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Digital merchant payments can help de-risk local business environments: here’s how
By Murray Gardiner, Managing Director, Bluecode Africa
Over the course of the past 12 months, the world has learned a lot about uncertainty. The financial space is no exception, having gone through the kind of ructions not seen in nearly a century. As governments around the world look beyond recovery and towards avoiding a similar crisis, financial regulators will look to take the risk out of their local financial markets and payment systems.
The Covid crisis has highlighted the risk of an increasingly perilous debtor book. This usually implies increasing capital adequacy and provisioning requirements and increasing the audit and fraud detection controls. Further consolidation can be expected. But one particularly poignant impact has been related to fraud with the spike in online transactions. Securing online payments and mobile banking channels has never been more urgent.
Tightening credit and doubling down on legacy payment security will have an economic dampening effect as African markets plunge into recession. A powerful tool that regulators have to respond to this crisis is by encouraging in-country digital merchant centric payments to focus on stimulating the local SME and informal business sector. Doing so not only improves the efficiency and security of payments, the digital transparency deepens the relationship between banks and business which in turn is good for consumers and producers alike.
Benefits from SMEs to Financial Institutions
One of the biggest benefits in-country digital payments have when it comes to de-risking local business environments is that they bring a greater degree of transparency and formalisation of the financial relationship between the bank and the SME.
In the SME space, for example, the advantages include contactless payments, instant access to funds on acceptance of payment, and digital transparency with their acquiring bank. The digital transparency and reliability of the in-bound receipts from digital payments to the acquiring bank promotes access to a wider range of financial services (insurance, savings, credit facilities, EFT payments) and establishes a business track record with suppliers and other service providers. A bank that can see the SME’s cash flow and rely on regular inbound payments can safely extend credit and other essential services that it could not reasonably do otherwise.
It also gives businesses a chance to open new sales channels, such as e-commerce and sales agent networks, and to offer value-added services to promote customer loyalty, sales campaigns, and partner programmes.
Importantly, these measures bring a greater degree of stability to these businesses and their workers, further helping the economies they operate in to reduce risk.
Financial institutions, meanwhile, benefit by being able to use digital transparency and data to understand the business and reduce lending risk and cost, increasing the size of the addressable market. Technology reduces the transaction costs associated with onboarding merchants as customers and creates a data-rich relationship that turns a thin file client into a data-rich client that is bankable. Digital merchant payments are a gateway to more comprehensive and conclusive finance to support and stimulate the productive economy.
Regulation and incentivisation
This is why it is important that governments embrace digital merchant payments on account rails, away from cards in a local scheme governed by local rules. This is a gateway to more comprehensive and meaningful finance to support growth and development of the productive economy.
It is often cited that digital disruptors run ahead of legislation by finding ways around the rules that were not anticipated when the rules were designed. The South African Reserve Bank has recently warned about a new activity with “Instant EFT start-ups that use a practice called “screen scraping” where a third-party is given access to a consumer’s bank account data and acts on behalf of said-consumer, using that consumer’s online banking access credentials to simulate instant clearing.
It’s important that regulators protect consumers and the confidence the public has in digital payments and needs to set parameters for the kind of digital payments adopted in their markets. Payments must be safe and customer data must be protected. But the payment also has to be sufficiently valuable to merchants and profitable enough for the financial institutions to build a meaningful commercial financial relationship bringing the merchant into the formal economy and create a merchant customer.
Minimising risk
While it’s impossible for regulators to totally eliminate risk particularly from unpredictable “black swan events” such as we have experienced in 2020, they can prepare payment systems for shocks and defend financial markets by encouraging transparency and financial inclusion with secure account rail digital payments.
While in-country digital merchant payments are just one measure, their use is one of the most powerful ways of generating growth in the local economy and “lighting up” the shadow economy. Ultimately, a local digital payment on the account rail can prove vital to a more comprehensive and conclusive impact to stimulate the productive economy.
Climate Action Africa (CAA), a leading advocate for climate resilience and sustainable development, has announced the opening of applications for the Deal Room at the 2024 Climate Action Africa Forum (CAAF24). The Deal Room is a groundbreaking platform that aims to connect high-impact climate innovators in Africa with potential investors seeking to accelerate sustainable solutions.
The CAAF Deal Room is a strategic initiative that aims to create opportunities for innovators in the climate-tech domain focusing on emission reduction, energy, agriculture, transportation, circular economy, and building and construction.
The goal of the Deal Room is to select finalists who will have the opportunity to pitch their innovative ideas and solutions at the upcoming 2024 Climate Action Africa Forum, which will be held on June 19th in Lagos, Nigeria.
The Deal Room aims to boost investments in Africa’s green economy by galvanising a community of innovators, entrepreneurs, and investors to create applicable solutions that can mitigate the challenges of climate change on the African continent.
The Deal Room session will facilitate financing for solutions contributing to the growth and sustainability of Africa’s green economy. These deals may encompass prize money, equity plans, debt financing, mergers and acquisitions, and other investment options.
“Through the CAAF24 Deal Room, we aim to bridge the critical gap between promising climate ventures and the essential resources they need to thrive,” says Grace Oluchi Mbah, Co-founder and Executive Director of Climate Action Africa (CAA). “By facilitating connections between passionate entrepreneurs and dedicated investors, we can collectively unlock the immense potential of climate solutions in Africa.”
The eligibility criteria for applying include:
● The company must be African-owned and operate in any of the 54 African countries.
● It must be a for-profit company, between 1-5 years post-incorporation, post-MVP (minimum viable product), and post-GTM (go-to-market).
