As the naira scarcity continues to exacerbate the economic woes of Nigerians, EDIDIONG IKPOTO examines why deposit money banks must improve their technology facilities to tackle the challenges of the Central Bank of Nigeria’s cashless policy
On Friday, March 17, 2023, a large crowd of commuters gathered at the forecourt of the Mobil Filling Station along Alagbole-Akute Road, Ogun State. The scene was quite reminiscent of the fuel scarcity that Nigerians are familiar with. However, the people were not queueing because there was a fuel shortage but the scarcity of cash caused the CBN to redesign the naira notes and also place a limit on cash withdrawals, which forced the majority of customers to opt to use e-payment channels.
However, the failure of e-payment channels on an epic scale meant that customers, who were unable to make payments were forced to wait for the networks of various banks to stabilize before continuing with their transactions. Other customers who made up the crowd were ones who had transactions hanging and were afraid of leaving.
To compound matters, the fintech, which has served as a lifeline in recent weeks amid the crisis that has hit deposit money banks, has also been having hitches in its networks.
An attendant at the filling station told our correspondent to avoid using any of the fintech to make payments as he still had many pending transfers to resolve.
Across the road, a 32-year-old car dealer, Segun Alabi was dejected because he had just attempted to make a withdrawal at a PoS terminal but his account had been debited for a failed transaction, leaving him stranded and unable to foot some urgent bills.
While speaking with our correspondent, the father of two questioned why the Nigerian banks were set up to trap funds from failed transactions, noting that the ability to access one’s money when needed could be the difference between life and death.
Segun said, “I wanted to make a withdrawal at the PoS but the transaction failed, and I was debited. It doesn’t make sense to debit somebody for a transaction that is said to have failed. Now I have to start going to the bank to lodge a complaint.
“When you do that, they will tell you to wait for seven days before they reverse the money. This is pure wickedness. It is a system that serves only the interest of the bank. The bank exists to serve its customers. To put its own interest ahead of that of the customer is pure wickedness.”
It is perhaps pertinent to note that the process of recovering trapped funds from failed transactions is not a particularly new development. Long before the naira crisis, commercial banks had characteristically required customers to pass through a painful process of lodging complaints, which would take days, weeks and sometimes even months before reversing the trapped funds. This has been in spite of outcry by customers for the system to be rejigged, considering the urgency which may surround these trapped funds.
Much of the outcry against commercial banks has been a refusal to emulate fintech that characteristically holds onto customers’ funds until a transaction is completed, hence eliminating any possibility of trapping customers’ funds and subjecting them to a rigorous recovery process.
“Whenever I transfer from my Opay and the transfer is not successful, the money stays in my wallet. This is what I expect the banks to do. You can’t say a transaction has failed and then you take someone’s money,” a frustrated Alabi told our correspondent.”
In a chat with our correspondent, a technology expert with Sterling Bank, who did not want to be named, blamed payment platforms for the difficulties associated with trapped funds from failed transactions. According to the source, all trapped funds are usually held by payment platforms until the bank initiates a request for a reversal at the behest of the affected customer.
The source also stated that the reason behind the extended period it takes the bank to reverse these funds usually boils down to the volume of unresolved complaints which are usually lodged on a daily basis.
On his part, while speaking exclusively with The PUNCH, the President of the Bank Customers Association of Nigeria, Dr Uju Ogunbunka noted that the primary reason behind the proliferation of failed e-payment transactions was the stress being put on the bank’s technology infrastructure.
He, however, wondered why the banks have been unable to configure their processes to avoid the long delays it usually takes to refund monies trapped as a result of failed transactions.
He said, “The major problem the banks are having is the capacity of their technology. Most of them are overwhelmed by the volume of transactions. Unfortunately, the systems are not consistently active. These network problems are very prevalent when the systems are clogged with so many things.
“I can imagine that some of the banks have their systems over-clogged with numerous transactions, otherwise, such transactions should bounce back. But if they don’t, they don’t have to go to a bank’s income account. The money must be somewhere. Banks can then do a reconciliation and credit the affected customer. However, the best would have been that when the transaction fails, it should bounce back to the owner’s account.”
Perhaps one ample piece of evidence, which communicates the stress the current situation has put on the banking system, has been the proliferation of customer complaints that have been witnessed in the past few weeks.
A customer care representative with First Bank, who pleaded anonymity, told our correspondent that the customer service department of the bank had become the most active unit of the bank, as it was usually inundated by customer complaints that majorly bordered on trapped funds from failed transactions.
While the Central Bank of Nigeria may not have come up with the naira redesign policy as a stress test for Nigerian banks, a stress test is exactly the reality that has unfurled; and, if the result of this test is anything to go by, it means the Nigerian the banking sector has its work cut out for it if the transition to a cashless the economy is going to be less painful than the experiences suffered by Nigerians in the past few weeks.
For years, there had been several conversations surrounding the idea of following in the footsteps of advanced economies to adopt a cashless economy. The purpose of a cashless economy has conventionally revolved around the need to control the movement of illegal money from circulating in the economy, better tracking of transactions and ease of carrying out financial transactions at any point in time from any place.
In the last few decades, governments across the world have stepped up their fight against cash. Cash is being increasingly viewed as a curse that mankind needs to rid itself of. The goal is to move towards a cashless economy; and, the closer an economy is towards this goal, the more successful it is considered to be.
However, despite the obvious merits of operating a cashless economy, such as reduced tax avoidance, higher seigniorage and better distribution of welfare, the frequent downtimes experienced by
Nigerian commercial banks before the introduction of the cashless policy had been the canary in the coal mine, which signalled alarm bells that Nigeria’s banking infrastructure was far from ready to embrace a cashless economy.
While speaking with journalists on the motivations behind Nigeria’s cashless policy, the CBN
Governor, Godwin Emefiele had noted that “on almost three to four occasions we had to step down the policy because we felt that there is a need for us to prepare ourselves and deepen our payment system infrastructure in Nigeria.”
The CBN governor also highlighted the fact that between 2012 and 2022, a lot of electronic channels had been put in place that will aid people in conducting banking and financial service transactions in Nigeria.
In light of the reality that has unfolded within the last eight weeks, it would appear Emefiele’s assertions had been based on assumptions that did not reflect the true capacity of the country’s banking industry.
Only last week, data from Nigeria Inter-Bank Settlement System showed that an increase in failed payment transactions in February caused a 4.83 per cent decrease in the value of cashless transactions to N37.67tn from the N39.58tn that was recorded in January 2023.
This came almost as a shock as many analysts had expected the value of cashless transactions to hit through the roof due to the scarcity of cash that has pushed many to embrace various e-payment channels.
According to the NIBSS data, in February, cashless gateways were used 901.46 million times, compared with 638 million times in January. However, despite an increase in usage, the total value of cashless transactions fell in February, indicating an increase in the number of failed transactions.
It goes without saying that the current cashless policy has been the single most turbulent wave commercial banks have had to navigate through. Having this at a time when many banks globally are facing hard times provides a cautionary tale for Nigeria’s banking industry to rejig its infrastructure and save suffering Nigerians from what has been nothing short of a nightmarish experience.
