Is NIBSS NQR really the solution to Nigeria’s e-payments puzzle?

When the Central Bank of Nigeria (CBN) first introduced the cashless policy in 2011, I was in high school, with my final exams in view and little or no knowledge about any payment mediums other than by cash.

Fast forward to 2021, a Statista Global Consumer Survey reflects that 77% of payments in stores, restaurants and point of sales (PoS) within 12 months have been with cash.

Make no mistakes, the CBN has approved various e-payment mediums to drive its cashless policy. These include Point of Sale (PoS), bank transfers, NIPS, Mobile Interscheme etc. But these e-payment systems have continued to suffer decline and decreasing usage.

In August 2021, PoS suffered its lowest transaction volume in six months with just 75.6 million. This represents a 7.4% decrease from the 81.6 million transacted in July. This is despite a 3.9% rise in registered PoS terminals.

The value of transactions for the month also fell by an outstanding 9% (N49.8bn) to N504.9 billion, down from N554.7 billion recorded in July. This is according to the recently-released data by the Nigeria Interbank Settlement System (NIBSS).

Overall, the volume of e-payment transactions fell from N402.3 million in July to 397.9 million in August, representing a fall of 1.09%. The value of e-payment transactions also suffered a colossal N190 billion loss, falling to N23.97 trillion in August 2021 from N24.16 trillion in July.

The question now is; how much progress has really been made on the cashless policy after 10 years?

With this backdrop, the Nigerian Inter-bank Settlement System (NIBSS) introduced Nibss Quick Response (NQR) – Pay Sharp Sharp. A secure QR-code-based payments and collections platform designed for merchants and customers to receive and make payments for goods and services.

How does NQR payment work?

NQR Payments are instant like normal transfers. The technology runs on Nibss instant payment infrastructure (NIP) which is the same technology currently used by various banks and payment service providers (PSP) for instant transfers and payments.

It was touted for its ability to disrupt the payments landscape by reducing costs and inconveniences associated with pre-existing payment technologies such as Point of Sale (POS) and cards.

The NQR Payment Solution is a secure QR-code-based payments and collections platform designed for business owners and customers to receive and make payments for goods and services.

This indigenous payment solution will unify all available closed QR code schemes in the country for consistent user experience and acceleration of digital adoption. It offers a simple, secure and contactless payment option.

Globally contactless payments are receiving greater traction. Due to the pandemic, contactless payments boomed from 35% to more than 50% in Germany while China recorded a 23% increase in e-wallet purchases over cash purchases. Visa estimates that more than 300 million contactless cards would be in circulation by the end of 2020.

Technology giants, Google, Apple and Samsung have developed payment apps to facilitate payments via mobile phones all in a bid to boost contactless payments.

NQR is set to do the same with its technology that allows users make payments with minimal contact and greater privacy. But is this system really the solution to the country’s e-Payment troubles?

NQR may not be for everybody

With a population of over 200 million people, Nigeria has roughly 170 million mobile phone users based on subscriptions. However, according to a Vanguard report, only between 10 to 20 percent of the population use smartphones. This puts the total number of smartphone users to be roughly between 20 million and 45 million.

While the projections foretell a strong growth rate, the reality suggest lesser population capable of leveraging NQR technology because it needs a camera to scan the QR code. The QR code may be affordable because it is free, but its usage is only limited to 23 per cent of the national population who can afford a smart phone.

NQR is important for a Nigeria trying to move from Covid-19. While not necessarily a new technology, it is quite fresh to the Nigerian populace. Considering how much financial institutions have invested on Point of Sale (POS) terminals over the years for which they’re yet to recoup their investment, it’s no brainer why Nibss would release this solution.

However, NQR isn’t here to challenge the existing payment systems, its technology is limited only to a few empowered enough to afford a smartphone. While it reduces the fraud risk and is cost-effective, ultimately, it isn’t for everybody.