After the Paystack effect: Are We Ready for the Digital Revolution?
By: Onyedikachi Ibekwe
Tags: Startup, Fintech, Digital

Some weeks ago, in the midst of the protests against police brutality by Nigerian youths, the news flashed that Stripe, a US-based online payment solutions giant acquired Nigeria’s Paystack. Paystack is a payment solutions Startup that was founded by two young Nigerians — Shola Akinlade and Ezra Olubi and incorporated in 2015. Both Stripe and Paystack’s solution works in a similar way, using an API that could be integrated into web platforms with few lines of codes to facilitate online transactions.

Since the news broke on the internet, the Nigerian startup and ICT space have been met with great excitement and enthusiasm. Recall that in 2015, Y-Combinator — the US based accelerator had invested $120,000 to acquire 7% of Paystack’s total shares. At the time of Y-Combinator’s investment, Paystack’s total revenue was about $1,300. It is somehow fascinating to know that with Stripe’s investment, Y-Combinator has now successfully multiplied the $120,000 it invested in Paystack at least ten times. We must commend Y-Combinator’s foresight and generically (because almost everyone has done the same) decry the unwelcoming attitude of Nigerian banks towards Startups but that is a discussion for another day anyway.

The trajectory of Paystack’s story is the expectation of every entrepreneur — a success story. Therefore, we could begin to ask questions like what did they do differently? Why were they able to scale the idea? Could anyone replicate what they did? and many more of such questions. But again, I will leave those questions out as a story for another day.

Paystack founders, Ezra and Shola

What interests me today is something we all may find within the corridors of common sense. The huge investment in Paystack highlights something we all already know — the potential of the ICT sector in Nigeria and Africa. These potentials are already being harnessed in other spaces. However, in Nigeria, we are yet to achieve massive success. But there are indicators that we could get there only if we build and capitalize on the critical factors driving the digital revolution worldwide.

Skill

It is impossible to play in the digital economy without having the requisite digital skill sets. According to a report by World Economic Forum (WEF), 46% of work activities in Nigeria are susceptible to automation. This implies that digital skills will position youths for jobs in the traditional sectors and at the same time, equip them to operate in emerging sectors with great possibilities of launching their own enterprises. Technology is always inclined towards replacing low-skilled workers; there is, therefore, a great need for the government to invest in reskilling programmes to ensure that technology complements instead of replacing a chunk of the workforce.

Physical and digital infrastructure

Photo by Leo Rivas on Unsplash

World Bank research estimates that a 10% increase in broadband penetration in developing countries is associated with a 1.4% increase in Gross Domestic Product (GDP). Connectivity is essential because it bridges the information gap and alleviates asymmetry; it is the most cost-effective means of connecting citizens to the markets and services; it increases productivity, lowers transaction costs, and optimizes the supply chain.

Just like many other African countries, access to advanced technology in Nigeria is constrained by infrastructure parameters such as lack of electricity and low teledensity (number of telephone connections), internet density, and broadband penetration. Enhancing the physical connectivity of fiber-optics and the interoperability of virtual platforms is critical for upgrading technology in Nigeria. All these put together would result in a wider reach and reducing unit costs of technology for the underserved in the society.

Regulatory framework and cyber governance

A major regulatory challenge involves increasing cybersecurity. Most African countries lack a comprehensive legal framework and institutional capacity to address cybercrime. Efforts to prevent cybercrime are being led by private actors themselves. Adopting widely accepted and appropriate norms and regulations is the first step to increasing cybersecurity. At the same time, companies should invest in their employees to develop cybersecurity skills and integrate cyber risk protection in their decision-making process.

The deficit in critical areas driving the digital economy provides both challenges and opportunities for tech entrepreneurs. While a deficit in key infrastructure makes it more difficult for new businesses and startups to survive, it provides an opportunity for private sector and government investments targeted at driving growth in the sector. Doing the right investments will create value and ultimately result in an environment that is conducive to tech entrepreneurship.