The strength of Nigerian e-payment market

When we started our business planning process for the Visa project, we relied primarily on research data from the World Bank, Central Bank and other research outfits. We used that primary data to build on our project. We basically looked at Nigeria’s Gross Domestic Product (GDP), which is approximately $100 billion.

If we make people use card instead of cash or cheque, we would have made the economy to grow exponentially.

We are also in the process of studying the consumer behaviour pattern in the economy. Before you develop any product and drive a good margin, we need to know why you spend your money.

ValuCard Investment in Nigeria

The kind of investment ValuCard has made is huge, for example the platform that we purchased cost $1 million, and we have invested in hardware, which is about $500,000. By virtue of our exclusive acquirer, we have deployed point of sale terminals; one POS terminal cost between N50, 000 to N70, 000 and we have deployed about 2,000 POS terminals. We also have a scheme where the banks could fund and when they do that, we share the portion of income that comes to ValuCard with them. We have invested heavily in training our staff as well as bank staff involved in the system.

Effort of ValuCard in e-payment

ValuCard is still around and remains the pioneer company in electronic payment segment of the Nigerian market. There are good things and horrible things that have happened to ValuCard. The banks put together infrastructure they all wanted to

share, these infrastructure is the technology behind the company. There is a commonly shared infrastructure they all put together and they go out to compete on the products and services that come out of it.

One of the major challenges that face the project at inception was that communication system in the country was dismal, and so, the promoters of the business ended up doing an offline product. Today, the situation has changed because we needed to restructure and refocus the company. In doing so, we got a formidable partner, Visa International, which ended up investing in ValuCard. Let me say at this juncture that ValuCard is still 90 per cent owned by Nigerian banks while the rest 10 per cent is owned by Visa.

Visa looked at other companies in Nigeria before they decided to partner ValuCard. They actually found ValuCard as the right company that can effectively promote Visa’s business model in Nigeria. Nilson’s report of March last year relating to card business says that Visa controls 65 per cent of the global payment market. About 1.5 billion cards issued globally have Visa logo on them.

Basically, that puts Visa by far as the dominant player in the industry. It is an interesting context because a person from South Africa carrying a card issued by a bank in London can go to Singapore or New York and buy goods by just presenting a plastic.

With the partnership between ValuCard and Visa, we intend to bring all the best practices in the world to Nigeria. More so, one of the problems or difficulties ValuCard has encountered is wrong business model. When I came back to Nigeria in 2001 and joined ValuCard, I realized some complexities the company was facing which include wrong business model, propriety technology platform and the issue of reaching out to people. When a company is not fully in the minds of the people, it is very difficult for them to relate well with such company.

and other brands that are in the market. The reason for this is simple; the banks make more money from issuing Visa cards than other similar cards in the market. However, we intend to introduce into Nigeria fully domestic EMV compliant debit card known as Vpay. This product enables one to purchase goods and services online and this is going to happen in no distant time.

The role of ValuCard in Visa implementation

ValuCard was appointed by Visa as exclusive acquirer for Visa transactions in Nigeria. With this development, if there is a merchant in Nigeria accepting Visa card, be it domestic Vpay or global Visa product, the transaction must go through ValuCard. The reason is that it is more secured and make a lot of business sense for the bank, the card holders as well as the merchant. In most other markets, you find out that acquirers are many.

For instance, in the old ValuCard model, any bank that is a member of ValuCard consortium can be an acquirer. This can lead to confusion as there are lots of POS terminals situated at a particular location by different banks.

The other is that when the business grows and there are about 10 different acquirers, it is going to be difficult to monitor fraud because the security tools are different, as the banks do not have the same tool for detecting fraud transactions. If you have a single point for all the analysis of the transactions that take place in the country, it will be easier to detect fraud transaction.

Another benefit of single acquirer is that banks will not compete on price; there is only one price, which is shared. We have also deployed highly efficient system with easy communication. We have effective back up to ensure that our system is up and running all the time.

We intend to replicate the success of Visa in over 160 countries in Nigeria because for an entity like Visa to invest in the country shows that they are confident in the general direction of the country.

open up all the ATMs for Visa. This will happen in a week time from now.

One card for multiple purposes

Cards are supposed to meet specific needs of a customer, the cardholder. There is nowhere for now where a single card is issued to serve several purposes. Card means different things for different people. There is no single bullet in terms of card that will solve all your problems. What I am saying is that need determines the card you use.

I may decide to use UBA card, Access Bank or Skye Bank card depending on what l want. At a very infancy stage of card in Nigeria, the starting point is for any card you have to be used everywhere in the country. The limitation of looking for my symbols before I use my card is the first challenge that has to be solved. When we solve that, then banks and cards issuing entity will begin to compete for share of customer’s wallet.

Visa card. If any bank wants to be global in outlook, it must issue Visa card.

