COVID 19: Implications for FinTech Companies in Nigeria By Confidence Amuda

The pandemic sweeping through most of the world has wreaked havoc in all areas of the economy as well as our personal lives. Globally, schools and businesses are grinding to a halt, while governments plead for people to stay home to contain the spread of Covid-19. As we minimize personal contact, morepeople are resorting to online and digitalized platforms for goods and services hitherto offered offline. With Netflix and Amazon Prime replacing cinemas, Uber Eats and Jumia foods connecting us to our favorite restaurants, primary, secondary and tertiary institutions in the UK now deliver lectures remotely, people can also manage their finances remotely. Recently, the World Health Organization flagged cash as a conduit for the spread of the coronavirus, causing Governments and startups to intensify measures geared at shifting a greater volume of payment transactions toward mobile money and away from cash. It is a unique case of FinTech being employed to impact human behavior during a public health emergency.

Simplistically, FinTech is a contraction of the words ‘financial’ and ‘technology’. Financial technology is any technological innovation that offers financial services such as personal finance, payments, lending, asset management etc. Some of the ways FinTech companies can leverage on this global pandemic include:

Peer-to-peer payments: With many of the world’s borders closing and  people advised, or even forced to stay home, digital wallets, mobile money and cross border payment and remittance solutions such as PayPal, Venmo, Square Cash, Google Pay might be the easiest and quickest channels to send money to peers, within the country or internationally. In Ghana, Uganda, Kenya, Tanzania, Rwanda, and Nigeria, Chipper can be used to transfer money to anyone in these countries without any charges.

Online merchant payments: As non-essential service providers are being forced to shut down to curtail the spread of the pandemic, e-commerce and online merchants are gaining traction as people resort to these platforms for supply of both essentials and nonessentials. With a variety of digital payment methods such as mobile money in Africa, QR payments in Asia and digital wallet payments in Europe and North America available to online buyers, less reliance should be placed on cash based transactions to limit the spread of the dreaded virus.

Consumer lending: As businesses close down, investments crumble and multi-sectoral retrenchments occur over the next couple of months, loans of all types are likely to rise in demand. It is proposed that indigenous FinTech companies and traditional financial institutions master digital credit scoring by utilising advanced machine learning and artificial intelligence to facilitate the efficient provision of loans. Some FinTech companies already offering this include: Affirm, Borro, Avant, C2FO, Credit Karma, Fundera, Renmoney and Fairmoney.

Health and life insurance: In the face of a life-threatening pandemic, health and life insurance will be amongst the most in demand financial services. InsurTechs such as Oscar in the U.S. have come to the fore with digital solutions, offering personalised plans to individuals, families as well as businesses while another InsurTech, Ethos also in the U.S. is tackling the life insurance space and increasingly gaining traction.

Some African governments have also implemented key financial policies targeted at limiting the spread of the virus. In countries where no directives have been issued, FinTech startups have risen to the occasion.

In Kenya, Kenya’s President Uhuru Kenyatta gave a directive “to explore ways of deepening mobile-money usage to reduce risk of spreading the virus through physical handling of cash”. In line with this directive, Safaricom, the country’s largest telecom service provider implemented a fee waiver for M-Pesa, East Africa leading mobile money provider to reduce physical exchange of cash and curtail the spread of COVID-19. The company directed that all peer-to-peer transactions under 1,000 Kenyan Schillings (≈ $10) would be free for three months.

Ghana is also using digital finance as a measure to reduce the spread of COVID-19. On March 20, the country’s central bank directed mobile money providers to waive fees on transactions of GH₵100 (≈ $18), while placing restrictions on withdrawals from mobile-wallets.

In Nigeria, regulators are yet to issue any directive geared towards utilization of mobile payment solutions and other FinTech platforms in the wake of the pandemic. However, Paga, a Lagos based FinTech had implemented fee adjustments, allowing merchants to accept payments from Paga customers for free, The startup will also allow free transfers up to roughly 5000 Naira (≈ $15) from customer accounts to bank accounts, to encourage more digital payments in Nigeria and reduce cash based transactions. FairMoney also offers services for users to renew subscriptions on DStv, GOtv and Startimes with no transaction costs. You can also get a 3% discount instantly when you buy airtime and mobile data on all networks in Nigeria.

It is expedient for the Central Bank of Nigeria, the key regulator of the industry charged by Section 2(d) of CBN Act 2007 with promoting a sound financial system for Nigerians to rise to the occasion and exercise the powers conferred on it by section 47(2) of above Act. The section provides:

Notwithstanding sub-section (1) of this section and in furtherance of the Provisions of section 2(d) of this Act, the Bank shall continue to promote and facilitate the development of efficient and effective systems for the settlement of transactions (including the development of electronic payment systems).

In the face of this global health emergency, it is imperative that the CBN pursuant to above section of the Act, relax Regulations 2.6.1 of Guidelines On Operations of Electronic Payment Channels in Nigeria, which provides that fees and charges for POS Card Acceptance services is to be agreed between the service providers and banks / entities to which the services are being provided. It is proposed that this regulation be relaxed and all Point of Sale and Mobile Point of Sale payments be without charges.

Section 10 and Part 3 (dealing with Mobile Money Operators) of Guide to Charges by Banks, Other Financial and Non Financial Institutions 2020, should also be relaxed and the respective charges for Instant (Inter-Bank) Electronic Funds Transfers, Use of Unstructured Supplementary Service Data (USSD), Intra and Inter scheme money transfers with Mobile Money Operations within a specified limit be waived.

These steps will spur increased reliance on electronic transfers, digital finance and electronic commerce thereby reducing person to person contact and circulation of currency which are catalysts for the spread of COVID-19.

It cannot be overemphasized that there is a clear need for an improved comprehensive legal and institutional framework to facilitate growth in this integral sector of our economy as technological innovations have revolutionalized world economies and we cannot afford to be left behind.