Nigeria is experiencing strong momentum in digital payment adoption, presenting a significant opportunity to empower Small and Medium-sized Enterprises (SMEs) and drive economic progress.
A recent Visa report, titled “Value of Acceptance: Understanding the Digital Payment Landscape in Nigeria,” reveals a significant trend among Nigerian SMEs towards adopting digital payment solutions.
The report highlights that 83% of surveyed merchants believe that digital payment is an important investment for growth, and a substantial number of them recognize the need to invest in digital solutions. While cash payments remain prevalent, over half of merchants have a preference for digital payment methods, highlighting a strong foundation for expanding digital payment adoption.
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The potential for digital payments among SMEs is significant, with many incorporating digital adoption in their plans. This ongoing shift is driven by reported lost opportunities when customers do not have cash on hand, leading to abandoned sales as reported by 44% of cash-only SMEs. Additionally, Nigerian SMEs are showing greater confidence in card payments, with only 22% expressing fraud concerns related to cards compared to 62% for cash.
A majority of merchants also recognize the positive impact of digital payments on their business growth, a recognition crucial for driving sustained adoption. This widespread interest translates into concrete action, as 76% of cash-only SMEs intend to acquire POS systems, demonstrating the potential for rapid expansion of digital transactions.
However, despite cost not being the primary concern for SMEs planning to go digital, overcoming barriers such as perceived technical issues and fraud concerns is critical to sustaining this growth trajectory, while propagating success stories and testimonials can build confidence among merchants to adopt card payments, further enabling the digital economy to thrive.
Understanding merchant motivations is key to accelerating adoption. In Nigeria, merchants find the cash to be a convenient payment mode with a low risk of payment errors and an easy refund process. On the other hand, cards are valued for their speed, with around 90% of those SMES accepting digital payments believing card payments have a positive impact on their revenues and footfall.
Moreover, digital payments are a gateway to broader financial inclusion. For the unbanked, they often represent the first step into the formal financial system, enabling access to services like remittances and government assistance.
Despite the evident benefits, several barriers hinder digital payment adoption among Nigerian SMEs. While confidence in card payments is relatively high, challenges such as payment failures cited by 42% of SMEs and a strong customer preference for cash present significant hurdles. Additionally, limited awareness about the advantages of digital payments and inadequate infrastructure further complicate the transition.
Addressing these challenges requires a multi-pronged approach which include:
Bridging the Customer Gap:
While merchants are ready to accept digital payments, customers still prefer cash. Increasing awareness, enhancing financial literacy, and offering incentives can encourage customers to transition to digital payments.
Facilitating POS Adoption:
With 76% of cash-only SMEs planning to adopt POS systems, it’s critical to focus on perceptions around the costs of acceptance, ensuring transparency, and simplifying procurement to accelerate the process and drive faster adoption.
Enhancing Infrastructure:
To address 42% of businesses that are concerned about payment failures, investing in robust and reliable infrastructure is crucial. Upgrading to modern technology and equipment can significantly enhance the reliability of digital transactions, thereby increasing trust and confidence among users.
Addressing Fraud Concerns:
Fraud worries are a major barrier. Informational campaigns focusing on security features, particularly the lower fraud risk associated with card payments (22% compared to 62% for Cash), can bolster awareness around secure payments and help shift perceptions to promote adoption.
Conclusion
By incentivizing the use of digital payment solutions among customers and providing the necessary support for SMEs to transition to these technologies, Nigeria can unlock the full potential of digital payments and drive economic growth.
Notably, investing in SME digitalization through digital payment promotion is a strategic imperative for governments seeking to drive economic growth, enhance competitiveness, and foster financial inclusion.