February 13, 2012
…CBN,NIBSS set up structure to settle PoS complaints, as low understanding among customers persists
The cashless policy of the Central Bank of Nigeria and the business prospects it offers for the electronic payment industry have drawn the attention of foreign investors to electronic payment firms in the country.
Meanwhile, the Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement System (NIBSS) have commenced plans to set up a structure to settle complaints arising from transactions through electronic payment channels, especially Point of Sale Terminals (PoS).
Vanguard investigation revealed that banks have commenced massive deployment of PoS, while merchants now demand for PoS terminals in their shops.
But a random survey of bank customers shows inadequate understanding of the details of the cashless policy. This is despite ongoing publicity campaign by banks and the CBN.
Low understanding among customers persist
Vanguard investigation revealed that while many Nigerians do not understand the details of the policy and are, therefore, vulnerable to sharp practices by nanks, some see it as an unnecessary burden. Some of the customers interviewed by Vanguard said that they did not know about the policy until the first week in January when their banks said they cannot withdraw more than N150, 000 or cash third party cheques above N150, 000 across the counter.
Mr. John Odumodu, an accountant who banks with Maza Maza branch of Zenith Bank, Union Bank, Oceanic Bank and Intercontinental Bank, told Vanguard he experienced some problems withdrawing above N150, 000 when the initiative took off in January.
He said the banks insisted on collecting their charges whenever he made withdrawal above the limit before the suspension of charging period to April 1. “There was a time I wanted to withdraw about N600,000 from my account but couldn’t because of the policy. Finally, I had to withdraw the money in bits.”
Asked if he considered using Point of Sale (PoS) machine for his transaction; he waived it off saying that one has another problem since one cannot withdraw more than N100,000 per transaction, adding that it attracts some charges as well.
Odumodu dismissed the entire policy as worthless, arguing that the country is not ripe enough for such policies. Instead, he suggested that the policies should be introduced in phases while the CBN embark on more education and enlightenment of the banking public.
He said: “The reason why somebody will sit in the comfort of his home and conceive such policy is because they do not engage in day-to- day transactions like every other Nigerian. Whatever they need is provided for by the government, from their clothing to their feeding. So it is easy for them to come up with such policy.
“Now I want to go and buy spare parts worth over two hundred thousand naira, will I give the dealer cheque and ask him to leave his wares for me or assuming I want to buy clothing for my children worth over N150, 000, do I sign cheque for that woman in return for her wares? I mean, the whole thing is not well thought out,” he declared.
Daniel Anene, an importer, who is a customer of Fidelity Bank said he has not had any problem making withdrawals of any limit since the beginning of the year. He recently received an SMS from his bank informing him of their intention of commencing full implementation of the policy by April 1.
A corporate organisation that banks with both Guaranty Trust Bank and Fidelity Bank, told Vanguard that the company has been withdrawing beyond the N1, 000,000 limits for corporate bodies without incurring charges.
However, Kabiru Nosiru and Ikechukwu Ikeneme, both Diamond and Ecobank customers, seemed lost when approached on the issue. After much explanation, they admitted that except for cashing third party cheques, they have not experienced any hitch withdrawing as much money as they wished. Ikeneme said that he has neither heard nor seen any PoS machine.
On his own part, Ejike Ani, a spare parts dealer and customer of both Spring Bank and Ecobank said he is totally ignorant of the policy, but told Vanguard that First Bank recently sent an SMS urging him to embrace cashless policy using the bank’s various mobile transaction systems. He withdraws and deposits as much as N500, 000 and above in each transaction.
Mr. Michell Elegbe, Managing Director/Chief Executive of Inter-switch, the first and biggest electronic payment switching company in Nigeria, however, said that the low level of understanding despite enlightment campaigns by banks was because the charges and limits on cash transactions have not become effective.
“When they become effective, people will not only know but will also understand the policy. It is those that are charged that will spread the information by sharing their experience with neighbours and friends.
“The potential for growth and business in the Nigerian e-payment market opened up by the cashless policy is attracting foreign investors”, said Mr Elegbe. In 2011, Helios Investment Partners, a private equity firm, acquired majority stake in Inter-switch, a deal described as the largest e-payment transaction in Africa.
“People still want to invest in Inter-switch because they see the prospects for business and returns,” he said while addressing journalists in Lagos last week. He said for example, the average transaction per cardholder in Nigeria, which is presently 14 per cent per annum, is projected to grow to 25 per cent in five years with the implementation of the cashless policy.
“But we can surpass this projection if sectors like transport, health, eateries etc., adopt electronic payment solutions for payment of their services. Also is the fact that the number of cards is far lower than the number of bank accounts.
This implies that the number of cards issued by banks will increase and this will further increase card transactions.
“On the Inter-switch network, we are doing over 100 million card transactions per month. We had surpassed this mark before but the upsurge in card fraud sometime ago caused it to drop to 60 million per month.
“But since we introduced the Verve Card, which is a chip and PIN card, and additional securities to safeguard e-payment transactions, the number of card transactions per month on our network has risen steadily and surpassed the 100 million mark. With the implementation of the cashless policy, we expect to see more adoption of cards for payment.
“These are the potentials that are making foreign investors to be excited about the country’s electronic payment market, he said. But they want to be sure of the operating environment and the policy direction before putting their money down.”
Elegbe said that the cashless policy is a good policy but there are a lot of things to be done to make the implementation successful. He said for example, the industry needs to focus more on the huge population of the un-banked in Nigeria.
“We have to find a way to encourage the un-banked 70 per cent of Nigerians to move into cashless transaction. We need to democratise cashless payment. My advice is that we should not focus all action on the corporate or those that already have bank accounts,” he said.