Electronic payments have risen in Nigeria since the Central Bank’s cashless policy of 2012.
For instance, in 2012, there were 4.4 million NIP transactions worth ₦3.9 trillion ($8.5 billion). Eleven years later, the frequency of NIP transactions has grown by more than 1,150x, while the value of those transactions grew by about 100x. That’s insane. Little wonder Nigeria processed more real-time payments volume than the US in 2021.
Expectedly, many new startups have launched to ride this real-time payment wave and bring more payments online. For example, the number of fully CBN-licensed PTSPs has quadrupled in the seven years between 2014 and 2021.
However, today is not for PTSPs. Instead, it’s for PSSPs, the people building software for collecting payments online.
A typical example of the software PSSPs build for payment collections is a Payment Gateway. A payment gateway is an interface that allows customers to pay for goods and services via multiple methods, channels, or both.
For this article, we use the terms; payment “method” and “channel” interchangeably. That said, there are five popular electronic payment methods in Nigeria. These payment methods are:
- cards (majorly debit cards),
- bank transfer to a NUBAN,
- direct debit from a bank account,
- USSD,
- mobile money or digital wallets
While the basics of a payment gateway are well understood, its implementation and offerings differ across payment providers.
So which payment provider should you integrate with as an e-commerce company or a freelance developer?
Selecting which payment gateways to review
In putting together this list, we did three things.
First, we sought the wisdom of the crowd. We asked our audience to tell us the payment gateways they’ve used in Nigeria, and more than 60 people replied.
In Nigeria, there are more payment gateways than Paystack and Flutterwave.
A colleague is trying to do a comparison of payment gateways, which ones do you know of and/or use?
— Benjamin Dada (@DadaBen_) January 20, 2023
Next, we extracted the recurring names and ran a quick search to find those the government licensed to serve as PSSPs. We would later land on the payment gateways built by these tech companies: Interswitch (developed WebPay), SystemSpecs (built Remita), Paystack, Flutterwave, Seerbit, Fincra, TeamApt (built Monnify) and VoguePay.
However, we will discount VoguePay because they are not as active anymore. The last tweet from their account was two years ago, and the people who mentioned them allude to the fact that they’ve gone quiet.
For good measure, we looked at the payment gateways by tier 1 banks, GTBank (owns GTPay) and Zenith Bank (owns GlobalPay), but we couldn’t find any open developer docs. To get access to their gateway, one would have to contact them. We’ll pass on that.
After all the filtering, we would compare only seven payment gateways operating in Nigeria: WebPay by Interswitch, Remita by SystemSpecs, Paystack, Flutterwave, Seerbit, Fincra, Monnify by Moniepoint (formerly, TeamApt).
The business metrics we will be examining are fees, coverage (markets), methods (channels), commission per transaction, operations (settlement time, disputes resolution), developer-friendliness and bonus features.
Fees
Fees refer to the cost of using the payment gateway. It could be a fixed or variable fee, a one-time or recurring fee, or a combination of both categories.
Years ago, legacy payment companies charged a fixed set-up fee alongside a commission per completed transaction on their gateway.
But with the competition from new-age PSPs (startups), transaction fees have become the primary way payment gateways charge for access and usage by their merchants. This phenomenon is the case in our review, as none of the seven payment gateways charges a set-up fee.
So, let’s talk about the commission per transaction.
Commission per transaction
We observed that the commission structures are similar across all players. Typically, payment gateways charge 1.5% (capped at ₦2,000) for local transactions and 3.8% (no cap) on international transactions.
For local transactions, Interswitch’s Webpay, Moniepoint’s Monnify and Seerbit charge 1.5% capped at ₦2,000. Paystack charges an extra ₦100 on top of the 1.5% fee (capped at ₦2,000), for customer payments above ₦2,500. Flutterwave and Fincra charge a slightly lower percentage, 1.4% but still capped at ₦2,000. However, Remita is the most expensive with a fee of 2% capped at ₦2,500 for local transactions.
For international transactions, Interswitch Webpay, Flutterwave, Fincra and Seerbit charge 3.8% while Paystack charges 3.9% (+ ₦100) and Remita charges 4.0%. Monnify doesn’t process international transactions, according to their pricing page.
Judging by transaction fees alone, Fincra is the most affordable, so they win this round.
Settlement
Settlement Time
Settlement time refers to the time between when a transaction (referred to as “T”) occurs and when a merchant receives value (money). The time is usually measured in days with the collection fees deducted before the balance, as shown in Table 1, is paid out to the merchant.
Every payment gateway in Nigeria settles local card transactions on a T+1 basis. So, there is no competitive advantage there. Where the difference is, is in settlement of international transactions.
The topic of settlement comes with many nuances, so we tried our best to find each gateway’s best offering for this comparison. An example of a nuance includes the type of merchant — are they deemed low-risk or high-risk? Low-risk merchants can typically get settled faster, but certain gateways choose to settle all merchant types on the same schedule for uniformity.
