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QR Code Payments to Hit $2.7T Value by 2025, China to Generate 85% of All Transactions

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QR Code Payment - Investors King

Over the years, QR code payments have witnessed impressive but fragmented global growth, with significant transaction value differences between the regions. Their ability to combine payments and loyalty makes them ideal for retailers seeking to leverage valuable transactional data, while their low-cost nature is expected to drive growth in the years to come.

According to data presented by AksjeBloggen, global QR code payments are expected to reach $2.21trn value this year and then continue rising to $2.71trn by 2025. As the world’s largest QR code payments market, China is forecast to generate 85% of that value.

QR Code Transactions in Latin America to Soar by 3,500% by 2025

Compared to contactless payments, QR code transactions have a low acceptance cost, making them appealing to retailers in emerging markets, with the lack of card infrastructure.

In 2020, the entire market hit $2.11trn transaction value, revealed the Statista and Juniper Research data. After rising to $2.21trn this year, the combined value of all QR code payments worldwide is expected to jump by another $495bn by 2025.

As the world’s largest QR code payments market, China is set to reach $2.37trn transaction value by 2025, or 46 times more than all other regions combined. Although there are a number of QR code schemes around the world, none of them is more successful than the two primary Chinese players, Alipay and WeChat Pay. In February 2021, Alibaba Group`s Alipay was the leading payment app in China, with over 658 million monthly active users.

However, other markets, especially the emerging ones, are set to witness a staggering growth of QR code payments.

Although the smallest of all regions by total transaction value, Latin America is expected to see its QR code payments explode by 3,500% and hit $21.2bn value by 2025, compared to $582 million in 2021.

North America is set to witness a 205% growth in this period, with the transaction value of QR code payments rising from $8.9bn in 2021 to $27.2bn in 2025.

The statistics show that national QR code payment standards, like SGQR in Singapore, will be powerful accelerators to the global growth of QR code payments. In the next four years, national QR code payment schemes will account for 22% of all QR code payments, up from 8% in 2020.

European QR Code Transactions Lag Behind

Although Europe also witnessed an increase in QR code payments in recent years, its growth rate is considerably lower than other regions.

The providers of six mobile e-wallets in Europe, including Austria’s Bluecode, Finland’s ePassi and Pivo, Oslo-based Vipps, Spain’s Momo and Portugal’s Pagaqui, are collaborating with China’s Alipay in a QR code mobile payment network that allows users of each wallet to pay for their purchases across ten countries in Europe.

Statistics show the combined transaction value of all QR code payments in European countries is expected to grow by 37% to $2.2bn in 2025, which is twelve times less than North America and nine times less than Latin American countries.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Fintech

FG to Roll Out Regulations for Fintech, Other Digital Investment

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Amid upsurge in financial technologies (fintechs) start-ups and patronage of digital assets and digital investment platforms, Nigeria is concluding arrangements to roll out its first regulatory framework for digital investment advisory services providers.

The forthcoming regulatory for digital investment advisory services providers, otherwise known as “Robo” because of the deployment of robotic interface, is the first phase of larger regulatory frameworks that include digital assets, offerings and intercontinental, borderless trading on emerging securities, according to sources.

A draft of the proposed regulatory framework for digital advisory services obtained by The Nation describes “Robo” or digital advisory services as “the provision of advice on investment products using automated, algorithm-based tools which are client-facing, with little or no human adviser interaction in the advisory process”.

Digital advisory services are categorised into two under the framework- fully automated and semi-automated. A fully-automated “Robo” advisory services provider requires no human adviser intervention in the entire advisory process while a semi-automated service allows minimal human intervention or interaction.

When it comes into effect, the new regulatory framework will become the basic regulatory document fo the Nigeria and shall be applicable to all institutional and individual capital market operators and persons offering or seeking to offer digital advisory services in Nigeria.

The framework brings digital or “Robo”advisors under the regulatory purview of Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator.

According to the proposed framework, digital investment advisers are required to put in place “adequate policies, procedures and controls to mitigate against money laundering and terrorism financing risks and comply with the Commission’s regulations on Anti-Money Laundering and Combating the Financing of Terrorism Act, 2013”.

The “Robo” advisers are also required to take steps to address specific risks associated with Non-Face-To- Face (NFTF) business relations with a client and employ additional checks to mitigate the risk of impersonation when on-boarding clients through a NFTF means.

