The e-commerce sector in Nigeria showcases a vibrant mix of payment modalities in 2023. Amid the digital wave, card payments and cash transactions hold firm ground. Simultaneously, modern payment channels like bank transfers, Buy Now Pay Later (BNPL), and digital wallets weave into Nigeria's e-commerce fabric. Each contributes to the evolving consumer purchasing behavior. This article delves into the multifaceted payment ecosystem within Nigeria's e-commerce sector, shedding light on diverse payment methods' roles and impacts. It also highlights the local actors propelling these payment modalities forward, painting a comprehensive picture of the e-commerce payment landscape in 2023.
Payment by card in Nigeria
In 2023, card payments hold a pivotal role in Nigeria's e-commerce sector. Particularly, consumers highly favor debit cards for online transactions1. In 2022, they made up 37% of online transactions, showcasing their continued significance2.
To support this payment method, the Central Bank of Nigeria (CBN) is launching a Domestic Card Scheme on January 16, 20233. This initiative, in partnership with the Nigeria Inter-Bank Settlement Systems (NIBSS) and the Bankers Committee, aims to enhance financial inclusion.
Moreover, Verve International, a domestic entity, has already issued over 50 million payment cards by July 12, 20234. This issuance underscores a substantial local scheme presence in the market.
Together, these initiatives by the government and local players foster a conducive environment for card payments in e-commerce.
Payment by cash payments
In 2023, cash continues to be a vital player in Nigeria's e-commerce payment scene, despite the digital payment growth. The prevalence of cash transactions reveals a lingering trust in tangible payment methods, with about 20% of online transactions conducted in cash in 20221. The trust in online payment platforms is gradually growing in Nigeria, carving a path for more digital transactions as we step into 20232.However, a clear urban-rural divide paints a different picture. Cashless transactions mostly cluster within urban centers like Lagos, Port Harcourt, and Abuja, while cash remains king in other regions3. Economic factors play their part too. A notable rise in the circulation of physical currency in previous years showcases a sustained preference for cash transactions among a significant segment of the population4.
Payment by bank transfer
In 2023, bank transfers play a crucial role in Nigeria's e-commerce sector. This trend echoes the past, specifically 2022, when 29% of online transactions were conducted via bank transfers1. This uptake is partly due to a surge in e-payment transactions. The Nigeria Inter-Bank Settlement System (NIBSS) reveals a 42% increase in transactions on its Instant Payment (NIP) platform in 20222. The total value soared to N387 trillion, up from N272 trillion in 2021.Moreover, the volume of transactions on the platform skyrocketed by 613.1% to 5.2 billion in 2022 from 729.2 million in 20183. This steep rise showcases a strong tilt towards digital banking and instant payments. Retailers too are adapting to this shift. Digital solutions like Fincra are leading the charge. Fincra facilitates online customer payments through bank transfers4. It embeds a bank transfer method in its Checkout system. For offline payments, it deploys Point of Sale (POS) terminals with a 'pay with transfer' method. This setup eradicates long wait times and instantly confirms transactions.
Payment by installment and BNPL
In 2023, Nigeria's e-commerce sector embraces the "Buy Now Pay Later" (BNPL) trend. This method lets consumers defer payments for purchases. They receive the item first, then pay in installments. This approach provides credit at the point of sale, growing in popularity in Nigeria1.The adoption of BNPL is on an upward trajectory. A report foresees a Compound Annual Growth Rate (CAGR) of 33.0% from 2022 to 2028. This data underscores the rising acceptance of BNPL in Nigeria2. Another report, "Nigeria Buy Now Pay Later Business and Investment Opportunities Databook", echoes this positive outlook for 20233.Payless, formerly Guddies Planet, is a key player in Nigeria's buy now, pay later scene, enabling credit-based shopping for essentials1. Carbon in Nigeria and Klump are also embracing this trend with zero-interest installments and flexible payment plans respectively23. Meanwhile, CDcare's 'pay small small' model is easing gadget acquisitions in Nigeria4. Beyond, LipaLater in Kenya is simplifying shopping with easy installments5, while Jumia Pay streamlines various online transactions across Africa6.Moreover, BNPL is not just a global phenomenon. It's a local reality in Nigeria. The average monthly living wage in Nigeria stood at 43,200 naira per individual in 2018. With BNPL, consumers can manage finances better while accessing needed products4.
Payment by digital wallet and X-Pay
In 2023, e-wallets gain traction in Nigeria's e-commerce scene. Klasha leads in cross-border payments, connecting businesses globally1. KongaPay, created by e-commerce giant Konga, now extends beyond its platform. It offers peer-to-peer transfers and easy bill payments, enriching user experience23. Similarly, OPay breaks banking norms. It ensures easy payments and rewarding savings, enhancing financial experiences4. ReadyCash follows suit with a secure mobile payment service. It aligns with the Central Bank of Nigeria's guidelines, ensuring safe transactions5. Moreover, the digital payment market in Nigeria thrives, with projections hitting US$16.69 billion in 20236. These e-wallets not only ease e-commerce transactions but also signify the growing digital payment ecosystem in Nigeria.
