Doubts trail cashless project as service downtime, low card usage persist

Much doubts still trails Nigeria’s migration from a cash to an electronic based economy, as a myraid of bottlenecks, including lingering service downtime on all electronic channels, low levels of card usage and poor awareness amongst the populace, continue to frustrate the initiative, market observers say.

The halting state of the scheme initiated by the Central Bank of Nigeria (CBN) to reduce the cost of managing cash was apparent during the Christmas and New Year celebrations.

BusinessDay further gathered that massive service downtime on banks’ electronic channels, including Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, mobile money and internet banking platforms, caused long queues of frustrated customers at the premises of many banks in Lagos and other parts of the nation, around the Christmas and New Year periods .

“The promise of Cashless Nigeria was that we would be able to use our cards to seamlessly pay for goods and services without using cash. The reality has been somewhat different”, said Adewale Adetugbo, chief technical officer at Telnet Nigeria Limited.

Though many ATMs in the country allow customers to make cash deposit, BusinessDay learnt that there were long queues of bank customers across the country, earnestly seeking to make cash payments, hours to the Christmas celebration.

Many of them had complained that most of the e-channels, which ride on the nation’s telecommunications network, and would have enabled them to perform electronic transfers, were not working. The season also witnessed a surge in non-functional ATMs and PoS terminals across many banks and merchant locations in the Lagos metropolis.

The CBN had put the volume of transaction on ATMs in the country at over N1.7tn as of June 2014. The apex bank said the number of ATMs increased from 10,727 in 2012 to 15,000 as of June 2014, “with transaction volumes moving from N1.3 trillion to N1.7 trillion within the same period.” But interestingly, the current population of ATMs in Nigeria, Africa’s largest economy by GDP, results in an average of about 13 ATMs per 100, 000 adults, according to latest industry findings.

A World Bank report shows that adults in the country account for about 56 percent (95.2 million) of the total population (I67 million). But, in stark comparison, Indonesia with an adult population of about 90 million, more than doubled their ATM installed base from 16, 700 in 2011 to 36, 500 in 2012, resulting in 37 ATMs per 100, 000 adult population, about three time the ATM per adult capita in Nigeria.

“From 2006, when ATM deployment started, penetration was growing year-on-year. After the policy changed, it stopped. Yes, the CBN reversed the ban on offsite ATMs but when policy changes abruptly, it indeed affects investor confidence”, said Victor Alaofin, chief executive officer, Ryte Internet Technologies, in an interview.

For Austin Okere, group chief executive officer, Computer Warehouse Group (CWG) Plc, “there are serious challenges in stable and consistent power supply, as well as network connectivity, both of which the ATMs and PoS cannot operate without”.

Another fundamental snag to the successful implementation of the cashless project is the low number of active PoS terminals.

According to data from Tech Cabal, as of the end of April 2014, about 20 percent of the over 160,000 PoS terminals deployed are active. These active terminals were used by 340, 000 payment cards for some 1.5 million transactions in that month with a value of about N16.9 billion.

For comparison sake, there were approximately six million payment cards used in ATM’s to withdraw approximately N161 billion across about 13,000 ATM’s. “With these figures, Cashless Nigeria project seems to be a bit of a misnomer. “There is still plenty of cash around”, said Adetugbo.

Merchant apathy towards cashless transactions constitutes a significant drawback to the adoption of electronic payments, industry observers say. According to them, the main problem merchants have with PoS is that transactions do not complete within a reasonable time and bank customers are not only charged for failed transactions, but are billed mutiple times.

In addition, BusinessDay found out that merchants are charged a fee of 1.5 percent of the value of the transaction capped at a maximum of N2,000. “We do not get immediate value. They take my money, give it to me days after and it is short”, Bisola Abiodun, a merchant in Lagos told BusinessDay yesterday. Apparently for a number of merchants, reconciling accounts with their bank is a major issue.

Ben Uzor