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Driving Nigeria towards a cashless economy

That the whole world is moving towards a cashless economy is no longer news. What however, is news is the reluctance at which Nigerian bank customers are embracing this global innovation. In this report, Correspondent WALE JOHNSON takes a detailed look at the development and concludes that the country cannot afford to ignore the deployment of this service if the benefits are properly weighed.

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The Central Bank of Nigeria has repeatedly lamented over the high cost of printing naira notes; this has led to it initiating a bill in the National Assembly to check abuse of the naira. This situation has once more brought to the fore that the nation's economy is cash dominated.
The regulatory body has also directed banks to put in place a system that will guarantee uninterrupted online transaction through complying to Basel 2, which requires banks to have disaster recovery system by duplicating their data centres and satellite connectivity points.

This is to ensure that the problem of system breakdown that delays banking operations sometimes is addressed. It is believed that such delays often time discourage people from relying on banks for important urgent transactions, thereby resorting to the use of cash as against cheque or plastic money.An e-payment card is a payment instrument, usually in the form of a plastic card, provided by the “issuer” (issuing institution) to the cardholder so that he/she by accessing a telecommunications network and based on the account associated with the card, may purchase goods or services, make payments, withdraw cash and/or conduct other transactions.

The e-payment card allows the holder to validate the transaction that he/she wishes to carry out.
However, the objective of all these is to reduce the use of cash in transaction in the country. Nigeria 's economy is cash dominant compared to some emerging economies such as Indonesia, Singapore among others.
Several attempts in the past to introduce plastic money failed basically because there was no telecommunication infrastructure in place to guarantee its efficiency. This resulted in hiccup experienced by users of such cards that

led to its being fizzled out. The liberalization of the telecommunication sector in 2000 which gave rise to private participation in deployment of both satellite and fibre optic telecom infrastructure, facilitated the launch of online transaction by banks that enable customers of a particular bank to have access to their account at any branch of the bank.

Information technology integration of banks is a relief to most Nigerians who have suffered a lot inconveniences in movement of cash from one location to the other. Lives have been lost and are still being lost today in the course of moving cash from one place to the other, through robbery attack, while some businesses have suffered set back through loss of money to robbers.

All these would have been avoided if there were effective card systems that enable people to use card for transaction no matter where the individual may be. However, the situation is gradually changing for the better with efforts by some companies and banks.

Efforts
It was in recognition of the importance of card in making their work easier as well as reduce the use of cash in transactions that banks pulled resources together to establish Interswitch, a card switching company that controls inter-bank transaction on Automated Teller Machine (ATM) using bank issued debit card.

		The company focuses on facilitating the exchange of value between service providers; financial, telecommunications and utilities, as well as merchants, their customers, and other stakeholders on a timely and continuous basis nationwide. Through its “Super Switch” infrastructure, Interswitch provides an online, real-time electronic payment system to support automated customer transactions from different customer touch points and transaction channels. Today, almost all the ATMs deployed in the country are connected to

Interswitch network and there are presently a little over 900 ATMs in the country. And the volume of transaction has increased considerably in recent times.
To complement the efforts of banks and Interswitch, the Automated Teller Machine Consortium (ATMC) has assisted in the deployment of ATMs in public places such as eateries and petrol stations. This has to a great extent helped in increasing accessibility of ATM to bank customers for cash withdrawal and payment as well.

There has also been coordinated effort in a seamless use of various cards such as using MasterCard, Visa and Debit cards on ATM deployed by banks. This was made possible by the interconnect agreement the various switching companies for these cards signed in order to remove any hitch that may discourage Nigerians from using card.
Industry observers have placed First Bank, UBA and Zenith as the three Nigerian banks that are jostling for leadership positions in the deployment of ATMs in the retail-banking sector.

In fact, informed sources disclosed that these three banks would be deploying over 1,000 ATMs each by the turn of the year.
To guarantee a continuous use by customers, First Bank and UBA regard a minute downtime from changing from public power source as a drawback to their service strategy.
Understandably, one can imagine 20 or 30 branches being down for a minute or more, it signals that at least 30 customers may be affected.

Considering that a customer satisfaction translates to few or more referrals, you then easily can appreciate the significance of these banks relying solely on inverters and batteries to generate reliable source of power.

Available Cards

Debit card: This card is associated with a current/savings account. When the cardholder uses it for payments, cash withdrawals at ATMs or transfers,

the corresponding amount is debited from the holder's current/savings account. This means that there is an equivalent reduction in the demand deposit account balance. This type of card is best described by its debit function.
A debit card allows its holder to buy now and pay now. It is therefore more convenient and safer to carry than cash or cheques.
Credit card: This card is associated with a “card account” and a credit line. When the cardholder uses this card to make payments or obtain cash advances, he/she benefits from a credit line extended by the issuer (which may or may not be a bank). Therefore, this type of card is best described by its credit functions. A credit card allows its holder to buy now and pay later. There are two types of credit cards; naira

denominated otherwise called local credit as the one Ecobank launched late last year,Skye Bank also launched last month. The second is international credit card such as MasterCard and Visa. In the country, the switching company for MasterCard is Card Technology while ValuCard is the switching company for Visa.Presently, six banks in the country are issuing MasterCard; they include Ecobank, Zenith, UBA, GT Bank, Intercontinental and First Bank, while over 20 banks have indicated interest in issuing Visa that have recently been launched in the country.

