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Tokenised Payment Transactions to Exceed 1 Trillion Globally by 2026; Driven by Click-to-Pay

The total number of tokenised payment transactions will exceed 1 trillion globally by 2026; rising from 680 billion in 2022.

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Retail Sales

A new study from Juniper Research has found the total number of tokenised payment transactions will exceed 1 trillion globally by 2026; rising from 680 billion in 2022.

This represents growth of 58% over the next 4 years. It attributed this growth to the rise of ‘one-click’ solutions, such as Click-to-Pay, using card-on-file tokenisation to store a customer’s payment credentials; enabling them to auto-fill their checkout details and complete transactions via a single click.

Tokenisation protects customers’ payment credentials when stored; replacing sensitive data with token values that hold no intrinsic value. This prevents malicious actors from gaining access to payment data in the event of a data breach.

• Key Drivers: Tokenisation growth is being driven by increasing adoption of one-click solutions by merchants within eCommerce to reduce friction, and by card networks, who are encouraging mass adoption of tokenisation at the network level to improve payment approval rates.

• New research report: Payment Tokenisation: Key Opportunities, Segment Analysis & Market Forecasts 2022-2027

• Free whitepaper: How eCommerce Is Driving Tokenisation Growth

Drive for Frictionless Checkout Is Catalysing Growth

The new report predicts online and mobile eCommerce-tokenised volume will grow by 74% by 2026. This growth is driven by the increasing customer expectation of a frictionless checkout experience, which one-click solutions via tokenisation offer.

Growth will also be driven by benefits, including time savings for the end user by eliminating the need for customers to re-enter payment credentials when shopping online.

IoT Payments Are the Future of Tokenisation

The research also identified IoT payments as offering the largest growth amongst the tokenisation market over the next 5 years, with tokenised IoT transactions expected to reach 19 billion by 2027, growing 400% from just 3.8 billion in 2022. Tokenisation is critical in facilitating IoT payments; enabling transactions to be made via new use cases and form factors, unlocking new revenue opportunities for payment providers.

Given tokenisation solutions’ long development cycle, tokenisation vendors, other than the already advanced card networks, must begin scaling their own IoT tokenisation solutions or risk missing this lucrative opportunity.

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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Nigeria Sees 31% Increase in POS Fraud Amid Rising Terminal Adoption

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Moniepoint

The prevalence of fraud and forgery in Nigeria’s payment system has shown a significant shift in the first quarter of 2024, with Point-of-Sale (POS) transactions experiencing the highest increase in fraudulent activities.

According to the “Fraud and Forgeries Report in Nigerian Banks” for Q1 2024 by the Financial Institutions Training Centre (FITC), POS fraud cases surged by 31.12%.

In Q4 2023, there were 2,683 reported cases of fraud associated with POS terminals. However, this number escalated to 3,518 cases by Q1 2024.

POS fraud cases made up 30.67% of the total fraud cases (11,472) recorded in the quarter under review.

Financial Impact of POS Fraud

While there was a rise in fraud cases, the amount of money involved in POS fraud declined. In Q4 2023, the total amount involved in POS fraud was NGN604.91 million.

This amount decreased by 37.74% to NGN376.59 million by Q1 2024.

Also, the amount of money lost to POS fraud saw a significant decline, falling from NGN14.62 million by 68.34% to NGN4.63 million on a quarterly basis.

The decrease in financial losses may indicate improved detection and prevention measures, but the overall rise in fraud cases highlights the need for continued vigilance.

Adoption of POS Terminals

The rise in POS fraud cases is attributed to the widespread adoption of these terminals by merchants and consumers alike.

As a cash-driven Nigerian economy, the convenience and efficiency of POS transactions have made them a popular choice.

However, this widespread adoption has also made them a target for fraudsters seeking to exploit vulnerabilities in the system.

In Q1 2023, the number of registered POS terminals increased by 218,475, from 2,318,947 in January 2023 to 2,537,422 by March 2023.

By the same quarter in 2024, the number of registered POS terminals had increased by 289,154, from 3,441,287 in January 2024 to 3,730,441 by March 2024.

Overall, between the end of Q1 2023 and Q1 2024, Nigeria witnessed an additional 1,193,019 POS terminals, marking a 47.02% increase.

Despite this increase in the number of registered POS terminals, the first quarter of 2024 saw POS transaction volumes reach 314 million, which is a significant drop of 73.81 million, or 19.03%, from the 387.81 million transactions recorded in the first quarter of 2023.

Regulatory Measures and Industry Response

The Corporate Affairs Commission (CAC) recently stated that POS agents of major fintechs in Nigeria, including OPay, Palmpay, and Moniepoint, among others, must have registered their businesses by July 7, 2024.

However, it extended the deadline by 60 days, giving operators until September 5, 2024. The CAC said the registration is aimed at safeguarding the businesses of fintechs and customers, as well as strengthening the economy.

Meanwhile, the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) condemned the mandated registration, describing it as an attempt to tax more Nigerians to generate revenue for the government.

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PalmPay Issues July 7 Deadline for POS Operators to Submit CAC Certificates

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PalmPay has announced a firm deadline of July 7, 2024, for all Point of Sale (POS) operators using its platform to register with the Corporate Affairs Commission (CAC) or submit their CAC certificates.

This mandate aims to ensure compliance with Section 863 (1) of the Companies and Allied Matters Act 2020 and the 2013 Central Bank of Nigeria (CBN) guidelines on Agent Banking.

In a statement released on Thursday, PalmPay emphasized the importance of adhering to these legal requirements.

