e-Commerce Technology & Payment Systems Deployment Across Africa: The Case of Nigeria

April 25, 2013

Outline

Definition of eCommerce Statistics Channels, Players & Drivers Nigerian Success Stories

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Challenges of eCommerce
Future Outlook Conclusion
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What is eCommerce?

e-Commerce (electronic commerce) refers to the use of communications technology & electronic systems such as the Internet to buy, sell & market goods and services to customers. This is to facilitate paying bills, shopping online, applying for vacancies, registering for exams, etc e-Commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems

The mass adoption of the Internet and the boom of the www have created a paradigm shift in the way businesses are conducted today, leading to the emergence of e-commerce
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The global reach of the Internet means that the local neighborhood is not defined by physical geography but by specialty & preference. Today, the line between e-commerce and traditional commerce is becoming more blurred as businesses are moving from the brick and mortar shops to take up residence at web sites.
E-commerce offers a level playing ground for large businesses, as well as small and medium-scale enterprises (SMEs) to operate in the global market-place; and for regional businesses and communities to participate in social, economic and cultural networks seamlessly across international boundaries (Mary-Anne, 1998).

Some Statistics

Channels, Players & Drivers

E-Payment Channels

Bank Branch, Merchant Location, Agent Location

Automated Teller Machines (ATM)

Point of Sale (POS) terminals

Internet

Mobile

Kiosk

Voice Based (IVR)

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The Players

Switching Companies
Banks & Fis Mobile Money Operators Regulators Card Perso/Printing Companies Telco/Data Service providers PTSA/PTSPs Merchants/Billers Cardholders

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eCommerce Transaction Drivers

Number of active cards Transaction success rate Application uptime Switch uptime Uptime of clients system (and other merchant/e-payment stakeholder system) Availability /uptime of network (VPN/Internet) Availability /uptime of Bank host Number/availability of channels Number of Banks utilizing application/services Risk appetite of stakeholders especially Banks Volume of transaction processed Distribution/Delivery channels for redemptions User experience Loyalty Schemes Adoption by merchant/corporate organization/government entities
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Some Regulatory Policies impacting eCommerce

Cash Policy - Cash withdrawal & lodgement limit - Cash in transit services to merchant - 3rd party cheques above N150,000 non eligible for encahment across counter

FUNDS DISBURSEMENT -End to end straight through processing Regulated transfer rates

ATMs - Interbank withdrawal fee removed - Offsite ATMs - 72hrs resolution for complaints - Camera - PCIDSS compliance - EMV level 1, 2 ATMs - EMV cards - Contact/Helpdesk

POS - Certified POS brands - Introduction of rolesPTSA, PTSP - New sharing formula

Prepaid cards - Must be EMV compliant - KYC required - N250,000 balance limit - Backed up by a commercial bank - Funds subject to insurance deposit protection

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Attempts at Legislation
Several relevant Bills introduced to the National Assembly include:
Cyber security & Information Protection Bill of 2010 Electronic Transactions Protection Bill of 2010 National Internal Security Bill of 2009 Security Communications Interception and Monitoring Bill of 2009 Critical Infrastructure Protection Bill of 2009 Computer Security & Protection Bill of 2009 Electric Commerce (Provision of Legal Recognition) Bill of 2008 Electronic Fraud (Prohibition) Bill of 2008 Nigerian Antitrust(Enforcement, Miscellaneous Provisions etc) Bill of 2008 Cyber security and Data Protection Agency (Establishment) Bill of 2008
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Nigerian Success Stories

With the help of Technology, the Internet, cashless payment systems and gateways, anyone can set up an e-commerce website and sell anything - physical goods or services - from any corner of Nigeria and the world.
The biggest names have been growing in popularity because they are spending vast amounts to get your attention. QuickTeller.com, Konga.com, DealDey.com, Jumia.com, huntella.net, buylikemagic.com, uk2meonline.com, etc and many other sites are springing up every day.