All these are in line with globalization where national boundaries are no longer barriers to the use of cards.

Challenges

The argument in favour of the adoption of ATM in Nigeria includes branch decongestion, reduced cost of transactions for both customers and banks among others. It could provide a rapid reach to customers even in the remotest part of the country rather than the brick and mortar type branch.

Another key opportunity provided by ATM to users is the flexibility to move around with minimal cash and thereby reduce incidence of theft.
With these obvious benefits, some key factors that may affect the effective use or deployment of ATM include, lack of awareness by bank customers, high cost of deployment arising from the poor infrastructure such as power backup, telecoms and also operational costs from loading of cash with availability of crisp notes that will be stashed now and then. ATMs also need to be secured and protected especially with the peculiarity of the Nigerian

environment. This is why banks are making huge investment on the deployment of ATMs. Players in the industry have identified high cost of infrastructures, such as ATMs, Point of Sale terminal.
Mr. Mitchel Elegbe, managing director, Interswitch said lack of basic infrastructure such as power is a major challenge; this he said need to be regular for the terminal to work at all time.

More so, lack of awareness poses a major hindrance to the use of card; greater percentage of bank customers still see ATM card as a product for the rich and educated, while some doubt its workability.
This correspondent happened to take a young man that worked for him to the bank to withdraw money for his payment. When they got to the bank and saw the crowd, the young man lamented why I brought him there to waste his time. I pleaded with him, that we were not going to spend time, but he wondered the miracle I was going to perform for us to get out of the place

on time. As we entered the bank premises, I walked to the ATM and slot my card, typed in my PIN number and carried out the transaction and got money in less than five minutes.
This surprised the young man who sought an explanation on how ATM works and if he can as well use the card and the machine. This case is one out of several thousands who do not also know that an account holder in First Bank with First Bank Debit card can make withdrawal in Zenith Bank deployed ATM.

Elegbe said that the problem of awareness could be solved by making the system work without failure, which according to him will build the confidence in the minds of Nigerians to use cards.

Now that the required telecommunication infrastructure to deploy ATMs in the country has been put in place efforts are geared towards increasing the deployment of ATM not at major commercial cities but also in every town in the country.

Allowing private partners to manage the ATMs such as making sure that there is cash always in the ATMs and ensure that they are working 24 hours could do this, according to Dr. Evans Woherem, an Executive Director with Unity Bank. “By so doing, it will reduce the incident of malfunctioning of the machines which discourages customers from using the machine, and thereby increase its use”.

Interswitch Implements ATM in Sierra Leone

Interswitch has announced the successful completion of its ATM driving solutions for Sierra Leone Commercial Bank to drive growth in the electronic payments arena in Sierra Leone and also reduce the cost of retail transactions.

InterSwitch solution controls and drives ATMs (including states and screens) directly; perform centralized routing, security processing, reconciliation and proactive monitoring functions. Sierra Leone commercial bank Limited, by this solution, will be able to issue debit card payment instruments to its own customers that can be used on any of the customer touch points.

The prime objective is to achieve high service excellence through multi channel service platforms that will ensure convenience and ubiquity.

Mr. George Taylor, executive director, Information Technology, said Sierra Leone Commercial Bank is excited to offer customer convenience through electronic delivery and that the electronic delivery channel will enable the bank to provide its customers greater access to their accounts and will give them long-term cost reductions.

Through reseller agreements with Postilion Software, InterSwitch provides a comprehensive ATM hardware and software solution that is able to handle ATM driving, switching, network management, settlement and reconciliation.

The InterSwitch solution-incorporating Postilion lays the foundation for future enhanced functionality that allows financial institutions to explore new customer service options and fully develop their ATM networks as retail delivery channels.

Melvin Haffner, general manager, African Information Technology Holdings, Sierra Leone (AITH) consultants to Sierra Leone Commercial Bank, expressed happiness that InterSwitch deployed the solution within the agreed time limit and budget.

Mr. Mitchell Elegbe, managing director, InterSwitch, expressed appreciation on the opportunity to work with the members of Sierra Leone Commercial Bank and the choice of InterSwitch to provide this solution.

eTanzact Extends Services

eTanzact has extended its services to other African countries with the signing of agreements between the company, utility services providers and other organisations in Ghana and Zimbabwe. eTranzact is availing citizens of these countries immense benefits of using its solutions to ease payments for goods and services.

Some of the partners to the agreement include Ghana Telecom and Mutual Fund Administrators in Ghana. In Zimbabwe, the partners are Zimbabwe Electronic Supply Authority (ZESA), TelOne. Telecel Zimbabwe, City of Mutare. The services that are being facilitated by eTranzact cuts across finance, education, telecom, water and electricity bill payments.

eTranzact has installed online fee payments at both Zenith University College and Telecom University College, in addition to micro finance payments for the Databank's ePack and mFund, all in Ghana. Ghana Telecom's one-touch service enables subscribers to do funds transfer, top up airtime of their phones and that of other subscribers, and pay for goods and services from the convinience of their mobile phones.

