The prepaid industry is now a truly worldwide market. Since launching in the mid-1990s in the US and the first programme in Europe in 1999, the popularity of prepaid cards has spread across the globe. Originally introduced as a more efficient replacement for paper gift certificates, prepaid now represents a payment category that spans a wide range of applications. As such, prepaid lends itself to diverse payment landscapes like Africa, with varied socio-economic climates, geographies and infrastructures.
Africa’s underbanked population remains high with approximately 330 million adult Africans, nearly 80% of the continent’s population, lacking access to formal financial services according to LTP. While card use and mobile payments are generally growing, cash still makes up a huge proportion of transactions – as much as 95 per cent of retail transactions in Nigeria last year according to a country report from Cards and Payments World. It is clear that there is a need for easy and convenient access to financial services. Unfortunately, opening a bank account can be incredibly difficult when you have no birth certificate, no fixed address, or the nearest branch lies hundreds of miles away.
In Nigeria in 2014, the government piloted an initiative to issue MasterCard-branded identity cards with prepaid electronic payments functionality to the public – initially to 13 million people. This scheme, when fully rolled out in 2019, will allow the 70 per cent of the country’s population that is currently unbanked to save and spend money without a formal bank account. In terms of security, the biometric verification feature of the card puts the government ID ahead of a vast majority of payment cards not just in Africa, but across the globe. It allows the cardholder to pay for goods and services at millions of merchants that accept MasterCard payment cards in Nigeria and in more than 210 countries and territories globally – a significant feature given the government’s history of restricting card usage abroad.
In the long run, the visibility of the previously unbanked population’s assets will allow them to build a provable financial history and establish credit-worthiness with financial institutions, leading to a greater chance of them using further formal banking products in the future.
Financial inclusion cannot be made possible by a single entity. Banks, governments and consumers themselves, have to actively be a part of the process. Adoption of an accessible product such as prepaid cards is certainly the first step, however driving usage is just as important and Nigeria is certainly putting measures in place to ensure this happens.
This article was written by Louis Peake from Compass Plus.
