Market News

Sometime in 2019 – in those heady days of travel innocence – I went with a group of friends to Buka Restaurant in Osu, Accra, Ghana. Amidst much jollification one thing quickly struck me; the black and white quick recognition (QR) codes affixed on the top of every drink (canned or bottled) that was served. I asked a waiter what that was for and was told that it was a way of knowing that taxes had been paid on each drink – excise taxes that is. Well, I know that Ghana does not joke with her taxes and so we weren’t surprised later to see listed on our bill, education tax, health insurance, and so on. I wrote a long article about my journey and urged that Nigeria learns some lessons in revenue generation from the Ghanaians.

But on the aspect of financial market development and innovations in banking, I would have given it to Nigeria. We are known to have some of the best bankers in the world. That has its downsides though as we economists always fret about the wars between financialisation and industrialisation. We would rather encourage industries than banks. We also complain about why our banks’ profitability cannot translate to buoyancy for industries and other sectors.

That aside,  of late even our central bank has been very ‘activist’ in action, churning out innovation after innovation especially in the payment systems space. We therefore not only have strong banks with reach in and out of Africa, but our banking publics have access to some technologies that are not otherwise available in some of the developed economies. 

The transfer of funds through unstructured supplementary service data (USSD )which Nigerians now take for granted, is not available to the banking public in many a developed economy that I know. This makes me look at the Nigerian economy from a different angle. Perhaps we have a higher velocity of peer-to-peer small fund movements than other countries. Abroad, people may not send monies around to their friends and family as we do here. Life is structured and most salary earners have direct debit orders to established service providers wiping off their balances each month-end.

Apart from the use of USSD codes, the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) have licensed a handful of FINTECH companies, and notably in the payment services space, we have the payment services solution providers (PSSPs), the payment service banks (PSBs), the mobile money operators (MMOs), among others.

Many smart Nigerian youths are involved in this growth space presently, making their mark. There are transactions which ease the average bank account holders’ life that are possible in Nigeria and not present elsewhere. However, on learning about Ghana’s introduction of QR codes into the payment service space, I had to take notice. If Ghana as a country does not have the smorgasbord of payment service options that Nigeria parades, on this one, it has trumped Africa. 

As a fact, only two other countries in the world have standardised QR codes for tax payment (Singapore’s SGQR and India’s BharatQR). Ghana has earned her bragging rights today as perhaps the only country in the world to have deployed QR codes for payment services. The ongoing COVID-19 pandemic provided a good reason for that country to push ahead with the project, as it became another way of ensuring contactless payments even as economies begin to open up after very costly lockdowns. Ghana debuted in November 2020.

ADVANTAGES OF QR CODES

The use of QR codes for payment services is quite beneficial though. Setting it up is quick and does not require any heavy investments on the part of retailers. It actually reduces the pressure on Point of Sales (POS) machines (some retailers may do away with them entirely). 

The technology can also work with smartphones as well as dumb, sorry feature phones. I have also heard someone call them ‘yam’ phones. I am navigating hard not to sound offensive to those brands that were indispensable in the early 2000s. Oh my, they saved so many lives!  

So, this technology needs no new investment in any dedicated hardware. The down-to-earthiness of it all means that this could even drive more financial inclusion because it does not require much literacy, so people who have been unbanked can see opportunities to engage. Traders and shoppers in Katamanto, Agbogbolshie, or Makola markets in Accra, as well as their counterparts in Oshodi, Mile 12, Okrika, and Kano here in Nigeria, can set up in a jiffy and be ready to collect and make their payments using this technology. What is more? Users do not even need bank accounts. 

Mobile money will do as users are able to make payments from mobile wallets.  This idea is smart as it has the ability to integrate the financial system across board, with all banks seeing themselves seamlessly, while banks and mobile phone companies also become interoperable. Well, so much for the big ‘grammar’.

HOW DOES THIS WORK?’

I did some research. For Ghanaians who are already used to seeing QR codes (that black and white dotted square) on every excisable good (cigarette packs, canned or bottled non-alcoholic and alcoholic drinks, and even bottled water), the transition is seamless.

For Nigerians, the way it will work is that a buyer can scan the displayed QR code of the merchant (seller) – who is obliged to display the same – enter the amount to be paid and confirm, and bingo! an alert will be received. The processes are simple but quite secure such as to prevent one from paying into the wrong accounts. The merchant is also saved the trouble of shop attendants receiving money into their personal or other accounts.

The payer (shopper) is sure that by scanning the QR code, he/she is paying into the real account of the shop. The government is also surer that more transactions are passing through accounts rather than through cash. This enables the government to be able to collect more taxes and also have a better handle on money laundering activities. This governmental advantage should be added to what Ghana has been doing for three years now; using smartphone-readable QR codes to drive excise duties and thus ramping up compliance in a big way. Nigeria could borrow from this approach.  Win-win.

And oh! Lest I forget, if smartphones will only scan to see details of which account they intend to pay to, how does it work for other less-smartphones? In Ghana, the dumbphones have to dial a USSD in order to get on the same QR platform.

DOWNSIDES

Like every innovation, constant updates and rule-tightening is required because some chaps have made it their business to crack and hack any innovation. A band of people exists whose generational career is to defraud other people of their hard-earned wealth. In China, a few instances came up where people set up QR codes to try and get into people’s phones and steal information. They had to reduce how much could be engaged using this platform. But there are tech people who are making this approach more and more efficient and secure. Many restaurants in Nigeria already saved their menus in QR codes which take a customer to their websites and show all the prices and displays. They say it’s a new world out there.

Let us engage!