Diarra is “extremely bullish” about using fintech partners to bring more merchants into cashless systems, she says on the sidelines of the African Financial Industry Summit in Togo in late November. Partnering with banks and fintechs in Nigeria means that Visa can be “a catalyst” for small business financial inclusion.
Nigeria has an estimated 20m small businesses which don’t accept digital payments. Proponents of reducing the use of cash claim reduced scope for corruption, increased financial inclusion and better tax collection as among the benefits. Critics have argued that the central bank is pursuing the policy too quickly and that much of the necessary technical infrastructure for a large-scale shift away from cash in Nigeria is still lacking.
Visa in November 2021 partnered with Nigeria’s Kuda Technologies, allowing the digital bank to roll out virtual and physical payment cards for customers. “Work is in progress already” on talking to more potential partners, Diarra says.
Licenses for payment credentials in Nigeria are being issued in what Diarra calls a “very measured approach.” The pace at which the credential licences are issued will help to determine how quickly new partnerships can be sealed, she says. “The key is to make sure we can on-board them onto our network.”
Nigeria has taken radical steps to support its goal of creating a 100% cashless society. The eNaira, Africa’s first central bank digital currency, was launched in 2021. The physical currency has been redesigned with the old notes ceasing to be legal tender on January 31, 2023.
The central bank has also imposed drastic reductions on maximum cash withdrawals by individuals and businesses which are due to take effect on January 9.
Visa in December said it will invest $1b to scale up in Africa by 2027. The company estimates that 500m people in Africa lack access to formal financial services, while more than 40m merchants don’t accept digital payments.
The company supports payments in all African countries. Diarra sees scope for use of mobile phones to allow merchants to accept digital payments without the need for expensive point-of-sale systems. Visa is currently carrying out pilot studies in six African countries. Diarra is determined to contribute to reducing the use of cash in favour of digital payments. “That’s what drives me. All the players in the ecosystem need to come together to facilitate it.”
She sees great potential for growth in the tokenisation of transactions. Tokens create a secure, but untraceable, link from the merchant back to the customer card used to make a payment. This allows merchants to hold customer data without the risk of confidentiality being breached.
The information generated by a stream of digital transactions can then be used to allow partner banks to gauge the creditworthiness of people who it currently cannot assess.
Banks need to find ways to lend to small merchants in Nigeria and Africa, Diarra says. “We want to make sure this kind of technology is deployed across the continent.”
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