Cashless Lagos: The Gains, The Challenges

Submitted by James Uzondu
culled from: http://www.nigeriannewsworld.com

Lagos residents are gradually adapting to the recently introduced cashless banking but experts say there are challenges to be sorted out before nationwide implementation . - By Ibrahim Mohammed
Despite pockets of hitches trailing the introduction of the cashless policy in Lagos State, experts are optimistic that the new policy will succeed. They warn however that flaws which characterised its introduction must be tackled before June 2012 when the policy is expected to spread to other parts of the country.
The managing director of Cowry Asset Management, Lagos, Johnson Chukqu, said in an interview with this magazine that part of the constrains militating against the policy include: the issue of inadequate point of sale, PoS, terminals. He said some PoS are occasionally fraught with technical hitches which make most people to depend on the traditional cash based transactions. Chukqu also noted that the level of awareness about the policy is very low even among banks. He said many banks do not understand the policy well enough. According to him, some banks insist that company cheques above the sum of N150, 000 must be issued in favour of its managing director or the chairman, noting that big companies cannot send their managing director to the bank to withdraw money. He added that the policy should be for companies to issue cashable cheques of up to N1 million irrespective of the bearer, which many banks do not understand.
Chukqu noted that for the policy to succeed, the CBN should relax its big ‘bang approach’ so that it can gradually sink into the people.  He also said that enough time should be allowed for people to transit from the culture of cash transaction to the new policy. He urged the apex bank to shore up the withdrawal limit of N150, 000 to N500, 000, and N1 million to N2 million for individuals and corporate bodies respectively.  Meanwhile, penalties for exceeding withdrawal limit for individuals and corporate bodies start April this year.  The CBN announced penalty fees of N100 per extra N1, 000 and N200 per extra N1, 000 for individuals and corporate defaulters respectively.
This magazine gathered that delay in implementing penalties is part of the factors affecting compliance with the cashless policy, if all the loose ends are not tied now, full implementation of the policy will face greater difficulties because the challenges are more prevalent outside Lagos.
Under the policy, monetary transactions will be effected through a list of options which include: wire transfers, debit and credit cards, on-line transactions, cheques as well as mobile banking.
The policy was introduced amidst concerns from keen market watchers that since 70 percent of economic activities in the country are in the informal sector, the policy might crash.  Now, this view is gradually changing as many people now think the policy will gradually reposition the economy if the CBN carries out sustained enlightenment and also provides much needed infrastructure for smooth operation.
The deputy governor, operations of CBN, Tunde Lemo late last year, said that the apex bank was mindful of the infrastructural and the security challenges posed by the cashless policy.  “We have progressed in forging effective partnership with telecommunication companies with the cooperation of the Nigerian Communications Commission, NCC, while ensuring that infrastructural impediments such as payment networks of stakeholders are improved.   We have strived to set up an industry-wide ‘Nigeria E-Fraud Forum’ to serve as an official body to represent the industry on fraud related issues, while enabling a forum for payment stakeholders to collaboratively share data on fraud attempts and proactively tackle these issues with the objective of minimising fraud attempts and help the industry in driving down ATM fraud incidences by 99 percent.”
The cashless policy will put pressure on the infrastructure of the banking industry, even though at the moment, most banks lack the capacity to cope with proper implementation of the policy.  What is certain is that the policy will, among other things increase customer base for banks while customers will enjoy multiple payment options and prompt notification of transactions on customers accounts.
As part of indication to demonstrate its commitment to the success of the policy, CBN last year licensed six payment terminal service providers, PTSPs, to support and maintain PoS. The PTSPs are: Value Card, Easy Fuel, ETOP, Paymaster and CitiServe. The PoS terminals are designed to accept all card schemes used in Nigeria: Master Card, Visa, Verve and Genesis.
Meanwhile, most banks in Lagos are deploring more PoS terminals, ATM and mobile banking devices to facilitate the adoption of cashless transactions whereas, Pay Master Limited, a leading e-business infrastructure provider is increasing the deployment of PoS terminal to some select location in Lagos.