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CBN Governor, Sanusi Lamido
…CBN,NIBSS set up structure to settle PoS complaints, as low understanding among customers persists

The cashless policy of the Central Bank of Nigeria and the business prospects it offers for the electronic payment industry  have drawn the attention of foreign investors to electronic payment firms in the country.

Meanwhile, the  Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement System (NIBSS) have commenced plans to set up a structure to settle complaints arising from transactions through electronic payment channels, especially Point of Sale Terminals (PoS).

Vanguard investigation revealed that banks have commenced massive deployment of PoS, while merchants now demand for PoS terminals in their shops.

But a random survey of bank customers shows inadequate understanding of the details of the cashless policy. This is despite ongoing publicity campaign by banks and the CBN.

Low understanding among customers persist
Vanguard investigation revealed that while many Nigerians do not understand the details of the policy and are, therefore, vulnerable to sharp practices by nanks, some see it as an unnecessary burden. Some of the customers interviewed by Vanguard said that they did not know about the policy until the first week in January when their banks said they cannot withdraw more than N150, 000 or cash third party cheques above N150, 000 across the counter.

Mr. John Odumodu, an accountant who banks with Maza Maza branch of Zenith Bank, Union Bank, Oceanic Bank and Intercontinental Bank, told Vanguard he experienced some problems withdrawing above N150, 000 when the initiative took off in January.

He said the banks insisted on collecting their charges whenever he made withdrawal above the limit before the suspension of charging period to April 1. 'There was a time I wanted to withdraw about N600,000 from my account but couldn't because of the policy. Finally, I had to withdraw the money in bits.'

Asked if he considered using Point of Sale (PoS) machine for his transaction; he waived it off saying that one has another problem since one cannot withdraw more than N100,000 per transaction, adding that it attracts some charges as well.

Odumodu dismissed the entire policy as worthless, arguing that the country is not ripe enough for such policies. Instead, he suggested that the policies should be introduced in phases while the CBN embark on more education and enlightenment of the banking public.

He said: 'The reason why somebody will sit in the comfort of his home and conceive such policy is because they do not engage in day-to- day transactions like every other Nigerian. Whatever they need is provided for by the government, from their clothing to their feeding. So it is easy for them to come up with such policy.

'Now I want to go and buy spare parts worth over two hundred thousand naira, will I give the dealer cheque and ask him to leave his wares for me or assuming I want to buy clothing for my children worth over N150, 000, do I sign cheque for that woman in return for her wares? I mean, the whole thing is not well thought out,' he declared.

Daniel Anene, an importer, who is a customer of Fidelity Bank said he has not had any problem making withdrawals of any limit since the beginning of the year. He recently received an SMS from his bank informing him of their intention of commencing full implementation of the policy by April 1.

A corporate organisation that banks with both Guaranty Trust Bank and Fidelity Bank, told Vanguard that the company has been withdrawing beyond the N1, 000,000 limits for corporate bodies without incurring charges.

However, Kabiru Nosiru and Ikechukwu Ikeneme, both Diamond and Ecobank customers, seemed lost when approached on the issue. After much explanation, they admitted that except for cashing third party cheques, they have not experienced any hitch withdrawing as much money as they wished. Ikeneme said that he has neither heard nor seen any PoS machine.

On his own part, Ejike Ani, a spare parts dealer and customer of both Spring Bank and Ecobank said he is totally ignorant of the policy, but told Vanguard that First Bank recently sent an SMS urging him to embrace cashless  policy using the bank's various mobile transaction systems. He withdraws and deposits as much as N500, 000 and above in each transaction.

Mr. Michell Elegbe, Managing Director/Chief Executive of Inter-switch, the first and biggest electronic payment switching company in Nigeria, however, said that the low level of understanding despite enlightment campaigns by banks was because the charges and limits on cash transactions have not become effective.

'When they become effective, people will not only know but will also understand the policy. It is those that are charged that will spread the information by sharing their experience with neighbours and friends.

'The potential for growth and business in the Nigerian e-payment market opened up by the cashless policy is attracting foreign investors', said Mr Elegbe.  In 2011, Helios Investment Partners, a private equity firm, acquired majority stake in Inter-switch, a deal described as the largest e-payment transaction in Africa.

