The many sides of cash-less banking

Cash-less banking comes with varied benefits, but grassroots campaign and enlightenment must be sustained to fully tap the opportunities it presents. The nationwide roll out on July 1, presented a huge opportunity for banks, regulators and other stakeholders to collaborate to achieve the desired objectives, writes COLLINS NWEZE.

Michael Abiodun, a 32 year-old entrepreneur, spends a part of his business time in banking halls making payments to his suppliers of goods.

During one of such visits to a bank in Central Lagos, a cashier who has been monitoring him for months, including his frequent visits to the banking hall, decided to tell him about electronic payments. “You don’t need to be physically here to pay your suppliers. You can do it at home, or even in your shops or through mobile phone,” the cashier told Abiodun.

The use of Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, web payment, online transfers and even mobile money, are just getting popular in Nigeria, after years of relying heavily on cash for payment for goods and services. Although e-payment saves costs and time, just about four per cent of transactions done in Nigeria are carried out through the process.

The figure was less than one per cent until January 2012 when the Central Bank of Nigeria (CBN) launched the cash-less banking initiative in Lagos. The ‘Cash-less Lagos’ as it is called, was later replicated in six other states and Federal Capital Territory last January. The nationwide implementation of the policy began on July 1.

As electronic payments gain ground, the number of connected card readers has increased to about 158,000 from 5,000 before 2012, according to the CBN statistics. The value of transactions rose 26 per cent to N1.4 trillion ($8.5 billion) in the first half of last year from the position, a year ago.

The CBN said it is targeting an increase to 375,000 readers by the end of next year. For him, improved e-payment would make monetary policy more efficient because of ease in which cash movement is monitored. The rise of online-shopping websites, such as Jumia and, has also spurred Nigerians to consider electronic payments. The value of online retail transactions, estimated at N62 billion in 2011, may rise to N150 billion this year, according to Euromonitor International, a London-based researcher.

 ATMs gain ground

ATMs withdrawals accounted for 93 per cent of electronic payments by volume in the first half of 2013, according to CBN data. Mobile money also hasn’t taken off in Nigeria, with phone payments accounting for just 3.7 per cent of all electronic transactions. The mobile money which allows mobile phones to be used to send and receive money, buy recharge cards, pay subscription fees for DStv, pay electricity bills, use of PoS terminals to pay for goods and services among others is under threat.

The telecommunication companies (Telcos) and banks which are expected to drive the process are not doing so. Both sectors want to drive the mobile money business and have found it extremely difficult to work together. General Manager, IBM Africa, Taiwo Otiti, said the strategy being adopted by the key stakeholders is stifling the success of mobile money in the country.

He said: “The approach we have taken in mobile money is the challenge. We have over 30 million unbanked, compared with over 100 million mobile phone users, the people who are unbanked, may have mobile phones, but how would you get them into the financial system. You must be able to get into his lifestyle for you to be able to get him subscribe to mobile money scheme. But many of the stakeholders are not doing that”.

Otiti said the getting the mobile money scheme running requires both the payment and supply chain properly defined and implemented by the stakeholders. He said there is need for a paradigm shift that sees all the stakeholders working together. “The telcos can’t also do without the banks, so also are the banks. It is only by collaboration, will the mobile money project begin to deliver the needed results,” he said.

The Executive Vice-Chairman of NCC, Eugene Juwah, said critical success factors for mobile payment in the country are the integrity and security of the end-to-end transition during a payment transaction process. He said the chain of transaction must be secured from initiation to authentication. Therefore, confidentiality and integrity of the data transition are critical factors in mobile payment.

While mobile payments increased more than threefold in recent years, only N6 million was transacted using mobile money, compared with N57.2 billion ($352.5 million) on ATMs, and PoS. The central bank wants commercial lenders to drive growth rather than phone operators because they regulate the banks and not the telecommunication companies, Moghalu said. Even among Nigerians with ATM cards, cash still dominates daily business as connection and network difficulties and delays in transaction times get worse. There have been cases where consumers are debited twice for the same purchase.

About 50 per cent of card-reader transactions also crash because of patchy radio and phone networks, Moghalu said. The CBN is trying to reduce failure to below 10 per cent over time, he said. Fixing botched transactions causes “quite a bit of frustration” because they can take months to resolve, Bisi Lamikanra, a partner and head of management consulting at KPMG Advisory Services, said adding that with these hitches, consumers typically rather withdraw cash from the ATM, even if they’re withdrawing it outside the shop. The start of chip-and-pin-card technology in 2010 helped lower incidents of ATM fraud by more than 90 per cent.

 Incentives for e-payment

The Nigeria Interbank Settlement System (NIBSS) is encouraging the use of cards to pay for goods and services via PoS terminal. The agency, collaborating with banks is working out modalities that will ensure that bank customers that use their e-payment cards to pay for goods and services on PoS terminals and web platforms will now be rewarded with cash back of 50 kobo for every N100 spent.

Chairman, Committee of E-Banking Industry Heads (CEBIH), Mr. Chuks Iku, the committee and  member-banks have partnered with NIBSS for an incentive scheme for members of the public. The scheme, he said, will allow cash back rewards to card holders for using their cards to make payments on alternate channels. “The objective is to encourage usage of cards on PoS and the Web,” he said.

Banks are also taking steps that would ensure the security of customers’ transactions. The lenders are discussing with Microsoft Nigeria to extend security features in Microsoft XP being used by most Nigerian ATMs.

With the expiration of the April 8 deadline set by Microsoft for users of Windows XP to migrate to Windows 8 Operating System (OS), there are fears that the ATMs of most of the lenders in the country may be vulnerable to fraud. Iku said Microsoft Nigeria had directed banks to migrate to the improved platform, which, he said would allow for enhanced banking benefits and security.

The banker said despite failure to comply by some lenders, ATMs remain secured and safe for transactions. He however said non-compliant ATMs might not be able to carry out improved service delivery.

“By upgrading, we are taken to a higher version, but that does not mean that the version that you have will not run. The ATMs are still working, and are not going to go down. “But the migration will only enhance the features of the ATMs. There is really no cause for alarm, the important thing is that we should do it quickly to ensure that our ATMs are in top performing levels,” he advised.

General Manager Microsoft Nigeria, Kabelo Makwane said several banks have identified non-migration to the new technology as a priority for them and are taking steps to address the challenge. He said non-migration to the Windows 8 could open the banks up for potential security vulnerability and threats.