A FEW months down the timeline for the implementation of the cash-less exercise in other states of the federation, the exercise has not been without challenges, despite the successes recorded, even as expectations are on the rise from stakeholders involved in the exercise.
It is not unusual to notice the reel out of figures by stakeholders involved in the cashless exercise on the success of the initiative, especially in terms of deployment of terminals and the amount of transactions recorded in the last few months. Interesting and encouraging, as it seems, events in the industry pose a lot of questions to the reality and sustainability of the scheme, especially with key drivers of the scheme, namely, merchants.
After months of trials and adoption, stakeholders are beginning to look up towards implementing the exercise in other parts of the country — first in Abuja, Ogun, Rivers, Kano, Anambra and others by January 2013.
However, various challenges of attitude, culture, literacy, infrastructure and education need to be addressed if the policy will achieve the desired objectives.
Specifically, some of the setbacks the scheme is still facing include the wide gap between deployment of terminals and usage by merchants, low literacy level (especially in rural areas), inadequate operationability skill of terminals by merchants, high rate of downtime in Internet services on terminals and sometimes, by the performance of the ATMs (particularly on weekends), transaction delays, heavy use of cash and fraud associated with electronic payments.
Furthermore, a major challenge for the CBN and, indeed, the banks, would be working out an effective method of reining in, the unbanked, underserved/underbanked and the not-so-informed on financial services, on the need to adopt electronic payment channels.
Financial surveys also indicate that only one in five Nigerian adults owns a bank account, with over half of the country’s adult population excluded from access to financial services, especially in the rural communities. Even for people in the periphery, the requirements for opening a bank account are often tedious that consumers get dissuaded from the act.
Experts have noted that except the financial literacy campaign spearheaded by the Central Bank and the stakeholders in the electronic payment towards enlightening the public of the electronic payment system is intensified, it may be difficult to close the current gaps hindering the rollout of the system in due course.
The success story
Statistics from the Nigeria Inter-Bank Settlement System Plc (NIBSS) showed that Inter-bank transfer, Point of Sale and cheque transactions done via the clearing house for all electronic payment transactions in the country hit N4.9 trillion in June, 2012.
According to the NIBSS, it had processed over 7.5 million transactions during the first half of the year valued at N4.9 trillion, while 604,793 transactions done on PoS terminals spread across Lagos were worth N10.6 billion.
Also, the NIBSS noted that over 1.2 million NIBSS Instant Payment (electronic fund transfer) worth N982 billion were transacted within the same period, while the remaining 5.8 million transactions, were done through cheques and were worth N3.9 trillion.
The CBN, NIBSS and the banks have been promoting the use of cheques, bank transfer, PoS and mobile payments as alternative to cash in the cash-less economic drive. While cheque and inter-bank electronic transfer recorded huge growth in the first half of 2012, Shonubi decried the slow adoption of PoS transactions within the same period.
Poor connectivity due to poor telecoms infrastructure and lack of awareness had been identified as major hindrances to PoS transaction growth.
Head, Shared Services Office at the CBN, Mr. Chidi Umeano, CBN, said the 88,622 PoS terminals that were made available in January this year to enhance Cashless Lagos, had all been successfully deployed, with additional deployment under the pilot phase, bringing the number to over 150,000 PoS terminals already deployed in Lagos State alone.
To him, the CBN licensed six PoS distributors to deploy the terminals across the country, more people were beginning to shift from the use of cash to the use of alternative payment channels, resulting in increased volume of financial transactions with alternative payment methods.
“The volume of transactions through alternative payment systems is between N40 to N50 billion daily, with PoS channels alone, recording over N200 million transactions daily, and the volume keeps increasing,” Umeano said.
He, however, admitted that awareness campaign on Cashless Nigeria was not enough and that CBN had concluded arrangements to engage the services of the National Orientation Agency (NOA) to further deepen the enlightenment campaign.
The setbacks
Despite the successes recorded in terms of deployment of Point of Sale terminals (PoS), indications are that there are about 62,095 unused Point of Sale (PoS) terminals in the cash-less Lagos initiative amid poor connectivity and downtime.
Experts have noted that this could have far reaching implications as it could hamper the success of the scheme aimed at reducing the amount of physical cash circulating in the economy and encouraging more electronic-based transactions.
Umeano noted that though registered PoS terminals on the NIBSS platform had reached 151,717, the “gap between registered and deployed, is mostly due to lack of capacity on the part of the Payments Terminal Service Providers (PTSP) to meet the demand.”
Specifically, some of the merchants, who spoke with The Guardian identified the technicalities of mastering the usage of the PoS terminals and other technologies deployed as part of the challenges encountered with the usage of the terminals.
One of the Merchants, Manager, Bahali Stores, Ikeja, Francis Okeke also highlighted infrastructure challenges such as power and telecommunications as major factors hindering usage of PoS in some areas in Lagos.
According to him, some of the PTSPs have come to install the PoS terminals, but don’t check back to see if there we are encountering other challenges. For instance, the PoS terminal I have with me does not receive signal in my area and I have thus neglected it.
Besides, the merchants have noted that for effective adoption and utilisation of Point of Sale (PoS) terminals by Merchants, the stakeholders may need to review the charges associated with using e-payment channels.
Also, the merchants have also attributed the continuous neglect and non-utilisation of PoS terminals to inadequate enlightenment from the stakeholders, while calling for a one-day transaction settlement cycle to aid reconciliation of transactions in the ongoing exercise.
Managing Director and Chief Executive Officer, Eronic Stores, Prince Eroni noted that delay in crediting merchants’ accounts and high tariffs on transactions are major impediments to the use of the PoS terminals.
Eroni said that the banks and the Central Bank of Nigeria (CBN) should work on achieving a one-day settlement cycle and a further reduction of the transaction fee below the current 1.2 per cent.
Another merchant, Nancy Obika said the transaction fee should be reduced further to encourage them to use the product.
“I think that aside addressing the problem of downtime, the next thing that regulator needs to do is to further reduce the transaction fee. That will encourage many of us to use the terminals more often,” she said.
One of the PTSPs, Citiserve, through its business head, Jubril Salaudeen at a forum recently noted that incessant GPRS network downtime is a major huddle to be crossed in PoS deployment, noting that some of the PoS terminals may be changed for terminals that use wireless networks in some areas in order to cater for the network problems.
Expectations
With the successes recorded so far, amidst challenges, expectations are still very high as regards how the cash-less initiative can be effectively optimised.
Key expectation is the need to intensify enlightenment exercises for both consumers and key players in the electronic payments industry.
Also, there are expectations on the need to develop products that will drive the cash-less exercise and also aid financial inclusion motive of the apex bank.
Specifically, while banks traditionally have been the providers of retail payment services, they are now facing a real threat of disruption as new technologies and new types of financial and non-financial intermediaries are combining to provide alternative and less-expensive solutions.
This has further renewed the drive to increase product offering to different segments of the market, especially the underserved by some banks.
According to the experts at Deloitte, “banks in emerging markets like Nigeria may wish to consider embracing prepaid products and mobile platforms to penetrate the mass market “bottom of the pyramid.”
“This could be a particularly important strategy for international banks, as they have limited branch presence and mobile can offer them a low-cost channel to acquire new customers and scale-up efficiently,” they added.
Furthermore, merchants also suggest the need for after-sale services from the PTSPs in order to address rising needs and challenges.
