Raheem Akingbolu

t the beginning, the campaign about cashless policy meant but little to most Nigerians, who thought it was a tall dream because of poor infrastructure, poor debit (credit) card transaction culture and low internet penetration. Today, the country’s economy is gradually becoming cashless, as digital payment and electronic banking are implemented in phases across various sectors, even among the players in the small and medium enterprises (SMEs), sector of the market. Besides, the adoption of electronic transactions is continuously increasing, with ATM transactions dominating the volume of electronic transactions and the Nigerian Inter-Bank Settlement System Instant Payment dominating in value.

Meanwhile, the demand for electronic transactions has attracted payment facilitators from Europe and Asia, who are investing in Nigerian electronic infrastructure projects. As a result of this, online commerce and financial technology in Nigeria is strengthened by fast growing youth populations, expanding consumer power, and increased smartphone penetration. According to McKinsey, the current eCommerce spending in Nigeria is around $12 billion, and is projected to reach $75 billion in revenues per annum.

But like every new thing, embracing eCommerce as alternative shopping experience was, at the beginning, tough for Nigerians.

In the last few years, both the operators and consumers have recorded both their good and low moments. While it has eased the mode of transaction, there have also been stories of scammers and attacks on delivery agents.

But today, despite the hitches, it is obvious that consumers who buy into the system are growing in folds every day. Trust has not only been built, but many Nigerians have also seen it as the easiest way to shop.

The recent upturn in e-commerce enterprises across Africa is believed to be revolutionising not just the retail market but also business in general. The growth potential of this niche, as demonstrated by several e-commerce firms showcases the enormous opportunity under tapped.

As one of the continent’s leading IT markets, Nigeria has seen a rapid surge in the development of ecommerce businesses.

Competitions In the last seven years or thereabout, consumption spending in Africa had stood at over $1 trillion from $364 billion in 2000. This, analysts have described as an impressive jump. According to them, if the internet penetration factor, which is in on the rise with a good 50 per cent of the continent expected to have access to the Internet by 2025, one can imagine the impact of this on online shopping

McKinsey report had recently predicted that online shopping could account for 10 per cent of aggregate retail sales in the continent. This works out to $75 billion a year of total retail spend.

This figure is expected to shoot up in the coming years. As a result of such prediction, e-commerce pundits are looking to Africa to deliver the next revolution in wealth creation through a burst of e-commerce activities, with Nigeria on top of the list.

With Nigerians and other part of Africa, fully waking up to the potentials and advantages offered by e-commerce, top global brands have found the market indispensable. Though Jumia and Konga top the chart in the market, there are more players in the Nigerian space including Payporte, Vconnect, Kara, Fashpa, Gloo.ng, Obeezi and Wakanow, and a host of others. They have collectively pushed the frontiers for Internet businesses in the country, getting over 500,000 online orders every 24 hours in Nigeria.

Jumia’s Q3 report as case study According to Q3 report released by Jumia, the active customers of its e-commerce platform, jumped 56 percent to 5.5 million in the third quarter of 2019 from 3.5 million over the same period a year ago, as orders nearly doubled to 7 million. The growth in customer base is the strongest in five quarters according to the company’s historical financial statements, which bodes well for future revenue growth.

According to the company’s results released on Nov. 13, 2019 revenue rose 19 per cent to 40 million Euros, even though the period also recorded some losses for Jumia, which targets to be profitable by 2022.

The firm’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) remained negative in the period, a large portion of the loss was attributed to an “increase in fulfilment expenses due to more cross-border goods transactions”, the company’s management team said over an investor conference call. Since its founding in 2012, the e-commerce firm’s costly model of delivery and the relentless pursuit of growth in 14 African markets have come at the cost of recurring losses.

One thing that will also interest analysts in the results presentation was the stellar growth recorded by JumiaPay, the firm’s in-house digital payments platform.

Total payment volume on JumiaPay increased by 95 percent to 32 million Euros from 16.4 million Euros in the third quarter of 2018, while the number of transactions spiked by 262 percent over the same period, much to the delight of CEO Sacha Poignonnec.

“We are focused on driving the adoption and penetration of JumiaPay within our own ecosystem,” Poignonnec said during the investor call.

“E-commerce marketplaces are very powerful engines to drive payment. Everywhere in the world some of the leading payment companies were borne out of and grown by market places,”

“We are following the same path to ultimately create the leading payments system in Africa,” Poignonnec said.

Growth Trajectory Since its launch, JumiaPay has spread across six countries and is targeting a larger share of the electronic payments market, according to Poignonnec who also said the payment platform’s bright future has been somewhat validated by the backing of global card giant, MasterCard, which invested 50 million euros in the firm before an initial public offering in New York.

The traction being made by the payment solution is significant for two reasons. First is that it means its ambition to generate more revenue from digital payment products is truly on and could even happen faster than expected. It also gives Jumia a leeway out of an expensive and problematic cash-ondelivery option which hinders efficiency and could be ridden with security lapses- as e-commerce firms in Nigeria have come to find.

Analysts believe JumiaPay is following in the steps of US-based Paypal, Alipay in China and Latin American fintech firm, MercadoPago. All three companies were established by and started out as the in-house payment platforms for Ebay, Alibaba and MercadoLibre respectively.

By leveraging the market place of their parent companies, digital payment platforms have often thrived, just the way JumiaPay is finding out now, even though it is believed that it hasn’t even scratched the surface in terms of usage.

That’s because, JumiaPay’s total payment volume, though up from 8.3 percent in the third quarter of 2018, was only 11.6 per cent of the parent company’s total sales (referred to as Gross Merchandise Value, GMV in online retailing) of 275 million euros in the third quarter 2019.