The day is a regular one, and the sun is burning hard. People are staggering back to city bus terminals in a desperate hope of finding their way home after a long day at work. The place is, of course, Lagos Nigeria, and the usual jarring animosity and aggressiveness still hang on the faces of these people. They are not ready to wait; dragging, pulling and pushing are the next lines of action. With a population of over 17 million and the searing thought of queuing up to face traffic, the earlier they board the buses, the better.
In fact, according to a report by the National Association of City Transportation Officials, a coalition of the Department of Transportation in the U.S, up to a third of the time of cash-based transit buses was spent in “dwell time” delays just because customers have to pay for their fares in cash before movement can begin.
Interswitch, a digital payment solution in Nigeria has studied and understood this story perfectly, and is now on the move to revolutionize the Nigerian transport system for good.
Here Is The Deal:
- Interswitch Group has worked out a technology that lessens the time Nigerians spend on long queues waiting for buses.
- The company has launched three products — the BeCard, the BeVal, and the BeReader — exclusively for the Nigerian market, which are expected to save Nigerian public transport users the stress of the Nigerian public transport system and increase their life expectancy by a percent.
- While the BeCard is your regularly shaped card — like any bank card or the Oyster card in London, the BeVal is the device which is installed on the buses where the passenger can tap on — just like on the London buses. The BeReader is the mother system that makes the BeCard and the BeVal work.
- To this effect, the Pan-African company which offers digital financial services in at least 14 English speaking countries has signed a £56 million (approximately N26billion) deal with Bekoz UK Ltd, a British transport ticketing company, to enhance transportation ticketing in Nigeria.
- But Interswitch is way smarter here: the company has taken the erratic power and internet availability in Nigeria into consideration. That is why none of the three products would be needing any of the above. The BeReader would be solar-powered and will not require network connection all the time to function.
Innovation and The First Timer Strategies
“Interswitch believes that the transport system in Nigeria, Africa’s largest consumer market, is ready for innovation,’’ said Akeem Lawal, divisional CEO for payment processing at Interswitch. ‘‘This partnership is a key and timely milestone in our industry vertical markets’ focus. It is highly compatible with our vision for Interswitch Transport Solutions (Smartmove) which is essentially to progressively facilitate a multi-modal and multi-operator transportation system underpinned by best-in-class technology.”
- Interswitch understands the game perfectly: nobody really cares much about the transport system in Nigeria, apart from the government and a few local players who have got used to the straight-minded approach of deploying as many buses as possible to run through some designated routes. Passengers simply have to queue up and purchase tickets if they are interested in traveling through those routes. Now, Interswitch sees a gap here. A recent Visa’s Cashless Cities study shows that digital payment on buses takes 2.6 seconds (on average) across a cross-section of global cities varying by digital maturity. Using cash takes 4.2 seconds, according to the report, and it would be much higher if it does not involve something similar to Bangkok’s system of hiring conductors to collect cash fares when passengers board — which is pretty much what is practiced in most parts of Africa.
- The strategy is also in the numbers: Figures released by Nigeria’s National Bureau of Statistics in 2018 revealed that there are 11,653,871 million vehicles in Nigeria. 6,768,756, representing about 58.08 per cent are commercial vehicles while 4,739,939 (40.67 per cent) are private vehicles. Nigeria’s population has recently been projected by the United Nations to have reached a staggering 200 million. The implication of this is that 6.7 million commercial vehicles cannot serve a population of 200 million or more. Out of the 6.7 million commercial cars in Nigeria, only about 200,000 commercial vehicles are on the roads in Lagos alone, with a population of more than 17 million people. Even playing the devil’s advocate with the 5 million total number of cars in Lagos, whether private or commercial ( with the national average pegged at 11 vehicles per kilometer and the daily average of 227 vehicles per every kilometer of road in Lagos), there is still not a sufficient number of commercial vehicles to match the heaving population of commuters.
- Interswitch Group knows this and is not afraid to seal the deal of over USD 73,129,560. Charging a service fee of NGN50 (approx. $0.14) per usage assumedly on 12 million daily transport users in Lagos alone over 300 days (65 days off, for irregularity in the frequency of commute) would be a whopping NGN180 billion annual revenue (approx. $500 million), almost seven times the value of the deal sealed by Interswitch.
According to Akeem Lawal, Divisional Chief Executive Officer, Interswitch:
“We have taken all of those technology pieces, and we have put it on the infrastructure Interswitch has built over the last 17 years. We combine the payment technology with those unique technologies that we have done in partnership with a UK company, and we create a solution that will work on Danfo buses, blue buses, in ferries and in trains.
It will be all across the country. We will start our proof of concept with some of our selected partners in Lagos and Abuja, and we will extend to the rest of the country when we are done.”
Related: Why Lagos Is The Most Valuable Startup Ecosystem In Africa
- Being the sole operator and the first timer here means Interswitch is going to have a field day counting its blessings.
Interswitch Is Also Relying On The Policy Strategies of the Nigerian Government To Give The Project A Pivot
Nigeria, through its Central Bank, has placed so much emphasis on a cashless economy in recent times. Interswitch is relying on this strategy to pivot this project.
It is A Win-Win Deal For Both The Government and Industry Operators
Lessons and Experience From Across Africa
According to the Visa’s Cashless Cities study, cashless transportation, as envisaged by Interwitch, could bring more, more money for cities and governments. The study shows that transit agencies — including government-owned transit companies and privately owned transport companies — spend an average 14.5 cent of every physical dollar collected. A whopping 10.3 cents from that amount is saved when the digital transport payment system as envisaged by Interswitch is used. This is because only 4.2 cents is spent for every digital dollar, taking into account such constraints as fare invasion, police corruption and pilfering among others.
Rwanda Is A Good Case In Point
When Rwanda had not awarded a cashless transit payment system design contract to AC Group, an indigenous tech startup or deplored the Smart Kigali Initiative, made up of three major bus firms — which partnered to transition to the cashless Tap & Go bus fare system designed by the AC Group — Rwanda was losing up to 40 percent in revenue due to the hurdles presented by paying for fares with cash. Since the launch of the cashless system, buyable cards led to a revenue increase of more than 30 percent and a speedup in daily commutes in Kigali. There are currently more than a million users of Tap & Go in Rwanda, and 100,000 in Cameron, where the AC Group has expanded to.
Kenya
The matatu transport system in Kenya meant that transport operators in Kenya would suddenly jack up prices as they liked. In a bid to eliminate this corruption and inefficiency, the Kenyan government adopted the contactless transport system (although it was operated by private individuals) by launching a program in 2013 which mandated all matatus in Nairobi to go cashless. 70 percent of the Nairobi’s 4 million residents subscribed to the deal and got themselves contactless cards.
Bottom Line:
While many others are waiting (and calculating the risk perhaps) or simply comfortable with the status quo, Interswitch is leading the revolution and is going to take jobs away from so many people. It is also going to cut a large, gaping hole in the ways things have always been done in the Nigerian transport sector. The next beneficiaries would be those who are fast enough to understand this deal and how they can be part of its value chain.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.