Paystack settles international transactions on a T + 7 schedule.
Flutterwave, Seerbit and Interswitch settle international transactions on a T+3 cycle.
Remita settles international transactions on a T+2 schedule.
Fincra’s international settlement occurs on a T+1 cycle for low-risk merchants.
International settlements don’t apply to Monnify because they do not process international payments, at the moment.
Fincra wins this round for a reported settlement time of T+1 on international transactions.
Settlement currency
Given the FX scarcity in Nigeria, payment service providers (PSP) settle international payments in the country’s local currency, naira, by default. However, some PSPs can provide USD settlement to a USD bank account.
Since we focus on Nigerian businesses, let’s look at settlement to domiciliary accounts.
Paystack and Seerbit can settle in USD, but Paystack now only settles USD to Zenith Bank USD domiciliary accounts while Seerbit only settles to UBA domiciliary accounts. Flutterwave can also settle Nigerian merchants in USD but to a corporate domiciliary account. The merchant must have accumulated up to $1000 before automatic settlement can occur.
Remita can settle USD to any bank, but insiders tell me they prefer Zenith bank for settlement and business reasons.
The nominated bank accounts can change based on the Payment gateway’s banking (FX sourcing) and service relationship (e.g ability to transfer USD over APIs) with their acquiring bank.
It’s easier to settle a merchant with an account in the same bank as the PSP (intra-bank) because inter-bank USD transfers in Nigeria are usually done over an international rail like SWIFT, hence, more costly and time-consuming.
Remita and Flutterwave win this round for their ability to settle any Nigerian domiciliary bank account.
Coverage and currencies
Coverage refers to the markets where these payment gateways operate.
For a PSP to operate in another market, they can accept the local currency there and settle in that same currency. This differs from the processing of international transactions, where they accept multiple currencies but settle in a limited number of currencies, primarily the home currency.
As a Nigeria-headquartered merchant with global ambition, it’s advisable to work with a PSP with wide coverage to save costs of integrating new PSPs in each market you expand your business into.
So, we made coverage one of our criteria for the comparison.
Remita operates in Nigeria (NGN) but has plans to expand across Africa.
Monnify operates in Nigeria (NGN), but it’s expected that its parent company’s expansion plans could see the payment gateway become present in more markets.
Interswitch has footprints in five countries—Nigeria (NGN), Kenya (KES), Uganda (UGX), Gambia (GMD) and Germany (GDM).
Paystack currently operates in three African markets—Nigeria (NGN), South Africa (ZAR), and Ghana (GHS).
Flutterwave is in at least nine markets including Nigeria (NGN), Ghana (GHS), Kenya (KES), South Africa (ZAR), Uganda (UGX), Tanzania (TZS), the United Kingdom (GBP), America (USD), and Europe (EUR). The African fintech startup can process over 30+ currencies.
Based on their pricing page, Seerbit operates in eight markets: Nigeria (NGN), Ghana (GHS), Kenya (KES), Tanzania (TZS), Uganda (UGX), and three francophone Africa countries—Senegal, Burkina Faso, Ivory Coast—that use the CFA Franc BCEAO [XOF] currency.
According to the number of Fincra’s offices, they are in three markets—Canada (CAD), Nigeria (NGN), and Kenya (KHS).
Flutterwave stands out as the winner in this metric for the widest coverage.
Methods
Payment methods refer to the means by which customers can make payments to a merchant.
Interswitch Webpay accepts Nigerian debit cards, bank transfers, USSD, QR code, Quickteller and 3rd party wallets while Paystack accepts payments through debit cards and bank accounts, bank transfer, USSD, QR code, and mobile money.
Remita’s payment channels are debit cards (Visa, MasterCard, Paga Wallets), bank accounts, bank branch, microfinance banks, USSD, POS, internet banking, digital wallets, Remita collection agents. Flutterwave supports cards, bank accounts, Mpesa, QR code, mobile money, and USSD.
Meanwhile, Seerbit accepts payments through bank debits or transfers, USSD, Card, MOMO and POS. Fincra supports debit cards, bank transfer, POS, Pay Attitude, and virtual accounts while Monnify’s payment channels are mobile or internet banking, USSD and debit cards.
Remita emerges as the best payment gateway on payment method because it supports eight payment methods.
Developer docs and Customer support
The payment gateway under our consideration had open developer docs to explain the integration of their API and answer FAQs.
Final words
A lot of work goes into assessing the suitability of a payment gateway for your company. Unfortunately, despite spending a month on the research, we couldn’t cover all of them.
Here are other factors to consider: transaction failure rate, and the robustness of its payout feature to handle refunds.
Also, many of the company representatives we spoke with indicated that new updates are coming soon. For instance, between when we started this review, and now, Fincra has launched a new website.
We are updating this document with more details on our methodology and will close out with a final recommendation.