Some of these sites are dedicated to particular items like Sunglasses.com.ng, BeddingsnBeyond.com, and the list goes on and on and on.

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www.dealdey.com

DealDey started with a humble ice cream deal on March 22, 2011, many felt it would be just another e-commerce service that would soon bite the dust. But while the company received $1 million in funding last year from Sweden-based Kinnevik, a $7 billion investment holding company, it has yet to take any other funding and seems to be growing its revenues month-on-month. With close to 15,000 discounted deals so far on a range of products and services in restaurants, spas, as well as retail shops, and currently with 1,600 merchants (up from 245 merchants one year ago) and over 88,000 purchases (up from 6,000 a year ago), the service is one of the fastest growing e-commerce platforms in Nigeria.
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- techloy.com
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www.jumia.com

Jumia, a leading online retailer in Nigeria, received an investment of US$26 million from Summit Partners, in a move that will see the company develop its brand across Nigeria, Egypt and Morocco. As a place for direct retail shopping online, Jumia implements 24-hour availability, a local and global reach, and the ability to interact and provide custom information and ordering, as well as multimedia prospects. As Nigerias no.1 online retailer, Jumia plays big within the Nigerian market, with a vision to being the solution to online retail in sub-Saharan Africa.

Web Research siteAlexa.com places Jumia as the fifth largest Nigerian content site, and the founders say their order volumes have increased significantly.
- www.humanipo.com
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www.quickteller.com

QuickTeller is the value added service platform of Interswitch Ltd, with multiplicity of usage. Quickteller has integrated to about 15 major mobile payment operators, 20 international funds & remittance companies & over 10 internet banking portals. It aggregates various Billers (over 160) across various sectors & focuses on enabling essential services (including utility payments) to be paid conveniently from one platform. QuickTeller was launched in 2010 and has processed over 25 million transactions till date; supported include: Bill payment, airtime recharge purchase, cardless transaction/transfer, inter-bank transfers, international remittance. These transactions can be done at over 10,000 ATMs, www.quickteller.com, mobile devices.

Verve, Mastercard Verve & Naira Mastercard brands are currently accepted for payments on QuickTeller. It is one of the fastest growing value added service platform in Nigeria.
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QuickTeller Transaction Volume

Source: InterSwitch - 2013

Revolutionizing e-Commerce in Nigeria

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FirstPayLink is a multi-platform Internet payment

gateway, that integrates to merchant websites to allow Internet payments using InterSwitch, MasterCard, VISA & eTranzact cards.
It offers a one-stop service for merchants to choose combination of cards to be accepted on their websites, while providing customized payment capabilities that can be tailored to each merchants peculiar needs, with flexible backend reporting, data export functionalities, and straight integration to web portals and legacy systems

In the past, payments for airlines are only made at airport ticketing desks & travelling agencies and very few Bank branches. With the advent of card payments through individual Switching companies, they converted their websites to additional channels Introduction of QuickTeller (by InterSwitch) also enabled card & non-card carrying passengers/customers transact with airlines in a convenient and flexible manner via ATMs, PoS, Banks Internet Banking solutions & QuickTeller websites.

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Some Nigerian eCommerce sites

