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Banks and other agencies providing infrastructure needed for the cashless policy of the Central Bank of Nigeria say they are ready for the scheme but facilities on ground do not seem to support that position
Daniel Udeme, who works in a courier firm in Lagos, is currently ruminating over his bitter experience with an ATM recently. He had gone to a first generation bank in Agbado to withdraw money with his ATM card. He slotted in his card to withdraw N20, 000. After two minutes, the machine indicated that it was temporarily unable to dispense cash. But no sooner had that happened than he received an alert that he just withdrew N20, 000. Udeme is still licking his wounds.
A journalist who wishes anonymity also recounted an unpleasant experience with the ATM. He had gone to a Guaranty Trust Bank branch along Ikosi road, Ikeja, Thursday, January 5, to withdraw money with his ATM card since he was not with his cheque book. He said he was stranded at the bank for over one hour because the ATM at the branch where his account is domiciled could not dispense cash. However, succour came for the reporter when a worker in the bank offered to transfer the sum he wanted to withdraw into her account and withdrew same for him.
The experiences of the two persons with ATM is a reflection of problems associated with electronic banking in Nigeria. Many people believe that these problems would hinder the success of the cashless scheme being introduced.
The new cashless scheme which Sanusi Lamido Sanusi, governor, Central Bank of Nigeria, CBN, announced on April 28, 2011, and was endorsed by the federal government during the federal executive council, FEC, meeting on August 30, 2011, pegged individual daily maximum cash withdrawal at N150, 000 while the limit for companies or corporate bodies is one million Naira per day. Under the guidelines released by the CBN, individuals that exceed the withdrawal limit would be surcharge N100 for every N1000 while the penalty for corporate bodies flouting the one million daily withdrawal limits is N200 for every extra N1000.
The scheme is to begin in Lagos. Last month, the CBN released fresh guidelines for the scheme in Lagos. The new guidelines stipulates that only cash-in transit licenced companies shall be allowed to provide cash pick-up services. It says that third party cheques above N150, 000 shall not be eligible for encashment over the counter. CBN also said that during the pilot scheme in Lagos, individuals paying money from Lagos into account outside Lagos shall bear the charges for any single transaction above the daily limit of N150, 000.
In order to douse the apprehension of the banking public in Lagos, CBN has ordered commercial banks to postpone the implementation of service charge fees to March 30, 2012, to give people time to embrace the electronic banking culture.
But a key problem is that many Nigerians are still in the dark over what the policy is all about. The few that understand the new banking policy are sceptical that the pilot scheme may not take off successfully in Lagos, the Centre of Excellence. Their scepticism is fuelled by the apparent non-deployment of adequate infrastructure needed to fast-track the implementation of the electronic banking scheme.
The two basic infrastructure required for the successful implementation of the electronic banking policy are point of sales, POS, terminals and Automated Teller Machines, ATM. A POS is an electronic device used for verification and processing of financial transactions through electronic cards, including debit and credit cards. Unlike ATM, it is meant for users to make payment electronically for goods and services while ATM is for cash withdrawals, cash transfers and payment for sundry services like PHCN bills, water bills and recharge cards.
To facilitate the deployment of POS across the country, the CBN, on September 16, 2011, licensed six firms to serve as terminal providers, PSTPs. The companies are Valucard PLC, Easy Fuel, Paymaster, Etop Nigeria, Citiserve and Itex. They are to deploy, maintain and provide support for POS terminals in Nigeria. The CBN also appointed Pax Technology, Bitel, Ingenico and Verifone as the approved manufacturers of POS.
Demola Aladekomo, managing director of Chams PLC and President of the Nigeria Computer Society, said that by CBN record, there were 11,000 ATMs in Nigeria out of which 7000 are working effectively. He said Nigeria needed a minimum of 25,000 ATMs for the cashless system to work. Statistics available also show that there are 13,000 existing POS terminals in Nigeria out of which only 3000 are functioning. By world standard, Nigeria is really lagging behind in the global transition to a cashless society. For instance, Spain with a population of 14 million people currently has 1.6 million active POS terminals. India conducts 360 million transactions per annum with 500,000 active POS while Brazil and Mexico have over 400,000 POS each for cashless transactions.
