Ever since the Central Bank of Nigeria redesigned the three highest banknote denominations in the country and put a time stamp on the validity of the old ones, Nigerians have had to deal with currency scarcity. The sudden development, which many have attributed to poor planning, has stalled business activities across different states of the nation, with the informal sector bearing the most brunt because it is cash-reliant. 

Considerably, the proliferation of fintech startups in the country and the continent has helped digitise the sector, but a wide payment gap still exists, which is why cash is still king. For instance, many utility expenses, from trying to buy fuel to entering public buses and buying food and groceries at corner stores, are largely cash-dependent. These microtransactions, on which many small businesses in the country operate, are still not fully captured under the thriving fintech canopy.

While these transactions appear insignificant, they contribute significantly to economic development and the growth of Small and Medium Scale Enterprises (SMEs) – the backbone of the Nigerian economy. Notably, many merchants in this sector do not have the infrastructure to accept card or digital payments, so people are often left with one option – cash. 

“We found a solution that is very close and as reliable as cash. We realised that transport is a focal point that we can use to put our payment instrument into the hands of people before expanding to payment verticals like retail and other payment services,” Olamide Afolabi, Co-Founder and CEO of Touch and Pay Technologies Limited (TAP) explained. 

TAP Co-Founder, Olamide Afolabi, Kabiru Yabo, and Micheal Oluwole.

Co-founded with Michael Oluwole and Kabiru Yabo, TAP, a Nigerian fintech company and a leading processor of micro-transactions (between 10 cents and $10) in Africa, began operations in 2019. The company’s proprietary technology powers the contactless Cowry card – an ingenious cashless solution that makes public transport more accessible and convenient. The touch-to-pay technology on contactless cards is powered by Near Field Communication technology or NFC, embedded sometimes as a golden patch on ATM cards. But while bank cards need the internet to process transactions and are vulnerable to network fluctuations, the Cowry card requires no internet, putting it at an advantage. 

In Lagos, the Cowry card is widely used for the Bus Rapid Transit (BRT), the LagFerry, and the recently launched Blue Rail Line. These means of transport typically work on low-value cash transactions, whereas most electronic cards do not allow for payment below $10, which can be problematic for passengers.

From being used by BRT buses, TAP has scaled its services to the ubiquitous Danfo – a Yoruba locution for a yellow public bus in Lagos. According to Afolabi, “Riding on the waves of the present Nigerian reality – cash scarcity, the adoption has been great. So anybody who does not have the new currency can use a cowry card for payment. Since drivers are profit-oriented, adoption is becoming rapid.” 

In Nigeria, the Danfo transport system is a bit complex, as multiple drivers and conductors could be manning one bus. TAP’s service has been tweaked to suit this indigenous need. As a result, agents have been stationed at bus stops so people can pay at their desks. TAP’s innovative system holds numerous benefits to all players in the ecosystem, and it cuts across revenue assurance for businesses and the government, financial inclusion, and poverty eradication.

First, the government can generate accurate insight into the transportation sector and use it in the equitable allocation of resources in the sector. Similarly, for bus operating companies or bus owners, accurate revenue insight is obtained, which is impossible with their traditional quota system. Commercial buses, tricycles and motorcycles reportedly pay an estimated N123.078 billion ($300.19 million) to agberos (a person, usually a thug, who collects fees, and other tax forms around motor parks) in Lagos each year, which never makes it to the government’s tax net. Financial leaks like this have crippling effects in whatever sector it is present in, but TAP’s solution could be a game changer as it provides revenue assurance. 

“TAP enables key players in the transport sector to understand the amount a route can generate, the peak hour for the corridor, to determine vehicle redistribution to maximise profit and revenue,” Afolabi stated. 

Also, passengers are able to digitise their funds, have a budget and be non-reliant on cash transactions. Additionally, TAP’s overdraft service enables passengers with insufficient funds to embark on their journey by running their cards to negative. Afterwards, the outstanding is deducted when they make a new recharge.

As with other innovations, running this relatively nascent payment system in Nigeria is not problem free. Afolabi identified the knowledge gap as the first problem faced in their operation. The informal sector where TAP operates consists of various categories of people with little or no level of education, therefore so much time and money is expended on sensitization.

A passenger using the TAP validator.

“Some people feel that our buzz validators would shock them, so they often want to tap fast. There were so many gaps that we needed to block, so we went on the radio every day to sensitise people. For the bus operators, TAP has a dashboard to help the not-so-literate see their transactions in real-time and also the data and insight department, that engages them regularly to explain things to them,” Afolabi said, highlighting some of the knowledge gap instances. 

In another case, Cowry users sometimes complain about random withdrawals from their Cowry card. However, Afolabi explained that “The cowry card is a store value card, so a random deduction is impossible. We do not have the power to remotely debit people. When you tap in, it takes the maximum fare. If you are not getting to the end of the journey, you ought to tap out so your balance is returned to the card. So when people fail to tap out, the charge piles up. And because of the overdraft offer, we allow the card to run into negatives. Those are parts of the sensitization we try to put on the buses.”

Over time, significant progress has been made with sensitisation, and people are starting to understand how TAP works. Afolabi explained that “There was a time we visited the rail terminal, and a passenger was explaining to a supposedly known passenger how to operate the card. Cases like this made us recognise how much progress we have made.”

In the area of impact, as of June 2022, the company had grown its customer base to about 2.5 to 3 million customers (300,000 of which are active daily), registered on about 100 bus and ferry operators in Lagos, Kano, Ogun and Oyo State. Monthly it processes 3.5 million transactions with $200,000 in recurring revenue. Many people have also been employed through the network ranging from drivers to agents.

A TAP agent.

TAP has extended its operations to Lagos, Kano, Oyo, and Ogun and plans to expand to other states in Nigeria, like Edo state, which is coming on board with a regulated transport scheme like Lagos state. When the Danfo service scales fully, Afolabi said TAP will start deploying to other transport forms in other states. The company is currently incorporated in Ghana and plans to get into Togo through a collaboration with Ecobank, and by extension, other sub-Saharan African countries. 

TAP does not only foster financial inclusion but also eradicates poverty by digitising cash through processing microtransactions. For a long time, Nigeria has been on a journey to financial inclusion, but about a significant percentage of Nigerian adults remain completely financially excluded. TAP is one of the players trying to bridge this financial gap. Onboarding a driver or person with no footprint in the banking ecosystem, with tier 1 KYC like phone number, date of birth, and gender, gives them a digital financial footprint. This status can be used to credit score the person. 

Capital is an essential grease for the growth of businesses, however, getting access to it can be a bit arduous. Some business owners can not get loans because they do not have a digital track record of transactions since most of the cash with which customers pay them does not end up on their bank statements. But with TAP’s service, merchants can show their trade value to a bank or financial institution and get loans to expedite their expansion.  

“The race is a marathon, not a sprint. Our goal is to digitise micro-transactions across any sector where they exist. People often say cash is extremely reliable, but we want to change their dependence on it. We know we can mimic cash,” Afolabi stated. 

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