“Robo” Advisers are also expected to provide sufficient information to their clients to enable them make informed investment decisions. with such disclosures presented in plain English and in clear simple language.

In line with the above, a digital investment adviser shall disclose to his client in writing the assumptions, limitations and risks of the algorithms, circumstances under which the Robo Advisers may override the algorithms or temporarily halt the robo advisory service; and any material adjustments to the algorithms.

To avoid conflict of interest, “Robo” advisers are required to comply with the disclosure requirements on conflicts of interest set out in the Code of Conduct for Employees of Capital Market Operators as well as disclose in writing to their clients, any actual or potential conflict of interest arising from any connection to or association with any product provider, including any material information or facts that may compromise their objectivity or independence.

“In the context of their business model, “Robo” advisers shall disclose situations where their algorithms are designed to direct clients to invest in products managed by their affiliates,” the draft stated.

With the growing investment of Nigerians in overseas-listed Investment products, the draft framework requires “Robo” advisers to provide a risk warning statement to their clients at the point of account opening and when advising them on overseas-listed investment products. Also, when advising on overseas-listed investment products, “Robo” advisers shall assess the merits of the products, as well as the client’s investment objectives, financial situation and particular needs as well as ensuring that all these are not in violation of any applicable laws and regulations.

To safeguard the client-facing tools which are primarily algorithm-driven, a “Robo” or digital investment adviser shall put in place adequate governance and supervisory arrangements to effectively mitigate against fault or bias in the algorithms.

The board and senior management of the “Robo” adviser shall be responsible for maintaining effective oversight and governance of the client- facing tool and, ensure that there are sufficient resources to monitor and supervise the performance of algorithms.

The “Robo” adviser should be adequately staffed with persons who have the competency and expertise to develop and review the methodology of the algorithms. Adequate training should also be provided to all staff members who use the client-facing tool.

“The board and senior management of the “Robo” adviser shall also put in place systems and processes to ensure a sound risk management culture and environment in its firm, as well as compliance with the relevant rules and regulations,” the draft stated.

The responsibilities of the directors of the digital investment advisory firms or platforms include approving the design and methodology development of the client-facing tool and ensuring its proper maintenance, approving the policies and procedures that apply to the systems and processes of the client-facing tool, maintaining oversight over the management of the client-facing tool, such as designating appropriate personnel to approve changes to the algorithms, having security arrangements to identify and prevent unauthorised access to the algorithms, ensuring that the requirements set out in the SEC’s guidelines on technology risk management are adhered to and maintaining proper documentation on the design and development of the algorithms.

In ensuring accountability and utmost responsibility, the proposed rules state that while the board and senior management may delegate the daily oversight and governance of the client-facing tools to other personnel, the board and senior management remain ultimately responsible and accountable for the proper development, monitoring and testing of the client-facing tools.

Also, in developing the client-facing tools, “Robo” advisers shall ensure that the methodology of the algorithms behind the client-facing tool is sufficiently robust, that the tool collects all necessary information and sufficiently analyses same to make a suitable recommendation, including have proper mechanisms to identify and resolve contradictory or inconsistent responses from clients and have controls in place to identify and eliminate clients who are unsuitable for investing.

Additionally, “Robo” advisers shall perform sufficient testing, prior to the launch of the tool and when changes are made to the tool, to detect any error or bias in the algorithms and to consistently and reliably ensure that the algorithms correctly classify clients according to their risk profiles based on inputs provided by them.

In particular, the “Robo” adviser shall conduct back-testing using hypothetical inputs to ensure that the risk profiles generated by the algorithms are in line with its risk profiling methodology. The testing shall ensure that the algorithm scores and assigns risk profiles to clients correctly and consistently; and that the algorithms produce the intended asset allocation and investment recommendation according to the “Robo” adviser’s risk profiling methodology.

Besides, the “Robo” advisers shall have policies, procedures and controls in place to monitor and test the algorithms on a regular basis to ensure that they are performing as intended. At the minimum, such processes should include access controls to manage changes to the algorithms whenever necessary, controls to detect any error or bias in the algorithms, controls to suspend the provision of advice if an error or bias within the algorithms is detected and compliance checks on the quality of advice provided by the client-facing tool. Such checks shall be conducted regularly and when there are changes to the algorithms, including post-transaction sample testing, and shall be reviewed by an independent and qualified human adviser to ensure compliance with the requirements of extant laws and regulations.

