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Why e-Payment Start-ups Fail in Nigeria

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  • Why e-Payment Start-ups Fail in Nigeria

For the electronic payment sub-sector of Nigeria’s Information and Communications Technology (ICT) industry to grow its start-ups, some limiting factors must be overcome completely.

Challenges currently identified as stunting the growth of payment start-ups in Nigeria, include un-scalable business model; insufficient funding; no advantage over existing solutions; skills shortage; regulation and too much competition.

Africa Payments Innovation Jury 2017, an insider’s view to the Continent’s payment and Fintech services, presented at the just concluded Interswitch organized ‘Connect Conference’ made available to The Guardian, said the electronic payments industry experiences continuous innovation on a worldwide basis, with new entrants aiming to grab a share of the market, and established players trying to defend and grow their existing business.

Africa, according to the jury, is no exception to that trend, and there is additional impetuses in the region to innovate because of the opportunity to bring large sections of the population that currently have access to electronic payment services into the digital payment world.

However, according to them, there are challenges for the industry because operating margins are always under pressure, but the payment sector remains attractive because the market continues to expand, and there is opportunity for players to participate in the transaction value.

Giving further insight, the Jury explained that un-scalable business model accounted for 27 per cent of reasons for payment start-up failures; insufficient fund 24 per cent; no advantages over existing solutions 15 per cent; skills shortage 13 per cent; regulation 12 per cent and too much competition nine per cent.

The Jury disclosed that African payments and Fintech entrepreneurs are faced by a shortage of venture capital — more acute than in other regions of the world, which is restricting their ambitions.

They stressed that the shortage of investment is marked at the angel and series level. A stage with many investors opting to wait until the business model is proven and the company is profitable.

The Chairman, Africa Payments Innovation Jury, John Chaplain, said the main reason for the failure of start-ups is that the business models are not scalable, which is attributed to a shortage of strategic and product development skills.

Chaplain advised that when introducing electronic payments into substantially under-banked markets, although breadth of service offering is critical to long term profitability. “It is important to identify the first use cases that encourage consumers to use digital payments services. Arguably when a consumer uses one electronic payment service regularly, it is easier to encourage them to use further services—but the first service is key.”

The Global Jury, which includes eight African members, rated Asia as the home to most payments innovation over the next two years, a position that it has held since inaugural 2008 jury.

The top rating for Asia comes from China now being widely seen as the global Fintech leader and other countries such as Malaysia, Singapore, and Thailand rapidly modernising their payments infrastructure. Africa is rated just behind Europe and ahead of North America and Latin America.

According to the Jury, with 81 per cent preference, Africa is seen as the best location to start payments business today.

‘Africa is at the beginning of its growth curve with significant opportunity for leapfrogging international trends. The potential is very promising and the market is still virgin. East and West Africa would be the preferred markets,” the Jury stated.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Visa and Mastercard Face Setback as Judge Indicates Likely Rejection of $30 Billion Deal

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Visa Inc. and Mastercard Inc. are facing a potential setback as a federal judge in Brooklyn indicated she is likely to reject their $30 billion settlement with retailers.

The deal, aimed at capping credit-card swipe fees, has been a focal point of contention between the card giants and merchants for years.

Judge Margo Brodie of the U.S. District Court for the Eastern District of New York expressed skepticism about the settlement during a hearing on Thursday.

According to court records, Judge Brodie suggested she might not approve the agreement, stating she would issue a written decision in the coming days.

Retailers have long campaigned to reduce their share of the costs associated with accepting card payments, known as interchange fees.

These fees, which are partially passed on to banks that issue the cards, including major institutions like JPMorgan Chase & Co. and Citigroup Inc., have been a burden for many merchants.

Announced in March and pending court approval, the settlement was designed to allow merchants to charge consumers extra for transactions involving Visa or Mastercard credit cards.

The agreement also aimed to introduce pricing tactics to steer consumers towards lower-cost cards.

“The court’s comments strongly suggest that she won’t accept the settlement,” noted Justin Teresi, an analyst with Bloomberg Intelligence. “While Judge Brodie doesn’t seem convinced that larger retailers should be allowed to opt out from the settlement, provisions like changes to digital wallet acceptance rules and some state bans on surcharges likely present real adequacy issues.”

Both Visa and Mastercard expressed disappointment over the developments. A Mastercard representative stated, “We believe the settlement presented a fair resolution of this long-standing dispute, most notably by giving business owners more flexibility in how they manage their card acceptance activities. We will pursue our options to ensure a proper resolution of this matter.”

Visa’s spokesperson echoed this sentiment, emphasizing that “continued engagement between industry and the merchants is the best way forward.”

