦3.83 trillion), and Jumia’s Q2 2020 report showed reduced gross merchandise value (GMV).

However, these figures began to improve as economic activities resumed in May. And this cut across all NIBSS Instant Payments (NIP) channels like point of sale (POS), USSD, Internet banking, mobile apps, etc.

According to data from the Nigeria Inter-Bank Settlement System (NIBSS), online transactions* hit 569 million by the end of Q3 2020, up 41% from 403 million in Q2 2020. The value of these transactions increased by 50% from 29.6 trillion ($77 billion) to ₦44.3 trillion ($116 billion).

Apparently, Nigerians posted major high-value transactions as the average transaction value for this period was ~₦78 billion ($203 million) compared to ₦73 billion ($189.5 million) in Q2 2020.

As more merchants embraced contactless payments, the volume and value of POS transactions increased; POS usage went from 138 million in Q2 2020 to 162 million.

The value of these transactions was ₦1.2 trillion compared to ₦995 billion in the preceding quarter. Compared to Q3 2019, the country’s NIP transaction numbers seem quite impressive.

In Q3 2019, 299 million online real-time transactions were recorded, but the numbers for the same quarter in 2020 (569 million) show a 90% increase in transaction volume in just one year. The value of these transactions (₦44.3 trillion or $116 billion) also went up 70% from ₦26.18 trillion ($68.3 billion).

However, it would seem like people spent more with each transaction in Q3 2019 than they did in Q3 2020. The average transaction value stood at ₦87.5 billion ($228 million) in Q2 2019, but it dropped to ~₦78 billion ($203 million) in Q3 2020.

Encouragingly, this suggests that Nigerians are gradually performing more high-volume, low-value transactions across major NIP channels, which according to some experts is a strong indicator that more people are embracing cashless payment.

A NIBSS report shows that Lagos, Rivers, Ogun, and Oyo states, as well as the FCT, recorded the highest number of transactions in 2018 and 2019.

Recall that four of these states were among the six that the Central Bank of Nigeria (CBN) chose to kick-start another version of its cashless policy in 2019.

It is, therefore, highly likely that players in these four states would record the most instant payment transactions in 2020. However, we wouldn’t rule out a surprise or two.

 For now, it is not certain which channels are attracting the most usage. The NIBSS is yet to upload a comprehensive report on each channel but some insight can be gained from previous trends.

Though POS usage has been increasing, the growth trends in 2020 have followed a pattern similar to previous years, and the increased business activities did not cause a drastic surge in growth.

According to the NIBSS, in recent years mobile phones and tablets have been the major channels used for NIP transactions. Mobile phones and tablets were responsible for 77% of instant payments between January and June 2018. By 2019, this figure increased to 80%.

In the first half of 2018 mobile banking recorded the highest usage with 132 million transactions; USSD followed closely with 109 million transactions.

In 2019, the volume for mobile banking surged to 220.8 million and USSD to 188.9 million. Internet, smartphone, and feature phone usage in Nigeria have been growing in recent years, and this seems to have a causal link with the growth of instant payment transactions.

The Nigerian Communications Commission (NCC) places the number of Internet users at 149 million as of August 2020 — a 26.5 million increase from August 2019.

Statista, likely accounting for multiple phones and subscriptions, puts the number of Internet users at 85 million in 2020.

Though the actual numbers are difficult to ascertain, the business data platform estimates the current number of smartphone users to be between 25 million and 40 million, at least 2 million higher than 23 million in 2019

Interestingly, as of May 2020, the number of active bank accounts in Nigeria surged to 111.5 million up 52% from 72.9 million in May 2019.

Contrastingly, as at October 18, 2020, the country’s BVN count stood at 44,083,732.

Despite the seemingly huge numbers for online transactions, two major points stand out: Nigeria remains a relatively untapped market, and the projected increase in Internet and smartphone users might do wonders to drive a largely cashless Nigerian economy.

78% of Payments Transactions Conducted on Mobile Devices –NIBSS