According to the proposed framework, the digital investment advisers shall implement internal policies and procedures to address technology risks while also meeting the requirements set out in SEC’s guidelines on technology risk management (TRM) and also refer to the TRM guidelines for industry best practice which they are expected to adopt.

Digital advisers shall perform a gap analysis against the requirements set out in the TRM guidelines to ensure that all gaps are adequately mitigated prior to the launch of the client-facing tools and also when changes are made to these tools.

The digital investment advisers are also required to have a reasonable basis for recommending any investment product to a person who may reasonably be expected to rely on the recommendation while also ensuring that a recommendation takes into account a client’s investment objectives, financial situation and particular needs.

In assessing the suitability of investment advice, a digital adviser shall take reasonable steps to collect and document information on the financial objectives of the client, the risk tolerance of the client, the employment status of the client, the financial situation of the client, including assets, liabilities, cash flow and income, the source and amount of the client’s regular income, the financial commitments of the client, the current investment portfolio of the client, including any life insurance policy, whether the amount to be invested is a substantial portion of the client’s assets; and for any recommendation made in respect of life policies, the number of dependants of the client and the extent and duration of the financial support required for each of the dependants.

However, a fully automated “Robo” adviser may exempt the collection of full information on a client’s financial circumstances if the advice is fully-automated, with no human adviser intervention in the advisory process or where human interactions are limited to providing technical assistance such as, assisting clients on IT-related issues or clarifying with clients on their responses when inconsistencies are noted as well as where there are in-built “knock-out” or threshold questions to effectively identify and eliminate unsuitable clients and there are controls in place to identify and follow up on inconsistent responses provided by clients. Such exemption also requires provision of a risk disclosure statement to clients to alert them that the recommendation does not take into consideration their financial circumstances, at the point when the recommendations are provided to them; and when the advice is limited to instruments within the regulation of SEC.

Notwithstanding, all “Robo” advisers shall still take reasonable steps to collect information on the client’s financial objectives and risk tolerance to satisfy themselves that the investment recommendation is suitable and to assess if a client possesses the relevant knowledge and experience to invest in complex instruments through the Customer Knowledge Assessment (CKA) or Customer Account Review (CAR). This applies, regardless of whether the client is self-directed or not.

According to SEC, the proposed new regulatory framework is expected to provide “guidance on the regulatory requirements and expectations in relation to the provision of automated advisory services”.

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Adebola Sanni: FinTech, Solution to Africa’s Financial Inclusion Problems

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Financial inclusion and provision of sustainable energy is at a turning point in Africa’s largest economy, Nigeria. With a population of over 200 million, about 50 per cent of the total population live in rural areas, and only 39 per cent of those living in rural communities have access to electricity. This is in addition to over 40 per cent of the entire population who are financially excluded or underserved.

However, the proliferation of digital financial services in Nigeria – powered largely by growth in fin-tech companies – has catalysed an unparalleled increase in the current number of people with access to formal financial services, while further opening up opportunities to address power supply challenges across rural communities; a major feat instrumental towards achieving the broad Sustainable Development Goal 7. With over 200 fin-tech companies in operation within its borders, Africa’s largest economy has found a way to target and capture over 40 per cent of its financially excluded or underserved population.

In a conversation with Adebola Sanni, co-founder, Infibranches Technologies and the Group Head, Business Development & Partnerships at Swifta Systems and Services, she highlighted the growing awareness of the transformative power of fin-tech and how if properly harnessed can help address both problems of financial inclusion and the more pressing sustainability challenges in the area of affordable and reliable power supply needed to drive the growth of local economies.

“Fintech has increasingly provided innovative ways to address existing gaps in the availability, accessibility and use of finance particularly among the unbanked population. By leveraging the proliferation of technology, agent banking and mobile money solutions now offer affordable, instant, and reliable transactions, savings, credit across rural communities where no bank had ever established a branch. Similarly, about 75 million Nigerians who mostly fall within the financially underserved or excluded demography live without reliable electricity access as the existing electrical grid serves largely the country’s urban population.”

“We understand how pivotal the provision of sustainable power is to driving growth of local economies in rural communities and by extension the need to boost financial services penetration across these communities. These are both enablers for catalysing positive transformation and driving sustainable economic progress across the country.”

Adebola, a leading business strategist and technology consultant also said, “To address these challenges, we believe distributed energy solutions that leverage digital payments will open up opportunities to reach the underserved market at low cost.”