Ownership structure

It was an investment decision that the banks made willingly. They can analyze and decide to buy x number of shares or not. Initially when ValuCard started, there were about four banks that had 12.5 per cent share, UBA, Union Bank, First Bank and the rest had five per cent. Subsequently, the company went for right issue and some exercise their right while some did not.

ValuCard’s target for the Nigerian market

In a long term, my target is to have 65 per cent volume control of the market. For me, long term in card market is seven years. But in short term of about two years from now, I expect to control 40 per cent of the entire card market in the country.

Today, greater percentage of the market is controlled by Interswitch. MasterCard is coming up; eTransact is here and I believe more players will emerge as the market opens up.

Consolidation and ValuCard business

The banking consolidation is a good thing for us. When I was discussing with Visa for them to invest in the country, one of the problems they expressed is that they want us to categorize the banks for them in terms of risk A, B and C. But when the announcement was made in 2005, we had a relief as banks that opened shop in January 2006 are worthy of doing business with and the problem of categorization was solved. That is one of the benefits of the consolidation. Any bank that has license by 2006 was already a bank that can work with Visa.

The second thing is that the people now financially position the banks to open more branches to make access to card easier.

EMV chip compliant of existing

ATMs EMV chip is the most secured chip in the world today. Magnetic stripe is vulnerable to fraud. ATM machine is basically where fraudsters copy information on customer’s card. EMV chip makes it difficult for fraudsters to get information from the chip, as he needs a chip reader to access information on the card. Chip reader is, however, not easy to come by just like that.

One of the challenges we have with most of the ATMs in the market is that although most of them claim to be EMV ready, well, the hardware may be EMV ready but the software are not. We went through a lot of difficulties to upgrade some of the banks’ ATMs. For instance, when you type in your pin number, it goes from the keypad to the processor but Visa does not like that. Rather, it prefers it that the pin should be an encrypted data that goes from the keypad to the processor. That is what we call encrypted think pad.

This is what we discovered that some of the ATMs in Nigeria do not have. But most of the ones purchased newly are complaint to EMV standard.

E-commerce is taking on a new meaning in classroom and eLearning. Educational institutions have been reviewing ideal software solutions to better teach ecommerce in the classrooms.

More and more educational institutions are beginning to leverage the potential growth opportunities in teaching ecommerce to their students. As the explosion in e-commerce continues to expand, there is an opportunity for students to understand just how easy and important ecommerce is in their future plans.

With technologies such as ShopFactory 7, educational institutions can teach the basics and advanced techniques of ecommerce using full featured applications geared towards the online selling marketplace. The need for learning ecommerce for business students is increasing as the market continues to grow in every country around the world.

The knowledge base in the ease of use and online marketing principles is moving away from specialized web development service companies as a result of full service and integrated software applications. Even general business users can learn the principles and practices of ecommerce as the base of users is becoming widely spread.

The saturation of knowledge has moved out of specialized development and programming into a more “common knowledge” practice for small business, entrepreneurs and students.
Chris Moreno, of The Internet Business School spoke at The System Seminar in Chicago, IL. In April 2007. “Using a program like ShopFactory, anyone can grow an online business quickly and efficiently,” he said. “With the power of spreadsheet marketing, you can capitalize on quick features you'll need as an internet marketer.

It really is quite simple when you break ecommerce down to its basics and anyone can be a success at it. All you need to know is the basics to get started and you can learn more advanced techniques as you grow.” Ecommerce is really just like walking into a store and buying something there, except that the product is delivered to your doorstep. The trick is to ensure you're up to date with security processes, search engine strategies and other online practices to get your eStore noticed.

There's a sign at The Bagel Tree in Roseburg telling customers that checks are not accepted.
“On the business side, it's helping us right now, because when (customers) bounce the check, it's hard to track them down,” said Manager Leny Garcia. “So, it's like the money is gone.”

The Bagel Tree stopped accepting checks for payment in October 2006. Garcia said before that, the business received two to three checks every week that were returned because of insufficient funds in the check writer's account.

Garcia said some customers have expressed frustration at not being allowed to pay with a check. It hasn't hurt business, however.
“Not at all, because I think most of the food businesses right now, they don't accept checks,” she said.
That's true at McDonald's. Gary Eads owns six local McDonald's restaurants and said they stopped taking checks two years ago.

It was part of a corporate movement, but Eads said the policy was implemented locally when his restaurants went to a system that accepted both debit and credit cards.
Previously, there was a charge to customers when they used debit cards at the restaurants. The new system took away that fee.

There is still a service fee for the businesses using debit and credit card processing machines, but Eads said that is balanced by having no more bounced checks.
Nationally, the use of checks has been surpassed by electronic payments, such as credit cards and debit cards.

