Cashless policy: 3 things CBN must do before extending to more states - THE RAINBOW

By The Rainbow

The Central Bank of Nigeria (CBN) has indicated its plans to extend its cashless policy to five more states as well as the Federal Capital Territory (FCT) from July 1. Without doubt, the CBN means well for the Nigerian banking public. The inherent advantages are too well known to bear being mentioned again here. We all know it is good for the people, the economy and the central bank if people embrace more of electronic transactions.

Since the pilot scheme for the policy has been in place in Lagos since January 2012, the plan to extend it to more states presupposes that the problems discovered while test-running it in Lagos have been fixed. It presupposes that most members of the banking public have adapted to various electronic means of payment and keyed in to the programme without sense of compulsion.

That is where the CBN has got it all wrong. From our findings, the rate of adoption of other electronic means of transactions aside of Automated Teller Machines (ATMs) is very low. Our independent survey showed that less than 20 per cent of the bank customers know about point of sale terminals (POS) and how to use them, less than 40 per cent have heard about Internet banking, but less than 10 per cent use it for banking transactions, while less than 10 per cent have heard or adopted mobile banking option. We also found that only a minuscule proportion of the banking public have adopted intra and inter banking transfers as payment options.

The result is that almost one and half years after adopting the cashless policy in Lagos on a pilot scheme basis, much of the transactions still revolve around cash, ATM and the age-long cheque payment system.

According a recent CBN figure, the totalĀ  value of daily electronic funds transfer in the country has risen to N80 billion, as a result of the introduction of the cash-less policy and indicating the growing acceptance of the policy by Nigerians. The Deputy Governor, Operations, CBN, Tunde Lemo, was quoted to have said that the Nigeria Interbank Settlement System (NIBSS) recorded over N20 billion daily transactions, while the Nigeria Electronic Funds Transfer (NEFT) conducts about N60 billion transactions daily. NEFT payment is an irrevocable fund transfer instruction.

NIBSS provides the infrastructure for automated processing, settlement of payments and fund transfer instructions between banks, discount houses and card companies in Nigeria and is jointly owned by all the licensed banks in the country and CBN, with substantial shares held by discount houses operating in the country.

According to Lemo, both the value and volume of cash transactions executed through the NIBSS and the NEFT have doubled compared to the use of cheques.

'We have forgotten that the cash-less project also included high volume payment transactions such as the NIBSS Instant Payment (NIP). The NIP now moves between N20 and N40 billion worth of transactions daily. Through NEFT, we also have tens of thousands of transactions valued at over N60 billion daily. So, between NEFT and NIP, we have transactions that have now doubled the cheque transactions volume,' he said.

That is good score sheet on cashless policy one dares to say. What is also clear is that while much of these increases should be credited to the policy, the growing number on Internet usage and adoption which has risen to over 32 million users has greatly enhanced the adoption of electronic payment option.

However, the main point we want make from the foregoing is that CBN has done much with regard to cashless policy, but that much is not enough. It needs to do more work if it really wants the cashless policy to enjoy higher adoption level.

First, CBN is expected to collaborate with the banks to create more awareness on payment options available and how to use them. It is unfortunate that more than one year after the cashless policy in Lagos, most bank customers only know the most rudimentary uses of ATM: dispensingĀ  of cash. They are ignorant of other uses like settlement of bills and even funds transfer.

Think of POS. They are just there before bank tellers with just few customers resorting to them. This is because as we found most customers did not know how to use them to facilitate their transactions. The same goes to Internet and mobile banking. One would have expected the CBN to work out an arrangement with the banks through which they would use the television in the banking halls, Internet videos, fliers and television/ newspaper advertisement to teach the people uses of those basic electronic payment means.

Second, the constant glitches in the inter-operability and sometimes outright mal-functionality of ATMs and their attendant problems need to be fixed and quickly too. Sometimes, ATM card holders could visit more than five ATMs without being able to draw money from them, because of one problem or the other. This has come to mean that you are never certain that you can access your accounts through the ATM any time you visited the machine. The situation might become worse when you are attempting to draw cash from ATMs other than that of the card holder. The queues which hallmarked some banking halls are gradually shifting to ATM centres. It is no longer an uncommon sight to see a cluster of up to 15 to 20 card users queuing up to use ATMs, and this is not supposed to be. It is not only a frustrating experience, but purely avoidable. Several man hours are wasted in the process.

Third, it is easier to understand why the CBN imposed limit on cash withdrawal, which it pegged at N150,00 for individuals and N1 million for corporate bodies. But is hard to understand why a limit has to be imposed on cash deposits by bank customers. Under the policy, the CBN pegged the daily cumulative cash withdrawal or deposit limit for individual accounts at N500,000 per day and N3 million per day for corporate accounts. . If the essence is to suck cash into the banking system and encourage cash based transactions, such limitation on cash deposits beggars the question.

From the foregoing, it is obvious that the CBN has not fully appreciated the magnitude of challenges facing bank customers in Lagos as a result of the cashless policy rammed into their throats by the regulatory authorities. The regulator should do something about the observed lapses in order to ensure that the cashless policy enjoys the success expected there from.