Maybe there’s no market yet for Stripe in Nigeria
[Controversy alert goes here]
After seeing Paystack, PayWithCapture, a number of other attempts and reviewing the product our own team has been trying to get off the ground for so long, it's made me a little reflective. It's been well over a year since PayPal "came to Nigeria". So far all they have focused on is making it easy for Nigerian bank account owners to shop on global sites. Till date (Dec 2, 2015), they have not launched the merchant tools yet.
This is not a one-off thing. In my new role at my hustle shop, I have, over the last one year reached out to a number of the "loved-by-the-startup-community" global players to work with us to serve their merchant tools here. We put in all sorts of offers to sweeten the deal. The feedback has mostly been to shrug off the Nigerian market with answers akin to "we dey come, we are dealing with bigger opportunities for now".
The established local players (*wink*), seemed not to have bothered too hard to dedicate resources and concentrate long enough to solve the same problem. Articles, articles and more articles have been written by different people advocating this. Some, not using vey kind words.
What I have seen are attempts by smaller players like Cashenvoy,
defunct? Eyowo, Paga, etc. Some of these players may not even have enough clout to get banks to bend their rules, engage a regulator or drive mass adoption of an alternative e-wallet by consumers. Hell, I don't even think any has succeeded yet in signing on enough large merchants with sizeable transaction volumes.
Chances are high, I think, that everybody can't be running away from money to be made. The opportunity is probably just not there. Yet.
The 80/20 issue
Everyone will tell you that a handful of online services are dominating most of the payment generating opportunities online. Getting these handful of online services to accept a payment method or gateway is not done by having the best API or cleanest merchant dashboard. It's done by cold hard B2B door knocking. As a result, payment service providers in Nigeria have focused on doing just that. Knocking on doors. And handholding the integration process with patch patch developer tools. By focusing on this, these companies are able to, in the immediate term, deliver revenue to their owners.
This does not mean the remaining 80% if pooled together and handled right may not be valuable. It only suggests that, at this stage, an investment in putting together tools and processes to serve that market is not justified to your business's owners when there's lower hanging fruit like airlines, tertiary institutions, government agencies, etc yet to be coaxed into drinking the electronic payments Fanta.
What is required is a payment provider who will look into the future and sit tight to serve the long tail. I posit that for 3-5 years, this would mostly be a labour of love and such a company must be playing a long game. Planting a flag down, pending when the market booms properly. And it would be expensive. Engineering resources, marketing to mop up a fragmented market, consumer education, etc. Ultimately though, it would be sizeable enough.
Mainstream consumer readiness
Not early adopters. Not tech enthusiats. Rather, my wife, your uncle, his Dad.
Not a lot of Nigerian consumers are ready to pay electronically. Even POSs at physical shops are just picking up. Why on earth will a (wo)man withdraw from an ATM next to a store and incure a charge of N65 just to pay in that store, when the same person could have used the same card in-store and even earned a reward? Why does the store attendant insist "Madam, the POS is not working, you no get cash?"? Why would someone buy stuff online then choose pay on delivery when he could have paid right there and earned a possible cashback?
The state of our infrastructure, operations and customer service has not inspired that much confidence in consumers yet to consider paying online. If this confidence is not built, the market won't be big enough. And the stats show it. Of about 30M cardholders in Nigeria, only circa 3M use another bank's ATM. Only about 200k bother to use their cards online. So, today's online payment market = 200k people. At least excluding distinct count of pay on delivery people.There. This is a more urgent problem to solve.
These are my top 2 reasons.
Any payment player focused on "cool developer & small merchant" tools is targeting a problem the Nigerian market doesn't have in a "herdable form" yet, when placed side-by-side the other opportunities. Such a business will in the short term not be able to generate enough cash to fund operations except they are heavily funded enough to wait it out while creating the market or they get pulled into B2B pursuits. Ask Paga. Ask Cashenvoy. Ask Remita. Ask Interswitch.
Now, don't get me wrong. The Internet is coming. Nigerian developers and young businesses are doing great stuff and these are the things that will create the market. Ultimately. Anyone, who creates an offering for the long tail 100-transactions-a-month companies AND builds good customer retention mechanisms AND can wait it out AND can help the businesses gain traction, will be sitting pretty when the market blows.
What Nigeria needs is a well funded and patient "market maker" online payment provider targeting the long tail community and not "distracted" by short term revenue needs.