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e-business: why full adoption of e-payment tools fails

*Lack of connectivity, low banking, unfavorable regulations fingered

The growing acceptance of digital lifestyle appears to make more Nigerians increasingly addicted to e-business.

The implication is that the prospects of cash transactions is fast shrinking, giving way to electronic payment system.

However, if opinions of major stakeholders in the e-business sector  are anything to go by, there are still pockets of challenges trying to play down the impacts e-payment has made.

Some of the operators in the payment and financial institutions who spoke to Hi-Tech, outlined some of those challenges facing online mobile transactions to include poor connectivity, low banking culture in some parts of the country, unfavorable regulations and poor funding , among others.

Some of these challenges, according to them, have made it impossible for automated teller machine, ATM, point of sale, POS and other payment channels to be fully adopted in the country.

Considering that the Central Bank of Nigeria’s, CBN, financial inclusion objective is to make sure that 70 percent of Nigerians are doing transactions electronically, one would ask  how this can be achieved without appreciable growth percentage and penetration of these cashless devices in the country?

Level of penetration

A business development executive at ITEX Integrated Services, Mr. Macdonald Okoh, thinks these devices have penetrated in Nigeria by 80 percent.

He said: “In the past three years, we’ve seen major growths and this growth has been seen in both number of terminals deployed and number of active terminals has grown. We have also seen number of value and counts of transaction grow. It grows actually by over 80 percent yearly.

“In the next two years, with the advent of agency banking and aggressive deployment of financial inclusion, we will see this grow to over 300 percent,” Oko said.

He believes POS has done better than other channels. “I know close to a thousand terminals are deployed on daily basis by all commercial banks in the country. We see penetration of POS with better network today. We see POS deployed in remote areas. I think POS has done a better job than any other channel,” he added.

In the same vein, Managing Director of Xpress Payment Solutions Limited, Mr. Oluwdare Owolabi, told Hi-Tech he has no accurate figures at the moment but thinks the penetrations of POS terminals have increased over the past few years especially with the cashless policy. “But I think it has gone up to about 30-40 percent across some regions in Nigeria and the number keeps on increasing on monthly and yearly bases according to factors and data coming from NIBSS.

Owolabi, however thinks both POS and ATM machines have driven the cashless initiative aggressively. “What is happening now is that you don’t need to carry cash around to do most of these transactions, and if you are carrying cash, it’s minimal. Before now, I remember that at times, I have to hold close to N400, 000 with me to the market but today most of the places allow you to use these devices.

“You can now have your funds through the cashless initiative at any point in time using the USSD to transact businesses and so, those have really helped the e-payment in Nigeria and that has really driven the cashless initiative aggressively,” Owolabi said.

A senior staff at an e-payment company, Globasure technology, also said that POS is growing very big because of the cashless policy that started some years back. He however added that Nigeria is not there yet but it is really making great waves.

Like others, the Globasure staff thinks the channels have helped reduce the amount of physical cash that is being carried about. “No matter what you want to buy, you don’t have to carry cash as long as you have your ATM card. That has also helped the level of security because you are confident that you can make payment without fear of anybody coming for the money,” he said.

The head, Digital Solutions at SecureID, Stanley Anetoh, on his own said he can’t give an accurate percentage of these devices’ penetration and thinks nobody can do that. But he is certain the growth of POS solutions in the economy is actually increasing fast.

In terms of how it has contributed in the cashless policy, he said it has actually encouraged people to stop using cash. “Most of the departmental stores, fuel stations and some small businesses now have POS. It has immensely helped the cashless policy in Nigeria and I believe that it still has a lot in fully meeting the complete demand of cashless policy,” Anetoh said.


Unanimously, experts believe these devices have contributed immensely to Nigeria’s cashless policy but this is not without few challenges. For instance, some passionate users have lamented that certain POS terminals reject certain debit cards while accepting others.  Meanwhile, some of these people have divergent views on this.

Owolabi attributed the issue of rejection to network problem. He said each rejection has a code which explains the reason for the rejection. “If the network is down at the other side of bank, then it’s going to come as if it is rejecting it. But each rejection actually, has a code, a code that shows maybe the bank is down, or you don’t have enough funds, or maybe your financial institution is not available. So every rejection does not mean that something is mainly wrong with your card or wrong with that ATM.”