A 2004 study by the Federal Reserve showed the total number of electronic payment transactions was 44.5 billion in 2003, compared to 36.7 billion checks written.
The switch of checks to cards happened quickly. In 2000, there were nearly 42 billion check transactions, compared to around 30 billion electronic payments, according to the Federal Reserve study.

Electronic payments increased 13 percent over those three years, while check usage declined 4 percent.
“Debit card transactions, with an estimated annual growth rate of 23.5 percent, are the fastest growing type of electronic payment,” a Federal Reserve release states.

The number of people currently using cards and how much they are spending is the subject of another Federal Reserve study currently under way. The results are scheduled to be released later this year.

With the imminent construction of the East African Submarine Cable System (Eassy), the Development Bank of Southern Africa (DBSA) has “tentatively” set aside $40 million for project participants.
DBSA ICT specialist George Finger says the final amount the bank will provide as investment funding to Eassy participants will depend on how much other investors, such as the African Development Bank and the World Bank, are willing to invest in the project, he says.

“The bank's investment in Eassy can go up or down, depending on how much appetite for risk the other financiers have.”
Sammy Kirui, chairman of the Eassy project management committee and MD of Telkom Kenya, says the financial aspect of the Eassy project is expected to be concluded in the coming weeks, when the physical implementation and construction of the cable system will begin.

Finger says the DBSA has been in constant discussion with the Eassy project coordinators, as well as other investors, to finalise the role each party will play in providing funding.
Meanwhile, the DBSA is developing a new strategy to give ICT investment a more regional flavour, which will see country lending caps increased, Finger says.

He would not provide firm details about the amount the bank plans to invest in ICT in the 2007/8 financial year. However, he explains the DBSA's 70:30 split in investments in favour of SA would change to a greater focus on regional projects.

Finger previously said ICT investment increased from accounting for 8% of the DBSA's investment in the 2005/6 financial year, to 20% in 2006/7. Last year, ending in March, the bank's portfolio of commitments in the ICT sector was over R3.2 billion, half of which is earmarked for spending outside SA, he says.

The investment cap for each of the countries in which the DBSA invests has also transformed in line with the changes in policy and regulatory framework, he says.
“It is very difficult to state what the new caps will be, as this strategic information would provide competitive advantage to our competitors.”

He says the DBSA still has a big appetite for risk and continues to invest in countries where other investors may be unwilling to go.
“Sometimes we burn our fingers, and we just have to live with the pain, but we do believe the bank should play a strong role in developing communities.”

The DBSA also provides investment funding to local operators who wish to expand into the African continent and entities that have been licensed as second national operators in their own countries, says Finger.

He notes there has been a growing demand for investment funding from African telecoms operators as the telecoms environment has become more liberalised and investors see more opportunities.
“The DBSA's ultimate goal is to encourage competition in the sector and assist to

To further curb the challenges being faced by banks and financial institutions is data and customer management, the Computer Warehouse Group (CWG) through its software subsidiary, ExpertEdge Software and Systems, has introduced two banking solutions.
The company, which introduced the Oracle Data Warehousing and Oracle Business Intelligence solutions, disclosed that currently banks are faced with the challenge of improving efficiency and profitability.

Speaking to ICT TODAY at a session organised for banks and financial institutions in Lagos, James Agada, managing director of ExpertEdge Software and Systems, said the only way to enhance profitability and efficiency in financial institutions is to have coordinated information about the profitability of individual customers, staff and branches of the institution. “Being a big bank is no longer news, the issue now is how to be profitable and remain profitable,” he noted.

Explaining the effectiveness of the Oracle Data Warehousing solution, Zakhia Zaarouf of Oracle Inc noted that the solution enables the concentration of bank data in one location but only allows for each department to have access to relevant data from the pool.

This, he said provides direct answer to the provision of BASEL II accord which tends to ensure that profitability of various department be separated.
Joseph Diouf, while explaining the need for Oracle Business Intelligence noted that the solution is meant for retail banking and institutional finance. “We take data from customer level up to the CEO, making the CEO aware of every transaction.”

He said the solution helps determine customer contribution to profitability, monitor and reduce risks by monitoring customer transactions. This is done by identifying critical risk early and sending out an alert when limit is breached.

“In banks today, you have to write reports through online transaction processes, but they are designed just to handle transactions faster but not designed to get information fast. In banks there is a struggle to write reports. The product is designed to give different perspectives to report writing and extraction,” Agada said.

A web-based application, the solutions would be supported by ExpertEdge. Further assuring the company’s competence in implementation, support, enhancement and training on the solutions, Agada said: “We are very competent as Oracle Certified Partner. We have probably about 35 software consultants who are working exclusively on banking solutions. While getting tool-specific, we are also training people for that.

While citing the company’s success in the implementation of Finacle as an example of its efficiency, Agada said the company’s role would include tailoring the solution to the Nigerian environment, upgrading when necessary and traning IT managers to the use of Oracle solutions.