1. 3sbids.com 2. 3stiches.com 3. aascargo.com 4. awoofshop.com 5. beademporium.co.uk 6. buycorrect.com 7. buynigeriaonline.com 8. buynownow.com 9. buyright.biz 10. circuitatlantic.com 11. dafunshop.com 12. depearl.com 13. emartnigeria.com 14. flegz.com 15. foodsmartworld.com 16. gafunk.com 17. gamestores.com.ng 18. goodlife.com.ng 19. iqrabooks.com.ng 20. ishopinlondon.com 21. kamdora.com 22. kasuwa.com 23. konga.com 24. kuuzar.com 25. laternabooks.com 26. mallforafrica.com 27. mannastores.com 28. mizzybshoesonline.com 29. mybidmonster.com.ng 30. myboolah.com 31. mygadgetsmall.com 32. naijashop.com.ng 33. naijastyles.com 34. naijaweddings.net 35. nigeriacatalog.com 36. osarmoire.com 37. outfitgalore.com 38. ovashop.com 39. procureitnigeria.com 40. quicksell.com.ng 41. sabunta.com 42. scuupng.com 43. sellbuynigeria.com 44. shop-ng.com 45. shop.verbeelen-ng.com 46. shopaholicng.com 47. shopkolo.com 48. sisime.com 49. smartbuy.com 50. smartbuy.com.ng 51. taafoo.com 52. thefloshop.com 53. time-tellng.com 54. truebranches.com 55. uk2meonline.com 56. upscalecollections.com 57. wakanow.com 58. walahi.com 59. yeside.gostorego.com 60. buylikemagic.com 61. hausofdinma.com 62. webmallng.com 63. egoleshopping.com 64. icanstock.com 65. 3al.com 66. buyology.enownow.com 67. easyshop.com.ng 68. stylerebirth.com 69. 1500naira.com 70. liberaldesigns.com 71. hellofood.com

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Benefits of e-Commerce
Avenue for revenue generation drive Provides an inroad to attract new Customers & retain existing ones

Gain mind share with Customers across International border

Opportunity to accelerate & achieve financial inclusion for unbanked

e-Commerce

Reduce TCO for banks by leveraging Shared infrastructure

Strengthens the financial Systems and economy

Provides convenience to the individual & corporate customer

Introduces efficiency

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Challenges of eCommerce

Challenges of eCommerce in Nigeria generally revolve around;

Integrity: Ascertaining that transmitted financial information is unchanged in transit. Non-repudiation: Ascertaining that all parties have non-deniable proof of receipt. Confidentially: Ascertaining that transactions are protected from possible eavesdroppers.

Reliability: Ascertaining that there is reduced possibility of failure.

Authorization: Ascertaining that individuals are recognized and granted the desired rights and privileges.
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Other challenges are; Security: The public nature of the Internet has made it vulnerable to a lot of security threats. Thus, it requires a systemic approach to guarantee its security (from Hackers & Attacks) on the fronts of web clients, data transmission, web server, and network server operating system. Similarly, moving businesses online requires efficient and effective management of operations and control (traceability, transparency, authenticity) Public Education and Acceptability Legal Framework: The Evidence Act, Cap. E14 LFN 2004 does not in any way recognise electronic evidence in any of its provisions. Lack of adequate Infrastructure Limited access to the Internet & electronic devices Relatively high shipping cost Resistance to changes in technology among customers & merchants
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Future Outlook

Improved regulatory oversight

Better financial reporting and disclosure Further regulation/new policies for adoption by the players Stronger regulation & legislation (eEvidence, etc)

Further marketdriven initiatives Mergers and acquisitions Emergence of global/ new/local players Collaboration/Joint ventures and partnerships Near Field Communication (NFC) & other contactless solutions

Emerging markets & growth opportunities Deepening penetration of adoption of alternative channels Outsourced services (of non-core activities) by financial institutions Products/solution for industry verticals (health, transport) Significant Online (web) payments penetration Mobile payment penetration & adoption

Greater emphasis on Channel development Product Development Continuous innovation Reduced cost of transactions Mobile Wallets

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Conclusion
The buzz is on. Consumer behavior towards e-commerce and mcommerce is being highly influenced. Innovation is on a high and ideas are being churned out on the fly. Young Nigerians with little or no funds are now actively involved in application development, coming up with brilliant inventions Nigeria is ready and the CBN is also positioned to spur the market. Banks & Telecom companies will implement new technologies while the knowledge gap is being bridged gradually. Once knowledge is widespread, acceptance is simplified for the Merchants & their customers, Interoperability of independent payment systems is established and entry barriers of private solution providers is lowered, then Nigeria can fully reap the fruits of eCommerce
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Thank You