Cash-less policy: Electronic transactions rise to 20%

CashlessEighteen months after the Central Bank of Nigeria commenced the cash-less policy in Lagos, electronic transactions have increased to 20 per cent from less than five per cent.

A report by the Financial Derivatives Company Limited, presented by Mr. Bismarck Rewane, stated, “In the first year and a half of the cash-less policy in Lagos, non-cash payments have increased by 20 per cent.”

Our correspondent, however, gathered that the various challenges confronting the policy, which include poor network connectivity, multiple debiting of customers’ accounts, high transaction charges, machine malfunctioning and other technical issues, were discouraging customers and had resulted in a slow adoption of electronic transactions.

The report showed that the cash-less policy concentrated on the banked public (customers who have bank accounts) rather than the unbanked or those in the informal economy, which is estimated to be about 75 per cent of the population.

Analysts, however, pointed out that the cash-less policy was likely to be more successful if participation extended to the informal sector and the challenges being currently encountered were minimised.

The cash-less policy, which is aimed at reducing the dominance of cash in the financial system, specifies penal charges for individuals and corporate organisations that want to withdraw or lodge cash above prescribed limits.

Under the policy, the banking watchdog pegged the daily cumulative cash withdrawal or deposit on individual accounts at N500,000, and N3m for corporate accounts.

The CBN had said that it was considering extending the cash-less policy to all the states in the federation by 2014.

The central bank recently extended the cash-less policy to the Federal Capital Territory as well as Abia, Anambra, Kano, Ogun and Rivers states; but deferred the implementation of charges for those who wished to withdraw or lodge cash above the limits in those states to October.

According to the Deputy Governor, Operations, CBN, Mr. Tunde Lemo, the bank has identified the challenges encountered by the initiative and is working towards resolving them.

Analyst, however, said one good way of achieving this was by introducing mobile banking under the cash-less policy platform.

Mobile banking is the provision of banking and financial services with the help of mobile electronic devices. The services offered under this platform include performing balance checks, cash lodgements and others transactions.

In the United States and other developed countries, payments via the mobile phone are still weak and lagging behind due to different standards, including near field communication and various failed efforts at mobile wallets.

However, in Africa, the lack of banking and other types of infrastructure have propelled the mobile payment initiative due to the wide adoption of mobile phone technology, despite the fact that the overwhelming majority of devices on the continent are low-end feature phones.

The analysts believe that Nigeria can take a cue from Kenya where mobile money has been most successful.

Experts at the FDC said, “Kenya’s mobile banking package was initially designed to facilitate mobile repayment of microfinance loans, reducing the costs associated with handling cash and thus making lower interest rates possible.

“But after pilot testing, it was broadened to become a general money transfer scheme that allows individuals to deposit, send and withdraw funds from a virtual account on their cell phones, which is separate from the banking system.”

Meanwhile, the Nigerian Electronic Fund Transfer and Instant Payment transactions on the Nigeria Inter-Bank Settlement will likely hit N2.48tn on a monthly basis.

The projection is based on the revelation by the CBN that the NEFT and NIP transactions processed by the NIBSS had reached N80bn daily, with the calculations showing that is likely to hit N2.48tn monthly.

Lemo recently said the NEFT and NIP transactions were already in the range of N80bn daily.

He explained that the NIP recorded over N20bn daily transactions by value, while the NEFT was conducting about N60bn transactions daily.

The NIP and NEFT are e-Payment channels used to make payments for huge transactions electronically.

The NIBSS provides the infrastructure for automated processing, settlement of payment and fund transfer instructions between banks, discount houses and card companies in Nigeria.

Lemo noted that both the value and volume of cash transactions executed through the NIBSS and the NEFT had doubled when compared with the use of cheques.

In spite of the growth in the NEFT and NIP, the Governor, CBN, Mr. Lamido Sanusi, identified poor telecommunication connectivity as a major challenge to the cash-less policy.

He said, “If you want to move data, for example, you need more bandwidth. It is not enough to have PoS terminals, or to have ATMs, there is a need to expand the bandwidth.

“There are operational issues; you will be amazed that you do a transaction on the PoS and you have operational issues because the name doesn’t match. So, these are small things that we discovered. We can say that we are not where we want to be; but definitely, we are inching closer and we will get there.”

Lemo, however, said the challenges were being overcome.

He said, “We believe very much that it is getting better because we monitor the transactions on daily basis and we are beginning to record large volume and value of transactions done through the PoS.

“We are not even looking only at the PoS as a major channel for the cash-less policy; we are now looking at all the other major channels. We have the mobile telephone, which we will use to drive the cash-less policy too.”

source: punch news
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