With only 3000 functioning POS terminals for more than 100 million banking public, analysts are of the view that the low density of POS deployment in Nigeria constitutes a drawback to the success of cashless project this year.
Again, the cost of deploying the POS terminals by the providers is another challenge facing the scheme. It would cost providers N90 billion to deploy 450,000 POS terminals across the country between now and 2015 which is the apex bank's target.
Juliet Anammah, director, real sector, Accenture Nigeria, identified connectivity problem which will result in frequent breakdown in communication, merchant apathy and lack of awareness as some of the factors responsible for Nigeria's low POS density.
The POS terminals to be employed will accept payments through all cards like Visa, MasterCard and Verve among others.
CBN recently accused the Nigeria Customs Service of frustrating the efforts by commercial banks and the apex bank to fast-track the massive deployment of Point of Sales, POS, terminals to drive the cashless economy initiative.
Tunde Lemo, deputy governor, disclosed this during the annual seminar organised by the Committee of e-banking industry heads held in Lagos, recently to assess the implementation of the Cashless policy in Lagos. According to him, Customs is demanding 20 percent duty on the POS being imported by the commercial banks as against the prevalent five percent duty charges on such devices. This Lemo lamented has cause delay in the clearance of the POS at the Lagos seaport; a situation he pointed out might hinder the hitch-free implementation of the scheme in Lagos.
Another drawback is the inability of many banks to meet the deadline by the Central Bank of Nigeria to handover their POS terminals to the CBN licenced PTSPs. Investigations revealed that some knotty issues in the commercial agreement between the PTSPs and the acquirers have stalled the handover.
POS acquirers in the new guideline by CBN on PoS card acceptance services are banks but PSTPs are terminal operators. According to the guideline, acquirers are mandated to handover their existing terminals to PSTPs.
In the new arrangement PSTPs will be required to enter into contract with the acquirers that will clearly state the terms and conditions of their support services, including the fee structure and timeline for fee settlement.
The guideline also states that the providers shall offer services covering all aspects relating to terminal management and support, including but not limited to purchase and replacement of spare parts, provision of connectivity, training, repairs, and development of value-added services, amongst others. Valentine Obi, managing director, eTranzact, attributed low patronage of POS by Nigerians to lack of awareness.
Obi said the use and availability of POS at merchant locations need to be brought to the consciousness of Nigerians just as banks did with ATM. He pointed out that presently, POS are deployed mostly in areas most people see as reserved for the rich.
Those that have also frowned at the policy argued that the high level of illiteracy in the country, low level of banking population, porous e-banking system and activities of cyber criminals are some factors that would work against the success of the scheme. For instance, many argued that if the idea is to promote e-banking by encouraging the use of e- payment channels like ATM, the bad experiences people encounter daily in the use of ATM would make the policy counter productive. Olufemi Timothy, president, Renaissance Shareholders Association, said the policy could further dampen the savings culture in the country. "There are some transactions you cannot effect without cash, the illiteracy level in the country is so high and what is the banking population in the country that we would want to discourage those that are already in the system."
Victor Ukutt, a legal practitioner shares the same view. He said the cashless scheme is unlikely to work efficiently in Nigeria given the lack of infrastructure on ground and the prevalent poor services of ATM in the country.
Charles Uwagbale, acting managing director of Paymaster, said the licence granted the company as a PoS terminal provider was an endorsement of the pedigree of the company as a tested and reputable e-payment firm. "We have invested heavily in the acquisition of POS terminals which were customised for the Nigerian market by Bitel for deployment across the country. We will leverage the internal capacity we have built as company over the years in POS terminal, maintenance, deployment and installation," he said.
For Tayo Olajide, managing director of EasyFuel Limited, the only PTSP to be involved in implementing cashless fuelling system, said his organisation was ready to implement the cashless system next year. Olajide said the company has successfully test run its cashless fuelling system across designated Oando service stations in Lagos. The Easyfuel cashless solution is designed to eliminate the use of cash in buying fuel at petrol stations across the country.
Vivian Okolo, head of department, acquiring and merchant services of Valucard Nigeria Limited, said the company is well positioned to make huge success of the project. Citiserve Limited, another licenced PTSP, has equally expressed readiness to deploy, support and maintain POS terminals at merchant locations on behalf of licenced acquirers and terminal owners.
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