● The company should leverage digital technology to deliver its business model.
● Female ownership is an added advantage.
Those eligible to apply include venture capitalists, impact investors, climate tech startups, Green SMEs (small and medium-sized enterprises), philanthropic organisations, and government representatives.
Following the CAAF24 deal-room will be a post-event accelerator in partnership with the Silicon Valley-based Founder Institute and IDEA Africa. This Africa-wide initiative is specifically designed to further accelerate and enhance support for promising Climate Tech startups and founders who participated in the Deal Room.
The official unveiling of this accelerator will take place at the Climate Action Africa Forum 2024 (CAAF24), marking a significant step forward in driving Climate Tech innovations throughout Africa.
Applications for the CAAF24 Deal Room are open from April 22nd until May 17th. Interested applicants can register at https://deal.caaf.africa/register.
The Lagos Chamber of Commerce and Industry (LCCI) has said that the government needs to simplify and harmonize trade procedures and address bottlenecks in order to boost economic growth in the country.
President of LCCI, Mr. Gabriel Idahosa, gave the charge at a Quarterly media briefing on the State of the Economy yesterday in Lagos.
He said that the government has to create an atmosphere that promotes export growth and competitiveness, which is projected to boost export earnings, raise domestic revenue, improve citizens’ welfare, and increase business productivity.
“We recommend that reforms must include simplifying and harmonizing trade procedures as well as addressing bottlenecks such as port logistics, congestion, and transportation costs. This is expected to position the country as the commercial centre of the region and a springboard into regional value chains,” he stated.
On managing the persistent high inflation, the LCCI president said both monetary and fiscal authorities should focus on the factors driving the inflation rates by tackling the supply-side deficiencies instead of focusing too much attention on the demand-side management.
“We urge the Central Bank of Nigeria (CBN) to continue with its foreign exchange (forex) market reforms with intense discipline, as the high exchange rate against the naira is a major driver of the skyrocketing inflation rates.”
Idahosa acknowledged the improvement in the naira exchange rate in the last few days, moving towards the level of N1000 per dollar or lower.
“CBN needs to sustain its policy and regulatory reforms in the FX market, adopt policies that would attract more FX inflow into the economy as well as build market confidence in the performance of the FX market,” he added.
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Dufil Takes Donation of Indomie Noodles Cartons to Vulnerable Communities in Abuja and Environ
In line with its commitment to provide critical support to indigent members of communities around the country in the face of the ongoing economic challenges, Dufil Prima Foods Limited, makers of Indomie Instant Noodles, in partnership with Golan Helps Abuja Food Bank Initiative (GHAFBI) and Meluibe Foundation on Wednesday, April 17 distributed Indomie noodles cartons to vulnerable communities in Kuje and Kubwa Local Government Areas in Abuja.
With the goal of alleviating hunger and supporting communities across Nigeria, Indomie Instant Noodles has committed to donating a substantial quantity of noodle packs to various NGOs working tirelessly to address food insecurity.
These organizations play a crucial role in reaching remote and underserved areas, ensuring that nutritious meals reach those who need them most.
“We are deeply committed to making a positive impact in the communities where we operate,” said Olusola Olayinka Idowu OON, former Permanent Secretary, Budget and National Planning, and the CEO/Founder of GHAFBI.
“At GHAFBI, we believe that everyone deserves access to wholesome and nourishing food. Our partnership with Dufil Prima Foods to donate Indomie Noodles packs is a big step towards addressing food insecurity and supporting vulnerable communities in Abuja”, said Idowu who was also the former National Conveyor, UN Food System Dialogues in Nigeria.
Speaking in the same vein, Obialunanma Nnaobi-Ayodele, Executive Director, The Meluibe Empowerment Foundation, expressed her gratitude to Indomie Noodles for the partnership. “Our vision as an NGO is to change the world one step at a time, by providing relief and support to vulnerable communities.
This is achieved through collaborations and partnerships, one of which is what we have done with Indomie Noodles. We remain grateful for their support through this food relief initiative”, she said.
By partnering with NGOs, Indomie Instant Noodles works closely with local leaders and community heads in directly engaging with rural communities to distribute noodle packs and provide immediate relief to families facing hunger and ensuring that food assistance reaches those who are most in need, especially in hard-to-reach areas.
“We are grateful for the opportunity to collaborate with NGOs and community leaders to make a meaningful difference in the lives of people facing food insecurity”, said Temitope Ashiwaju, Group Corporate Communications and Events Manager, Dufil Prima Foods Limited. “Together, we bring hope, love and relief for all”.
The community leaders and some of the beneficiaries also expressed their immense gratitude to Indomie for the support, stressing the impact the products donated will have in alleviating hunger in their communities.
Speaking at the outreach centre, His Royal Highness, Muhammed D. Jibril, Community Leader of Gbazango Community in Kubwa Local Government Area said: “I am very grateful to Indomie Noodles for coming to our aid in these challenging times. I pray for more expansion and growth for the business and may God bless Indomie Noodles”.
Other communities who benefited from the product donations include Wunmi, Tondo, Godoji and Shazhi communities in Kuje Area Council of Abuja.
Dufil Prima Food’s donation of Indomie Noodle packs underscores its commitment to corporate social responsibility and its dedication to supporting communities in need. By providing essential food relief, Dufil Prima Foods is contributing to the well-being and resilience of vulnerable populations in Nigeria.
Indomie Instant Noodles remains dedicated to bringing joy to mealtimes and making a positive impact in communities around the world.
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