Swipe fees have become a substantial financial issue for retailers, totaling more than $160 billion last year, according to the Merchants Payments Coalition. Reactions to the settlement were mixed when it was announced, with some retail coalitions pledging a thorough review and others quickly opposing it.

The Retail Industry Leaders Association, representing large merchants such as Target Corp. and Home Depot Inc., described the settlement as a “mere drop in the bucket” and urged careful review to assess if it adequately addresses the harm inflicted on retailers.

Doug Kantor, general counsel for the National Association of Convenience Stores, praised the judge’s remarks, stating, “We’re gratified to see that the court recognized how bad this settlement was.”

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Norwegian Watchdog Slams Meta for Cumbersome Opt-Out Process in AI Training Plans

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Meta Platforms Inc., the parent company of Facebook and Instagram, is facing a new legal challenge in Norway over its plans to utilize user images and posts to train artificial intelligence (AI) models.

The Norwegian Consumer Council has lodged a complaint, criticizing Meta’s cumbersome and deceptive opt-out process, which it argues breaches stringent EU data protection regulations.

The Council’s statement on Thursday highlighted that Meta’s method for allowing users to opt out of data collection for AI training is overly complicated and intentionally confusing.

“The process to opt-out breaches strict EU data protection rules and has been made deliberately cumbersome by using deceptive design patterns and vague wording,” the Council said.

This isn’t Meta’s first run-in with European regulators regarding data privacy. The tech giant has previously faced multiple complaints for allegedly failing to obtain proper consent from users before collecting their data to target advertisements.

Also, the European Union’s top court has warned Meta about safeguarding public information on users’ sexual orientation from being used for personalized advertising.

“We are urging the Data Protection Authority to assess the legality of Meta’s practices and to ensure that the company is operating in compliance with the law,” stated Inger Lise Blyverket, head of the Norwegian Consumer Council.

The complaint was prepared by the European Center for Digital Rights and will be submitted to the Norwegian Data Protection Authority, as well as other European data protection authorities.

Due to Meta’s EU base in Dublin, the Irish Data Protection Commission will serve as the lead authority in this matter.

The outcome of this complaint could have significant implications for how Meta, and other tech companies, handle user data within the EU.

Meta’s use of user data for training AI has raised significant privacy concerns. Critics argue that without clear and straightforward consent mechanisms, users are often unaware of how their data is being used.

This latest complaint underscores the ongoing tension between big tech companies and European regulators striving to enforce robust privacy standards.

The Norwegian Consumer Council’s action reflects a growing impatience with tech giants’ data practices, emphasizing the need for transparency and user control.

As AI technologies continue to advance, ensuring ethical and lawful data usage remains a critical challenge for both companies and regulators.

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Ethio Telecom Sale to Foreign Bidders Halted; Local Investors to Get Priority

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Ethiopia has decided to halt the sale of its state-owned telecommunications operator, Ethio Telecom, to foreign investors.

Instead, the government will prioritize domestic retail investors before listing the company on the nation’s upcoming securities exchange.

Originally, the Ethiopian government planned to sell 45% of Ethio Telecom to foreign investors. This approach was abandoned in November after Orange SA, a major contender, withdrew from the bidding process.

Emirates Telecommunications Group Co. was also rumored to have considered a bid but did not proceed.

“There were bidders, but each one of them has left the process at one point,” said Abdurehman Eid, CEO of Ethiopian Investment Holdings, which is overseeing the sale along with the finance ministry. “At the end, we felt it’s probably better to halt the process.”

Eid explained that foreign interest did not meet Ethiopia’s expectations. “The priority now is to expedite the sale of 10% to retail investors, who are showing a huge appetite,” he noted during an interview at a sovereign wealth fund conference in Mauritius.

The focus on foreign investors will resume after Ethio Telecom is listed on the Ethiopian Securities Exchange (ESX), set to commence operations in October.

Ethio Telecom, the largest telecommunications operator in Africa’s second most-populous country, had a monopoly for decades. By January, the company boasted 74.6 million subscribers and recorded a profit of 11 billion birr ($191.6 million) for the first half of the fiscal year.

The shift in strategy underscores Ethiopia’s intention to leverage domestic investment capacity. The decision to prioritize local investors aligns with broader economic goals, aiming to stimulate local participation in major economic sectors.

This move is part of a larger plan to list five other state-owned companies on the ESX. According to Eid, proceeds from these divestitures will be utilized to reduce public debt.

Over the years, enterprises controlled by the government have accumulated substantial debt, leading to financial struggles.

The Liability Asset Management Corp., established three years ago, currently manages close to 780 billion birr in debt.

By redirecting the sale of Ethio Telecom shares to local investors, Ethiopia is fostering a more inclusive investment environment and setting a precedent for future listings.

The new strategy is expected to enhance domestic capital markets and provide more opportunities for Ethiopian citizens to invest in the country’s economic future.

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