April 29, 2012

Counting the costs of cash-lite economy

By Udeme Clement
The pilot study for the cash-lite policy initiated by the Central Bank of Nigeria (CBN), which commenced on January 1, 2012 in Lagos, has received wide acceptance as commercial banks doing business in the former federal capital are providing financial infrastructure to ensure alternative services aimed at achieving full implementation of the policy.

Sunday Business gathered that banks and Payment Terminal Service Providers in the country have acquired 72, 960 Points of Sale (PoS) to enhance efficiency in the system, even as active PoS terminals have increased from 5,300 in June 2011 to 18,874 by March 2012. Also, another set of 54,086 PoS terminals have been registered.

A manager in Zenith bank branch Ilkoyi disclosed, “The cashless policy is going on well in Lagos and will work in other states if properly implemented. For instance,  the CBN wants to have over 100,000 PoS terminals deployed by 2012 and another 350,000 by 2015.

Already, the CBN has directed that 40,000 PoS terminals be deployed in Lagos while targeting over 450,000 across the country by 2015. Also, the PoS, being deployed in the country, operate with dual SIM, with minimum of 24hours battery life and biometric option.”

Other services provided by banks for depositors under the new dispensation include internet banking and ATM cards.Zenith, GTB, Diamond, Keystone, Ecobank, Access Bank and First Bank in Lagos are offering internet banking services with the device for money transfer for about N3,000, profiling for internet banking without device for money transfer free while ATM goes for between N500 and N1,000.

Aside from charges for internet banking operations in  most banks, withdrawal with (PoS terminal ),which are given free to customers who apply for them, attracts N200 for transaction above N40,000, N350 for transaction above N500,000, N500 for withdrawal up to N1million, N1,000 for withdrawal up to N5million and N2,000 for transaction up to N10million.

For example, in Keystone Bank,procurement of ATM card attracts N1,000 while withdrawal with the same card from ATM machines of other banks attracts N100 per transaction.

Some customers, who commended the policy initiative of CBN, said the apex bank should monitor compliance of the rules governing the new dispensation by commercial banks. A depositor, Mrs. Alice (surname withheld), who spoke with our correspondent at First Bank, Akute branch, said, “Some ATM machines are just there without cash in them.

For example, I went to the First Bank branch at Akute last Sunday to make withdrawal of N20,000 when I had emergency but could not withdraw. I had to rush to First City Monument Bank (FCMB) around the same area to make withdrawal”.

Also, a journalist with a national daily in Lagos, who spoke in GTBank premises at Creek Road Apapa, said, “I was disappointed when electricity went off while my transaction was processing. I left the bank because it was 8.30pm already. But the next day N10,000 was removed from my account”.

While some financial analysts said that the pilot study was designed to experiment the entire process, others are of the opinion that the study should be extended to business areas of the country before full implementation in other states.

The director general, West African Institute for Financial and Economic Management (WAIFEM) and a professor of economics, Akpan Ekpo, advises the CBN to move the experiment on a slow pace since 65 per cent areas of Nigeria are un-banked.

His words:”The reports we are getting so far indicate that the cashless experiment is working very well in Lagos . There are challenges but I think over time these challenges will be over come. For example, people complained about their cash being stuck in ATM machines.

A situation whereby a depositor’s money is stuck in ATM machines can easily be tackled. What is required in such a case is for the customer to go to the bank and complain in order to retrieve his money. The interesting thing is that the apex bank is monitoring the process to ensure efficiency.

For instance, if customers encounter problems during transactions and such problems are not resolved within 72 hours, CBN has a hot line where depositors can call to complain and the apex bank will take action immediately.  So, with the commitment of CBN the policy will be smoothly implemented in Lagos .

“Well, that depends on the fees the banks are charging, which the CBN may have to also look at. Also, the banks are competitive and may charge different fees for the services they are offering. The good thing is the fact CBN listened to consultations from people when the programme was launched and that prompted the monetary authority to increase the month from N150.000 to N500.000 for individuals and from N1million to N3million for corporate organisations, which is a big jump.

“My advice is that CBN should extend the pilot study to business areas of Nigeria. This implies that the pilot study can be extended to places like Ibadan , Port Harcourt , Kaduna and Abuja where large scale economic activities take place on daily basis.

CBN should be a little careful about other areas in the country. The reason being that, about 65 per cent of the areas in Nigeria are un-banked. So, if they rush into such places with these gadgets to introduce cashless activities it might create problems.

Let CBN continue with the pilot scheme for a while and experiment more on areas where tremendous economic activities are taking place before moving to rural area. The point is that CBN should move slowly using the pilot study as an attempt to experiment other places.

“Do not forget that CBN is not saying do not take money. The apex bank is only giving a withdrawal limit, meaning that individuals can withdraw more money, but must be ready to pay the fines. The reality is that no society is cashless because people use cash daily for business transactions.

The whole idea of the new policy is to limit the volume of cash and to encourage other banking services to check fraud in the system. Also cashless economy will encourage the use of cheques. I wonder why we are not using coins in Nigeria . “If you go to other countries like Britain and United States of America (USA) you will see people using coins.