MitchelL Elegbe is the Managing Director/Chief Executive of Interswitch, the first and biggest electronic payment switching company in Nigeria. Prior to the cashless policy introduced by the Central Bank of Nigeria (CBN), the company in conjunction with its owner banks introduced ‘Operation Cashless’.
The initiative was driven by the introduction of the Nigerian Debit card scheme, which allows banks to issue cards that can be used on any ATM or PoS on the network of the company. Though it did not compel massive transition from cash to electronic payment channels in the
country, the initiative popularized and facilitated the use of debit cards and electronic payment. In this interview, he spoke on the cashless policy of the CBN. According to him, the policy is good but there are so many things to be done to ensure successful implementation.
Excerpts:
The implementation of the cashless policy seems to be different from bank to bank, and there is some confusion and lack of understanding even among banks’ staff at the branch level. What is responsible for this?
I am not a member of the Bankers Committee, so I don’t know what transpired there, but I do know that we had interactions with CBN, various committees were created looking at different aspects, so a decision was made to help reduce the cost of bringing PoS terminals, so right now, we have only four PoS manufacturers for the whole country and CBN negotiated with them at a price. We are not in that committee.
If you look at the way we run organisations, I’m looking at the whole country as an organisation now. At the board level you come up with broad strategic direction for the board of the organisation and then management is left to execute it.
Management is not one person, but the managing director and the executive directors. So they sit down, ‘the board says we will like this company to be an African business, which means we want to be in many African countries by the year 2020.’
The board may not tell you which African country it’s going to. So there is a room for management to interpret that policy in a way that meets the objective.
Let’s say this company needs to be in many African countries, they may decide that because you are in Nigeria, and most people go to Ghana but they don’t go to Benin Republic, let us move to Ghana first at least, after Ghana, let us move to Kenya, because that is where Nigerians are moving to right now, but they have not gone to Kenya, they have not gone to Cameroon, that is one interpretation.
Another interpretation can be, ‘let us dominate the West African coast first, then let us go to Gambia, and someone will ask you what are you going to Gambia to do, it is 1.5 million people, it is less than the population of Victoria Island? Why are you going there? I know it is a different interpretation, so the way I will like to look at this cashless policy, the direction is very clear, cash is expensive, cash is inefficient, cash has a lot of problems, and we need to reduce our dependence on cash. Each bank would have gone back to look at its own cost of managing cash before coming to the conclusion, if I can take this away fine, based on that, each bank has to look at how they intend to execute this, what is common for all the banks should be the penalty.
If a bank is interpreting the penalties differently, then there is a problem, we know that will not be the case.
If a bank is saying that I want to allow people withdraw up to N150,000 from my ATM, if it was N100,000 before, there is nothing wrong with that, the bank now says after N150,000, any other cash you get you pay.
But another bank can say, We have to promote usage of electronic products, I want to create multiple card products, I want to create a debit card, I want to create a credit card, I want to create a recharge card, I want to create a chip and pin card, I as Mitchell may decide to adopt all four cards but because I have four cards and these four cards can allow me withdraw N150,000 each, that means potentially, I can withdraw N150,000 times four, have I violated the policy? No!
The policy says that I should have more cards out there and I am creating different products, so each card, not an individual now, can give me N150,000, that is one interpretation and none of them is wrong.
But another bank will say, it doesn’t matter the number of cards you have, as an account holder, everything you withdraw should not be more than N150,000.
Different banks will interpret these things in different ways but at the end of the day, more cards means that Mitchell will have more cards to do electronic transactions electronically, you still support the policy.
So I suspect that what we might have noticed is the early interpretation of the policy that different banks looking at their strength, what I call their DNA, they can tell you that this is the best way I want to go about it.
It is that same concept of, is there only one way to communicate with God? There are many ways we can call God, for as long as no religion teaches that you kill your neighbour, then the ultimate goal is that I want to better the society. So another point of view therefore, I will say is that the issues we are seeing right now are issues around interpretation of a policy.
If I go back to the issue of a company that wants to go out, it is somebody that sat down strategically and said let us go to Kenya and Ghana, the Head of HR will come up with a policy that creates a policy around human resources in a way that supports diversity.
The board did not say that when you travel out, you must use Nigerians everywhere you go, so one company may say, to us we want to use citizens of that country to run, others will say no. The board did not settle for that level of discussion.
So I think the CBN has not done anything wrong by coming up with a broad framework, because no two banks are the same, no two banks have the same customer base, no two banks have the same customer profile, so to try to force everybody to one profile, you might create more problems. So it is a broad policy direction allowing different banks to execute in a way that supports that policy direction that you would like to go.
I do not want uniformity because the reason why I will go to Abuja with night bus on Young Shall Grow Motors may not be the reason why you will go to Abuja during the day, but we all went to Abuja and we all got there and did what we wanted to do, so I think that area of flexibility is important as long as everybody knows the right way to execute it fully. If we begin to execute, I know some people will say this approach we are using is wasteful, why give the same man four cards, that is an additional cost, just give him only one card, as time goes on things will settle down a bit.
What is your response to those who say we are we rushing the policy?
In Interswitch, there are policies we have taken, which initially I was reluctant to let go, saying you don’t rock the boat, it is a moving train, we should not just change things any how. Sometimes it never happens and there are policies that are very major and we said by tomorrow it will happen like this, and it happens.
