“The integration of e-naira in Nigerian e-commerce, yes, it is a revolution”

(Ecofin Agency) – According to We are Tech Africa, Nigerian fintech Flutterwave will integrate e-naira with e-commerce payment options. Idriss Linge, author of the report “ Fintech Regulation explains the changes that this option heralds in payment services.

Ecofin Agency: In Nigeria, e-naira is entering e-commerce. Is this the beginning of a revolution?

Idriss linen: Not to paraphrase, it’s a very small announcement, but it could be the start of a big change. Until now, the exclusive channel for transmitting money, whether fiat (notes and coins) or book-entry (information recorded in accounts), has been commercial banks. Today, we are actually witnessing a situation in which the money created by a central bank is transmitted between economic agents, by a non-bank payment company that is also not a payment company linked to mobile phone operators. So the answer is yes, we are witnessing a revolution. To understand the extent of the evolution, it is necessary to remember that Flutterwave offers its users exclusive access to multiple payment solutions, which integrate card, bank transfer, QR code, use of telephone networks and barter. We’ve seen Mobile Money shake up the payment services market by offering more possibilities than the banks offered. Today, we see e-money service operators competing with payment companies that are neither banks nor telecom operators. In our report entitled “ The African Bank of Tomorrow », we have already explained that the creation by the Nigerian central bank of its eNaira (digital Naira), constituted a pressure for the segment of payment services carried out by commercial banks. Even if this risk is reduced in the short term, the deal with Flutterwave heralds likely changes with regards to payment services.

AE: In your report Last January on African Mobile Money’s growth prospects, you mentioned the danger that central bank digital currencies pose to the millions of MoMo service agents. Should we expect social tensions?

HE : The report you mention is based on data released by the GSMA, the organization that gathers most of what the world has in terms of mobile service companies. It has already indicated that, at the end of 2021, there were 2.4 million Mobile Money Agents in Africa primarily active in West Africa (with Nigeria in the lead) and East. Its role continues to be very important in the circulation of electronic money issued today by payment companies, subsidiaries of mobile phone companies. Our African Mobile Money report, in fact, reminds us that cash-in (Deposits) and cash-out (Withdrawals) still dominate mobile money transactions. From this point of view, the agents that receive this money are needed to transform it into electronic money, or for the inverse operation, that is, to convert electronic money into fiat money. If we actually reached a generalization in the use of central bank digital currencies, the role of agents would be gradually reduced. But the threat to agents does not date from today. This function has already left the exclusive domain of private individuals with a transaction box, to be extended to financial SMEs that offer the services of several payment companies. But it is clear that their earnings will gradually erode and hundreds of thousands of people will be out of work. But the industry has shown in recent years that challenges always give way to new opportunities and central banks will need relays for certain types or volumes of transactions.

AND THE: According to Chainalysis, Nigeria, Morocco and Kenya are among the top 20 countries in the world with the most cryptocurrency populations. How do you explain this enthusiasm of Africans?

HE : So what Chainalysis says is that these countries are in the top 20 of the populations most committed to investing a substantial part of their financial resources in cryptocurrencies and in fact this report completes another one where it is clearly said that these countries are those where individuals maintain decentralization. more digital currencies. This enthusiasm for these financial products can be explained in several ways. The first, which in my opinion is the most important, is the pursuit of gain. In many African countries, Bitcoins and other cryptocurrencies are associated with opportunities to get rich into millions of dollars very quickly. Second, in markets like Nigeria, this dream was made possible by an enabling environment where people could easily acquire cryptocurrencies. The third reason is that decentralized digital currencies have undergone a real evolution and are perceived in certain markets as an alternative to currency regulations. On some level, it has become easier for people to trade bitcoins internationally than to find US dollars. Finally, Africans have access to very few financial products. Shares and bonds remain limited in their availability, weak in terms of depth and ability to be quickly exchanged and complex to acquire due to the obligation to resort to intermediaries who, in passing, charge significant commissions.

AND THE: How do you think commercial banks can handle the future competition generated by central bank digital currencies?

HE : Technically, central bank digital currency is not in competition with currency created by commercial banks. It should be remembered that 80% of the currency in circulation in Africa is in the form of digital codes on the computers of commercial banks. When individuals want to make payments, they can transfer directly from bank to bank and now from bank to mobile money account. But they can also withdraw cash or coins. In our report on african bank of tomorrow, we mentioned the fact that this could even be an opportunity for banks to reduce their costs. Fiduciary payment instruments are expensive in terms of transportation, maintenance, and even customer service, and there is a need for cashiers. If now the deed money on banks’ computers can be turned into central bank digital money, payment transactions will be faster and less expensive. On the other hand, competition can come from payment companies like Flutterwave, or even from the payment companies of mobile operators. But the bank continues to have an advantage over its new competitors, as it is at the heart of an important component of the modern economy, namely credit. Thus, it is the banks that carry out the financial structuring, the transformation of short-term resources into long-term credits. Furthermore, they continue to play a leading role in meeting the financing needs expressed by States or large companies on the money market. Finally, central bank digital currencies are not monetary creation, but the making of a payment instrument. The difference here is that instead of banknotes and coins, commercial banks will receive units of digital currency from central banks and will be able to re-inject them into the economy, in compliance with the regulations governing their industry.

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