We partnered NGOs, including Shell Foundation, USAID, to extend agent networks together with off grid energy providers in 2019 where we set up about 200 agent locations across Nigeria, identifying communities across the rural and peri-urban regions with needs for both power and financial services. We also partnered renewable energy companies such as Green Light Planet (Sun King), D.Light Solar, Sosai, PAS BBoxx, Konexa to set up payment points necessary to expand access to highly subsidized power for such communities.

“This solution provides affordable home solar systems to rural communities with an affordable and convenient payment structure where beneficiaries pay as low as N500 (less than $2 dollar a month) which allows for people to pay off the cost in a year to fully own the solar equipment.”

Till date, over 400,000 people have been impacted across 22 States and 108 local government areas in Nigeria through various initiatives supporting energy access especially in rural areas. The addition of the ‘Solar Power Naija project’ by the Federal government initiative under the Economic Sustainability Plan (ESP) and managed by REA, for off-grid communities, will further expand energy access to 25 million individuals through the provision of Solar Home Systems (SHS) or connection to a mini grid. This is a good initiative to help expand energy access faster.

One of the success stories underpinning how providing innovative energy solutions can transform communities is the Havenhills mini-grid project in Kigbe community located in Kwali Local Government Area Council, Abuja. Before executing the project, the Kigbe community with geographical limitations had no electricity as they were completely off-grid. The project upon completion delivered a 20KW solar enabled mini-grid through 3km 3-phases and 1-phase grid lines to 145 homes, enabling them to power basic electrical appliances such as light bulbs, fans and TVs. The project also supports 5 local businesses including a barbing salon, grocery store and viewing center.

As part of creating sustainable economic empowerment, Adebola Sanni, who has strong passion for financial inclusion and energy access, has facilitated the implementation of a pioneer digital infrastructure that supports micro insurance, pension and savings providers and the first API infrastructure that aggregates renewable energy products and services making them accessible to any payment service providers, banks and other financial and non-financial institutions.

She is vastly experienced in driving growth, creating market focused products and providing innovative solutions to businesses in Financial Technology, eCommerce, Telco and Private/Publics sectors as well creating partnership opportunities for growth.

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Paystack Expands Operation After Acquisition, Enters South Africa

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Paystack, one of the leading Nigerian fintech Startups, has expanded operations to South Africa just seven months after Stripe acquisition.

The startup acquired for over $200 million in October 2020, announced its official launch in South Africa on Thursday to increase its operating markets to three, including Nigeria and Ghana.

The South African launch was preceded by a six-month pilot, which means the project kickstarted a month after Stripe acquired it. Stripe is gearing toward a hotly anticipated IPO and has been aggressively expanding to other markets. Before acquiring Paystack, the company added 17 countries to its platform in 18 months, but none from Africa. Paystack was its meal ticket to the African online commerce market, and CEO Patrick Collison didn’t mince words when talking about the acquisition in October.

There is an enormous opportunity. In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050,” he said.

Although Stripe said the $600 million it raised in Series H this March would be used mainly for European expansion, its foray deeper into Africa has kicked off. And while Paystack claims to have had a clear expansion roadmap prior to the acquisition, its relationship with Stripe is accelerating the realization of that pan-African expansion goal.

Now, Africa accounts for three of the 42 countries where Stripe currently has customers today.

“South Africa is one of the continent’s most important markets, and our launch here is a significant milestone in our mission to accelerate commerce across Africa,” said Paystack CEO Shola Akinlade of the expansion. “We’re excited to continue building the financial infrastructure that empowers ambitious businesses in Africa, helps them scale and connects them to global markets.”

The six-month pilot saw Paystack work with different businesses and grow a local team to handle on-the-ground operations. However, unlike Nigeria and Ghana, where Paystack has managed to be a top player, what are the company’s prospects in the South African market where it will face stiff competition from the likes of Yoco and DPO?

The opportunity for innovation in the South African payment space is far from saturated. Today, for instance, digital payments make up less than half of all transactions in the country,” Abdulrahman Jogbojogbo, product marketer at Paystack said. “So, the presence of competition is not only welcome; it’s encouraged. The more innovative plays there are, the faster it’ll be to realize our goal of having an integrated African market.”

Khadijah Abu, head of product expansion, added that “for many businesses in South Africa, we know that accepting payments online can be cumbersome. Our pilot in South Africa was hyperfocused on removing barriers to entry, eliminating tedious paperwork, providing world-class API documentation to developers, and making it a lot simpler for businesses to accept payments online.”

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