Mitchell Elegbe, Managing Director/Chief Executive of Interswitch
It will appear that in Nigeria, the ‘let it hap-pen tomorrow’ makes a lot of sense, creates small tension. In Uganda we have a business, the regulation is not different from the way it is in Nigeria, the market moves at a slower pace, in Nigeria things are made to happen faster and the market moves in very different ways.
So it will be difficult for me to say it is rushed, or it is not rushed, but I can say that the handwriting was on the wall, it is not a new thing, just like when the CBN said, stop all magnetic strip card, go to chip and pin, that policy have been there for over five years before they came out from the system. So it is not prudent for us to assume that there is no policy because it has always been there.
The reason Nigerians do something suddenly is because we ignore the warning sign, the noise, until we cannot bear it anymore and so it must happen now, so I think in this particular case, they’ve been given adequate information. What does it take to adopt, to get a POS terminal? It doesn’t take six months, let’s be truthful, how long does it take to get cards, it doesn’t take six months, all they are saying is more people should adopt it.
What does it take you to go to your bank and say I want a card, because I can see, I am going to be charged if I don’t have a card.
When we are talking about a policy that takes time to implement, like bank consolidation, that, we can understand. It takes time if I am going to raise money. But to move from cash or adopt electronic payment, I don’t think you need a six months notice before it happens.
Interswitch is a major stakeholder in the e-payment industry, controlling about 70 per cent of the card business. Would you say the company was sufficiently consulted prior to the announcement of the policy?
I have got three kids and they are from the same mother, the same father, but then, they have different behaviours. My daughter, you can talk to her, you can plan with her; my sons you can plan with them but you have to plan with them many times in a day because as they are getting out, they have forgotten everything you people discussed, but my daughter is not like that.
We have been in discussions with CBN but sometimes I feel the frustration of CBN in discussing with us. I am being open here, we are all in the business to make money and we have companies too.
What Interswitch sees as opportunity for doing business may be a problem for someone else and that person will be looking at it that whatever the CBN is saying is a problem while Interswitch would want to say it is a big opportunity and the more I push the opportunity or part of it, the more the people who see it as a problem push too.
Here you are, you come to people, spend two weeks in talking with them and you achieve nothing. You know what is good for the economy, you go and make the law and allow them to fall in line, and I will not say they’ve not consulted; they’ve consulted but sometimes that consultation is like every collective bargaining situation.
It is like the fuel subsidy discussion. Our President, in the month of December says we are all talking but on the 1st of January, the subsidy was removed, and they continued to talk. Then the price was reduced to N97.00 and we all accepted it. The point I am making is that I do not want to blame the CBN because they consulted, but has it gone the way I want it? May be no, has it gone the way you want it, maybe. But the truth is we were consulted, we argued our point. Some of you might think this is not the way to go, some of you might think this is the way to go, but if you have customers in your banks, you say I need to enable my bank and my customers to achieve the objective of their regulator otherwise there would be no business.
Overall , has that paid Interswitch? May be that is why I am having this discussion. What I will tell the bank is that a less cash policy is a good policy.
So far, what is your assessment of the policy, would you say there is a coordinated approach to it?
Somebody who sees the glass as half full will execute differently from somebody who sees it as half empty. If we see it as half full, I will equip you with the mindset that it is half full. Somebody who sees it as half empty will execute but not sufficiently, I see this as an opportunity for the entire products we have introduced over the years. We have tried to push Operation Cashless, that is what we called it before, we could not, now somebody with bigger muscle is pushing it, why will I resist it? With my small muscle, I tried to but I couldn’t lift it, somebody with bigger muscle has come to help me lift it, why will I resist?
We say thank you and move on but you that have never tried to lift anything before will be wondering why he is helping that man.
There are so many e-pay products out there and recently, mobile money was introduced. What role would mobile money play in this policy?
When we came up with MastercardVerve, people said it does not make sense, it is not necessary, it’s just another waste of time, and guess what? Some banks have moved their entire card base to that product. It’s about segmentation. After all, today we have cards that can be used in other countries.
Today, my pastor goes to church, talks to us about the need for tithe and offering, he will quote the book of Malachi in the discussion, we will all, in the mood of being in church, realise that it is good to pay your tithe. Now that is the best time for the pastor to pray and say as you are moving out, go to Interswitch, there is a direct debit solution there, just go there log on and register quickly, that is perfect timing. If he has done that, I would have registered some of my debit card, but because that solution does not exist, he preaches to you, in the mood that you are in the church, you pay you. You will pay one month, two months and three months later, pastor will look at the tithes and say ‘what is happening? Things are not moving again.’
The truth is that we all want to pay our tithe, the Bible does not lie, and we know what it is saying but sometimes we don’t pay because of pressure of school fees and other things.
There used to be a product for tithe and offering, that product is a direct debit solution, we already have it in working, but churches don’t know, but if I now call that product Tithe Direct, when banks package it, you will see adoption.
You get my point? What I am saying is that products are there, just like the Cowbell milk container before they started making the sachet one.
It is the same Cowbell milk but there is a segment you need to package it for properly, that segment might come out more successfully for the company, the man that could not buy one container of cowbell for let’s say N1,000, can go and buy small piece of the same thing 1000 times at N20 and in the end, he would have spent N2000 for what he would have bought for N1,000.
The point is that there was no time he ever had N1,000 to have bought product for that segment. So I don’t think segmentation of a product is bad.
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