Bank customers’ billions trapped in failed ATM transactions

Several billions of naira is caught up in failed Automated Teller Machine (ATM) transactions across the more than 5,500 branches of Nigeria’s 25 deposit money banks nationwide.

This is causing pain and frustration to many of the country’s 25 million bank customers. The situation arises mostly in cases of cross-bank ATM transactions, with funds of customers trapped due to slow failed transactions      resolution.

The typical scenario is that a customer of bank ‘A’ finds that the nearest ATM to him is that of bank ‘B’. In an attempt to conduct a withdrawal, the customer’s account gets debited without the ATM actually paying. This is usually due to faulty ATM machines or connectivity problems with the switching company.

When the customer goes into the bank that owns the ATM, he or she is asked to go back to the issuing (his own) bank to file a formal complaint. Following the initial interface, the customer is sent back and forth by the affected banks, over and over again for an interminable period.

In many cases, the customer becomes weary and gives up the chase, waiting for an internal solution that takes too long, or never comes at all. This leaves billions of naira in stranded ATM transactions piled up in the banks.

Analysts say banks’ capacity to handle public communications is often questionable. Many customers leave the banking halls feeling short-changed, which has negative impact on the brand, not knowing that it is just a case of poor co-ordination by the banks.

Seeking a way out of this hazard, many ATM users search out their own bank’s ATMs, no matter how far away these may be, because cases of failed transactions, when they occur on a customer’s bank ATM, are usually resolved within 24 hours. Other bank customers still conduct cross-bank ATM transactions but have resorted to collecting the intended sums in bits to avoid huge losses, in case of failed transactions. This, however, leads to time wasting, long queues, greater wear on the ATM machines and higher risk of failed transactions as explained in the theory of probability and chance.

Many bank customers are also losing confidence in electronic payment systems as a result of slow and inefficient dispute resolution when issues relating to faulty ATM transactions arise.

A source conversant with official ATM transaction, clearance and co-ordination systems in Nigeria, who preferred not to be named, tells BusinessDay that “there is an ‘Arbiter Rule’ agreed to between banks and the switching company, Interswitch, which stipulates that failed ATM transactions within a customer’s own bank must be resolved within 24 hours”, adding that “the Arbiter Rule further stipulates that failed cross-bank ATM transactions must be resolved within five days”.

The source further says that while there might be compliance shortcomings, Interswitch is obliged to correct the error within five days but can only do so on the authority of a report from the originating banks.

Another source observes that the consumer protection desk of the CBN needs to be more awake to its responsibilities. Industry watchers say that the apex bank also needs to compel relevant stakeholders in the electronic payment value chain to resolve disputes much more quickly.

Dupe Atoki, director-general, Consumer Protection Council (CPC), had earlier declared that the body was taking a sectoral approach to ensuring standards compliance and protection of consumer rights. According to analysts, the financial services sector should be top priority.

“There’s little a bank can do because they do not switch for themselves. There is a CBN guideline that stipulates that disputes are resolved within 24 hours,” Rasaq Olaegbe, an e-payment expert, tells BusinessDay.

According to him, the CBN needs to prevail on Interswitch and the Nigerian Inter-Bank Settlement System (NIBSS) to adhere to the guidelines, adding, “Banks also have their internal issues. They are faced with capacity constraints.”

The cash-lite initiative of the CBN is aimed at curbing some of the negative consequences associated with the high usage of physical cash in the economy, including high cost and risk of using cash, as well as the lure to corruption which could attend cash transactions. 

There were about 11,000 ATMs in the country as at the end of 2013, with many of them being dysfunctional, according to CBN. As electronic payments gain ground, the number of connected card readers has increased to about 158,000 from 5,000 before 2012.

The value of transactions rose 26 percent to N1.4 trillion in the first half of 2013 from the year-earlier period. According to the Q2 report on the electronic transaction activities for the year released by the NIBSS, PoS records an average volume of 591,000 transactions on a monthly basis.

Available statistics also show that Nigerians who make use of NIBSS Electronic Funds Transfer (NEFT) system to send money transferred over N11.63 trillion between January and October 2013, according to a report. NIBSS EFT is a system where a bank customer issues an instruction for a specific amount of money to be transferred to a beneficiary who is a customer of another bank.

Industry analysts say the CBN’s cash-lite policy has recorded relative success, but it is still hampered by poor internet connectivity and e-fraud. The apex bank sees the move as a way of reducing transaction costs, countering corruption and bringing more Nigerians into a financial fold estimated to have left out 46 percent of the 167 million-strong population.

For Onajite Regha, chief executive officer, Electronic Payment Providers Association of Nigeria (E-PPAN), “Poor connectivity from mobile operators is a significant drawback to the adoption of e-payments in the country.”

But Stephen A. Bello, principal partner, Kayafas Konsult Limited, has a different view. According to him, e-payments are putting a lot of pressure on the mobile networks leading to deteriorating quality of service (QoS). The effect of extra traffic imposed on the existing networks poses serious degradation in QoS, said Bello at an industry forum.

The CBN has stepped up direct engagements with Mobile Network Operators (MNOs). The apex bank is looking to fashion out new intervention that could, in the short to medium term, alleviate connectivity challenges associated with e-payments.

“Engagement between the CBN and telcos is ongoing. We have stepped up engagement with the telcos because without them e-payments cannot succeed,” Olusuyi Adaramewa, deputy director, CBN, told BusinessDay at an industry forum.

Ben Uzor Jr