The fear of electronic fraud is hindering the swift development of e-commerce which has a potential value of $10 billion in the country, market observers say.
Speaking with BusinessDay in Lagos, Wednessday, Olumide Olusanya, chief executive officer, Gloo.ng, Nigeria’s online grocery store, said the potential of the industry remains largely untapped.
Though e-commerce firms have changed tactics in recent times by encouraging Cash on Delievery (CoD) payments to bridge the lack of confidence in the system, Olusanya said this option still poses some level of risk to the industry’s growth and viability.
Omobola Johnson, minister of communications technology, earlier disclosed that the country’s e-commerce market had a potential value of $10 billion per annum, with about 300,000 online orders currently being made on daily basis.
Market observers are of the view that fear of online fraud further cascades into the the financial services industry, as many banks currently clogg their payment channels with a myraid of security layers and processes in order to forstall cyber attacks. This, they say is simply not convenient for Nigerian online buyers. “Abroad, online shopping is a one-click process. In Nigeria, before you can conduct an online transaction, you have to provide your card number, TVC 2, card expiry date, PIN. After that, you are asked to supply a one-time authentication code. It is just too cumbersome for a customer to consummate an online transaction”, said Olusanya, in an interview with BusinessDay.
According to the Gloo.ng CEO, payment systems are yet to pecolate down to the masses. “Mobile money is not as ubiquitous as it is in Kenya with MPESA.
“Debit and credit cards are still tied to bank accounts”, he further observed.
The entry of PayPal, a US-based online payment process into Nigeria was expected to provide seamless payment , but PayPal account holders can only pay for goods and services abroad. Raphael Afaedor, co-founder of Jumia Nigeria, pointed out that CoD payments are playing a massive role in addressing the issue of trust.
“Once the selected items get to the customer and they confirm the authenticity and the warranty of the goods, they can hand the cash over to the delivery man. Once a customer orders once or twice and has built trust, he or she can then move to the next level of paying online with credit cards,” he further explained.
According to a recent survey, the local online shopping sector grew from N49.9 billion to N62.4 billion between 2010 and 2011, and from N62.4 billion to N78 billion between 2011and 2012 representing a 25 percent increase in each period, says Phillips Consulting.
According to the World Bank, the country’s middle class has risen by 28 percent, while its GDP based on purchasing power, has increased by 21.67 percent in the last four years. The rise in consumer spending, and the expansion of broadband service have boosted the growth of Internet-enabled businesses in the country. The value of Nigeria’s online payment has risen exponentially in the last few years. Online payments grew from $314 million in 2010 to $488 million in 2012, according to the Nigerian Inter-Bank Settlement System (NIBSS).
Analysts told BusinessDay yesterday that the cash-lite policy of the Central Bank of Nigeria (CBN) aimed at encouraging electronic transactions, which started with Lagos in 2012, is already acting as a tributary stream for growing e-payment channels. The ministry of communications technology has expressed high hopes of further growth.
In Western economies like the UK, e-commerce is expected to account for 10 percent of GDP by 2015, or roughly $200 billion annually.
Sim Shagaya, chief executive officer, Konga, shares the same optimism but says the emerging ecosystem is fraught with challenges, one of which he says is the inefficiency of Nigeria’s postal system.
“In the United Kingdom (UK) if you are starting an e-commerce firm for instance, you can easily rely on the Royal Mail. “All you do is to stock your warehouse and Royal Mail comes to pick up things from your warehouse.
“With all of the reforms, NIPOST is still ineffective. As an e-commerce firm, you would have to build the infrastructure outside of your warehouse”, he said.
Due to the under-performing postal service, poor road conditions and unspecific addresses both in major cities and rural areas, e-commerce firms have built independent distribution networks to ensure satisfactory end-user experience.
Ben Uzor