'People still want to invest in Inter-switch because they see the prospects for business and returns,' he said while addressing journalists in Lagos last week. He said for example, the average transaction per cardholder in Nigeria, which is presently 14 per cent per annum, is projected to grow to 25 per cent in five years with the implementation of the cashless policy.

'But we can surpass this projection if sectors like transport, health, eateries etc., adopt electronic payment solutions for payment of their services. Also is the fact that the number of cards is far lower than the number of bank accounts.

This implies that the number of cards issued by banks will increase and this will further increase card transactions.

'On the Inter-switch network, we are doing over 100 million card transactions per month. We had surpassed this mark before but the upsurge in card fraud sometime ago caused it to drop to 60 million per month.

'But since we introduced the Verve Card, which is a chip and PIN card, and additional securities to safeguard e-payment transactions, the number of card transactions per month on our network has risen steadily and surpassed the 100 million mark. With the implementation of the cashless policy, we expect to see more adoption of cards for payment.

'These are the potentials that are making foreign investors to be excited about the country's electronic payment market, he said. But they want to be sure of the operating environment and the policy direction before putting their money down.'

Elegbe said that the cashless policy is a good policy but there are a lot of things to be done to make the implementation successful. He said for example, the industry needs to focus more on the huge population of the un-banked in Nigeria.

'We have to find a way to encourage the un-banked 70 per cent of Nigerians to move into cashless transaction. We need to democratise cashless payment. My advice is that we should not focus all action on the corporate or those that already have bank accounts,' he said.

CBN, NIBSS set up structure to settle PoS complaints

Meanwhile, as part of efforts to ensure effective implementation of the policy, the Central Bank of Nigeria (CBN) and Nigeria Inter-Bank Settlement System (NIBSS) are putting in place a structure to promptly settle complaints arising from transactions through PoS terminals.

'NIBSS and the CBN are working out a structure to settle PoS complaints promptly', said Niyi Ajao, Ag. Managing Director/Chief Executive, NIBSS.

'Even  at NIBSS, as we are talking, we are working on measures, like going on Facebook so that people can make complaints or send information about any e-payment transaction issue, so that we can quickly rectify them. I can tell you that once we have information that a PoS is not working, we will immediately address it by calling the banks and the Payment Terminal Service Provider (PTSP) and it is quickly resolved,' he told Vanguard in a telephone discussion.

NIBSS are the operators of the National Central Switch (NCS), which is connected to all electronic payment channels and switches in the country. On the targeted deployment of 40,000 PoS in Lagos State, Ajao said: 'I can tell you that deployment of PoS terminals is ongoing and the number is growing by the day.

'We now have more PoS working while the volume and value of transactions are also rising. He said while it is too early to expect a significant increase in number of transactions,  the reduction usually experienced in the first few weeks of the year due to lull in business activities has not been experienced.

The cashless policy was introduced to promote the use of electronic payment channels as alternative to cash, and thereby reduce the dominance of cash in the nation's economy. As part of efforts to achieve this objective, the CBN introduced limits of N150, 000 and N1 million on free cash transactions for individual and corporate account holders respectively.

It also introduced service charge of N100 per N1000 and N200 per N1000 transactions above these limits.

The apex bank also banned encashment of third party cheques above N150,000 across the counter. Banks were also banned from offering cash pick up services for merchant customers.

Preparatory to the June 1, 2012 date for full implementation of the policy across the country, a pilot scheme was commenced in Lagos State on January 1, with the deferment of the charges and limits to April 1.

To ensure the transition to electronic payment, the CBN and the banks promised to deploy 40,000 PoS terminals across the state. The deployment of the PoS did not meet the January 1 commencement date of the pilot scheme due to friction between the CBN and Customs over 20 per cent import duty imposed on each PoS by the latter. In addition to this was the delay in provision of dedicated telecommunications line and provision of SIM cards for the PoS by the GSM companies.

Investigations, however, revealed that deployment of the PoS commenced effectively in the third week of January.

'I believe that the target of 40,000 PoS would be achieved by June,' said Mitchell Elegbe.

'In the last three months, we have seen orders for PoS that we have not seen in the last nine years. We now have situations where merchants themselves are calling their banks to deploy PoS terminals in their shops.