On his own, Okoh told Hi-Tech that there is an issuing and acquiring side when it comes to these devices and there are some restrictions when the issuing side has not met certain conditions.

“Majority of the POS deployed in the market today are positioned to accept any card. A few of them after going through some certifications are also allowed to accept international cards. So it’s in the hands of the issuing side more than the acquiring side. The acquiring side is ready to accept any card but from the issuing side, there needs to be some sort of hand shake for the acceptance to be similar,” he explains.

On the contrary, Globasure staff thinks the reason for rejection is basically the fault of the credit card producers.

He also believes that’s part of the challenges they are facing. “I can’t categorically say where the issues are coming from but I know that it is one of the challenges that we face,” he said.

However, head, public relations of Nigerian Communications Commission, Reuben Mouka, said the issue of rejection has to do with security issues. “Some people develop different platforms with different security systems and codes. So if you are not on a uniform platform, your card may not access some banks. I know there are some banks that reject some cards, its either the recipient bank is trying to protect itself from that level of security available or the bank you are using does not allow you to use that in another place.

“On the whole, it is actually the Central Bank that could actually answer why one card could not access all because they are the ones that license them.

“Ours is to provide in that ATM the phone connection, signaling and everything. It is the banks that talk about securities and which card access which POS.

More challenges

Aside from rejection of some POS terminals, Anetoh noted that full adoption is still a problem. “Basically, it takes some times for some people to completely embrace this policy especially the rural areas where connectivity is an issue due to power.

“Again, some people still don’t have bank account so these are the small teething problems that affect the penetration but I believe that with new technologies like agency banking and mobile payment we should be able to penetrate,” he said.

As for Owolabi, he sees a major challenge in regulation. “Regulation in this industry has brought some major limit to people’s expression. If people are given the full allowance to express themselves, we would have seen a lot more entrance into this space, so one major limitation is regulation.

“We have also seen a few fraud cases and that have made deployment of financial solutions more expensive because you want to deploy a solution that is secured and to deploy a total secured solution, it comes at some huge cost. So, I leave it as cost, funding and regulation,” he said.

As for Globasure staff, the major challenge he sees will always be connectivity because for the POS to work, it has to be connected.

“Because it is live transaction going on and most times we need internet, we need data to process this transaction. Sometimes, you have issues where a POS is not working because data is not available or there is network challenge,” he said.

Also speaking whether e-payment has heightened or curtailed financial crime, Owolabi believes financial crimes have been heightened a little bit, “because we still have some inside entities that allows fraud to happen in their system because they are the ones that are working. These are the reasons why there are lots of crimes still happening on the e-payment systems.

Okoh also believes financial crime has heightened because it has created a new type of crime but innovations have also reduced it. “The truth is that it has created a new type of financial crime on its own. The crooks have become smarter with electronic payment coming. But we’ve seen regulations fight fraud in this part of the world.

“In Nigeria, we used to have a lot of fraud around when the cards were max tribe, I think Central Bank of Nigeria now stepped in, and we now have only chip cards. We reduced that type of fraud by close to a 100 percent. You can hardly hear a case where people clone your cards. It is now so expensive to clone cards. I will say, e-payment started with some high level of crimes but innovation has also reduced fraud in this space,” Okoh said.

Globasure Technology staff believes e-payment has bad and good sides. “Basically, e-payment has made life easier but it always comes with its bad side because some people will always want to abuse it. That’s why we have hackers and all the people that abuse the platform.

Conversely, Anetoh thinks it has actually curtailed financial crimes, “because for each transaction that passes through the payment terminals, there is a monitoring system that can actually track payment: who is paying or receiving the money, and what time.

“So it has actually helped to curb crime because if I am using a card and I know that if I use this card in this place it will be tracked, I will be careful with how I go as compared to when it is just cash payment.

Also, it takes away the risk from business owners because they don’t get to keep cash anymore. So if you are been robbed it is actually not cash because everything is electronic payment,” Anetoh said.

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