" The solutions we have made available to our subscribers have enhanced the benefits they derive from using ther mobile phones, enabling them to do a lot more than just call and send text messages," George Babafemi, business development manager, Ghana Telecom, said.

In Zimbabwe, several local government administrations have installed eTranzact solutions to facilitate the payment of water rates and other fees that they are authorised to collect. The City of Harare, City of Bulawayo and City of Mutare are the first to install this online payment system. The Zimbabwe Electric Supply Authority, ZESA, has installed the same multi-channel payment system for the payment of electricity bills. TelOne and Telecel, both telecom services providers, have availed their subscribers the possibilities of topping up airtime of their phones remotely.

In all of these situations, eTranzact's expertise and novel solutions are being deployed to ease payments and funds transfer, making life easier for customers and helping organizations simplify their payment structures. Valentine Obi, chief executive officer, eTranzact, said, "the solutions we have deployed in Ghana and Zimbabwe are part of our long term strategies to expand eTranzact services globally, because we are a worldwide payment solutions provider."

Temenos Retains Prime Position in IBS Rating

Temenos Group, the provider of integrated core banking systems, has retained its prime position in the newly released International Banking Service (IBS) rating. The latest rating placed Temenos T24 banking software in the second position in its Sales League Table 2006 in the universal banking category. Seven consolidated Nigerian banks and the Central Bank of Nigeria are currently using Temenos T24 .

The new licence sold by the company saw a 25 per cent increase in 2006 with 40 new clients, giving it a customer-base of 440 banks in this category, the largest of any core-banking product. The report also records one sale of Temenos Core Banking (TCB) with a retail client base of 79.

Temenos has appeared in the top two positions of the league table for eight of the last nine years.
Andreas Andreades, chief executive officer of Temenos, said: “Our consistency in serving our industry over the past 10 years has been recognised with our placing in the IBS league report. I personally want to thank all our clients that have placed their trust in us for their commitment and support.

The strong revenues yielded from our growing raft of tier 1 and 2 wins ensure that we're able to invest 20 per cent of turnover in Research and Development (R&D), a higher rate than any of our competitors. That we can then roll out this rich functionality to our entire client base gives us our unique business model.”

During the past two years, Temenos has announced eight tier 1 wins with banks such as Deutsche Bank, Fortis and Sumitomo Mitsui Banking Corporation.

Having the largest client base across all banking verticals has put Temenos in the best position to launch Temenos Model Bank in 2006. Temenos Model Bank delivers T24 with mostly pre-configured, pre-parametered features and incorporates a global best practice standard that achieves 50 per cent lower implementation time frames.

Temenos Model Bank and the associated implementation methodology minimises customisation, reduces costs and also brings tighter controls over project scope and deliverables. The overall result is a quick and safe implementation.

T24 is a functionally rich, thin client, scalable, integrated, modular banking system. It is built on open service oriented architecture, and uses established technology standards such as HTTP, XML and HTML.

MasterCard, Scotiabank introduce new credit cards

Scotiabank and MasterCard Worldwide have announced the launch of Scotiabank MasterCard Business Card and Scotiabank/AAdvantage Business Executive MasterCard card; to make credit facilities more easily available for small- and medium-sized businesses.
Speaking at the launch of the new cards at the Jamaica Pegasus last Thursday, Scotiabank Jamaica's President and CEO Bill Clarke said: "With the Scotiabank MasterCard Business Card and Scotiabank /AAdvantage Business Executive MasterCard we are seeking to ensure that Scotiabank facilitates and acts as a catalyst of growth for small and medium enterprises, which are vital for sustained economic development in Jamaica.
From left to right, Scotiabank Jamaica's Marketing Director Heather Shields; President and CEO Bill Clarke and Vice-president and Customer Business Lead for Scotiabank MasterCard Worldwide Diana Forti show off the new Scotiabank MasterCard business credit card at a presentation held at the Jamaica Pegasus last Thursday. (Photo: Bryan Cummings)
"Our partnership with MasterCard will allow local entrepreneurs to access services to meet special business needs; and the extended facilities and benefits will allow businesses to operate more efficiently and without many of the current restrictions that they now encounter when accessing credit facilities.
Clarke also added that it was very timely for Scotiabank to join with MasterCard to launch these two new credit cards as the bank is advanced in its establishment of a business unit which will offer additional services and guidance in establishing, operating and growing small and medium sized enterprises.
"Small- and medium-sized businesses often have different financial needs compared with larger operations, for that reason MasterCard is pleased to be able to facilitate robust expense management and widely accepted payment tools to help small businesses better manage their cash flow and pay their expenses with ease," explained Paulo Fernandes, Vice-president of Corporate Business Products for MasterCards Latin America and Caribbean region.