“Following CAC’s directive for POS operators to register and submit their CAC details on or before July 7, 2024, PalmPay is encouraging its business users who have not yet complied with the directive to do so promptly,” the statement read.

This initiative comes in the wake of a two-month registration deadline issued by the Federal Government through the CAC, mandating POS companies to register their agents, merchants, and individuals.

The directive is part of broader efforts to bring regulatory compliance and transparency to Nigeria’s burgeoning fintech sector.

To facilitate the registration process, PalmPay has integrated the CAC registration portal into its Business App.

This integration allows operators to seamlessly register their businesses and submit the required documents, ensuring a smoother compliance process.

Umuteme Enakeno, Head of Marketing and Communication at PalmPay, reiterated the company’s support for the CAC directive.

“PalmPay fully supports the CAC’s directive. We provide 24/7 customer support and conduct weekly meetings to guide operators through the process,” Enakeno stated.

He also highlighted that operators can seek assistance through PalmPay’s customer support channels, including phone, email, or in-person visits to any of the 36 state offices across Nigeria.

PalmPay has urged all its business customers to submit or register their CAC details before the deadline.

“Register your business via the PalmPay Business App: Ensure that all necessary documents and information are provided accurately before submitting your application. Update your PalmPay account once you get the certificate to reflect your new corporate status,” Enakeno advised.

Failure to comply with the CAC registration requirement will result in the freezing of PalmPay accounts, the company warned.

This stringent measure underscores PalmPay’s commitment to aligning with national regulatory standards and fostering a compliant fintech ecosystem.

Meanwhile, the Association of Mobile Money and Bank Agents in Nigeria, representing POS operators, has indicated plans to challenge the mandatory CAC registration in court, questioning its legality and potential impact on their operations.

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Digital Payment Boom in Nigeria Driven by Sub-N10,000 Transactions

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Nigeria’s electronic payment landscape is undergoing a significant transformation, fueled by a surge in micro transactions, defined as transfers below N10,000.

This boom underscores the increasing adoption of digital channels in everyday life, according to a recent analysis by BusinessDay.

The prominence of these micro transactions gained momentum following the Central Bank of Nigeria (CBN)’s cashless policy initiative.

The policy, announced in October 2022 by then CBN Governor Godwin Emefiele, included a naira redesign to bolster monetary policy, promote digital alternatives like the eNaira, and enhance the currency’s integrity.

By January 2023, the scarcity of physical naira notes prompted many Nigerians to embrace digital payment channels.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) revealed that cashless transactions rose by 45.41% year-on-year to N39.58 trillion in January 2023.

This upward trend continued throughout the first quarter of 2023, with cashless transactions increasing by 44.84% to N126.73 trillion compared to the same period in 2022.

By the end of 2023, total cashless transactions had surged to over N600 trillion from N395.38 trillion in 2022, as more Nigerians adopted digital payment methods.

The trend persisted into 2024, with transactions growing by 88.09% to N237 trillion in the first quarter.

However, this substantial increase in e-payment transactions has not translated into higher government revenue through the Electronic Money Transfer Levy (EMTL).

In the first quarter of 2024, the government collected N66.35 billion from EMTL, the same amount as in the corresponding period of 2023.

This stagnation is primarily because most transactions were less than N10,000 and thus not subject to the tax.

The EMTL, introduced in the Finance Act 2020 as an amendment to the Stamp Duty Act, is a single, one-off charge on electronic receipts or transfers of money deposited in any bank or financial institution on any account for sums of N10,000 and above.

Despite higher e-payment volumes, the government’s expected increase in revenue has not materialized due to the prevalence of micro transactions.

“Payment methods have become easier, faster, and better, and people are using them for everyday things,” said Adedeji Olowe, founder of Lendsqr. “Everyone from small kiosks to supermarkets now accepts transfers. If I go downstairs where I live, I can buy something worth N1,000 and pay with transfers.”

This shift signifies a maturing payment space where real-time transfers are becoming more acceptable in an economy striving to reduce reliance on physical cash.

Africa had the highest real-time share of electronic payments in 2023 at 40%, with Nigeria leading the region, according to ACI Worldwide.

Experts in the payment space note that most transactions in the country are below N10,000.

“The range below N6,000 makes up about 45% of transfer transactions. Some in the range of N10,000 is around 25%,” an industry source commented.

“The boom in micro transactions began when the cashless policy was implemented. People started moving away from cards and focusing more on transfers as a means of payment,” said Nosa Oyegun, VP of product and innovation at Kuda.

This shift has led to the rise of new fintech companies like PalmPay, Opay, and Moniepoint, with point-of-sale withdrawals increasingly conducted via transfers rather than cards.

The micro transaction growth is also enhancing financial inclusion by drawing more individuals into the digital financial system.

“It is good for them because there is now more access to financial services,” an industry source noted.

While it may not result in higher tax revenue for the government, experts argue that the boom in micro transactions supports the government’s digital inclusion and economic growth plans.

“It is fostering a national policy… I don’t think it is lost revenue for the government because it is like the gold. I don’t think you can tax it,” an industry expert said.

The growth of micro transactions also reflects the general economic downturn, with Nigerians grappling with double-digit inflation.

“People are struggling today due to economic downturn. Incomes have been strained and most people go for things that are affordable, which are usually cheaper than N10,000,” said Ike Ibeabuchi, a macro economy analyst.

The Federal Government has outlined plans to generate N483.73 billion from EMTL over three years in the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper.

However, the significant increase in micro transactions suggests a shift in Nigeria’s digital payment landscape, highlighting the role of small-scale transfers in driving the e-payment boom.

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