Social distancing measures didn’t cause the throng of customers that besieged banks after the lockdown was eased, it didn’t bring back tally numbers either; hundreds desperate to withdraw cash did. The queues, sporadic breakdown of terminals or dormant channels and the persistent transaction failures accompanied with long resolution periods across banking halls confirmed how cash still rules transactions in Nigeria and how digital banking still has a long way to go. A new report by Mastercard released on Thursday shows that cash continues to enjoy 80 percent patronage of all transactions in Nigeria from bank customers.
Nigeria has one of the most diverse digital banking channels in sub-Saharan Africa. Both retail banks and fintech firms are aggressively leveraging the different channels including mobile bank transfers, USSD, mobile money, and PoS terminals.
Banks have also invested heavily to upgrade their digital banking infrastructure in recent years. The audited reports of 10 Nigerian banks showed that as of December 2018, they cumulatively invested N120 billion building and upgrading their software. This represents a 55 percent increase from 2016 when the banks collectively reported N77.35 billion investment in software technology.
Their investment notwithstanding, the number of active ATMs, PoS, and mobile wallets are still not enough to cater for the growing banking population in Nigeria. While the number of BVN accounts is over 40 million, the country has a total of 17,518 ATM terminals as of December 2019, according to data from Nigeria Interbank Settlement System (NIBSS). The number of PoS terminals is 449,998 as of January 2020 and only 306,409 of these terminals have been deployed. Nigeria also has 25 licensed mobile money operators (10 are bank-led and 15 non-bank led) catering for 15.3 million customers as of December 2019.
The shortage in capacity means that the malfunction of an ATM terminal or PoS terminal easily compounds the pressure on the remaining terminals, thereby increasing traffic inside the bank halls. Hence, despite the slashing of e-transaction charges by the CBN in recent times, cash transactions continue to be preferred by many Nigerians, contributing to the recent surge in long queues on banks premises.
A bank official who did not want to be named to enable him to speak freely said there could be other reasons customers prefer coming to the bank halls.
“I once went around our bank halls asking customers why they would not use their phones to make their transactions. One customer said to me, ‘I just want to see my money.’ Many of them do not trust the digital channels and prefer to stay on queue all day for a transaction they would have easily completed using their phones,” the bank official told BusinessDay.
Steve Chinemere, a construction worker in Lagos, told BusinessDay he had gone to the bank to retrieve his ATM card after he received a message that it was ready the previous day. On getting to the bank located within Lekki/Ajah axis, he met a long queue with people sitting two metres apart from each other as a measure to observe social distancing.
“I ended up spending three hours before I was attended to,” Chinemere said.
An official of United Bank of Africa (UBA), who pleaded anonymity, told BusinessDay that many of the customers are traders who come to deposit the money they have accumulated over the three days per week the government allows for markets. Part of the guidelines for easing the lockdown was that markets are only allowed to open Mondays, Wednesdays and Fridays.
A BusinessDay investigation had shown how banks were resorting to issuing tallies to customers to deal with the crowd. Banks also have well-arranged seats in their premises where customers sit to wait for their turn to be allowed inside the banking hall for their transaction.
Part of the challenge is that many banks are yet to reopen all their branches despite a CBN directive to do so following the second phase easing of the lockdown. A few banks have also been closing down branches.
David Hundeyin, social media influencer and columnist on BusinessDay, had observed on Wednesday how a Standard Chartered Bank branch at the junction of Lateef Jakande and Acme Road, Agidingbi, Lagos, was converted to a Chicken Republic outlet. The bank also closed a branch at Allen Avenue, Ikeja recently.
System failures and the unending number of failed transactions also contribute to customers going back to bank branches. For instance, during the lockdown, most ATMs were not functioning and mobile transaction failures went unresolved because the CBN had frozen resolution of failed transactions until the lockdown was lifted.
Also, the rate of failure on Point of Sale (PoS) transactions went on a steady rise from May 2020. Data from NIBSS showed that transaction failures rose to 15.31 percent between May 2 and 8, the week COVID-19 lockdown was eased.
In an effort to bring relief to frustrated customers, the CBN had in June directed all banks to resolve the backlog of all ATMs, PoS and web customer refunds within two weeks. Unfortunately, the apex bank is silent on what it is doing to improve payment infrastructure which is a primary barrier for financial inclusion at the grassroots.
While crowds continue to besiege bank halls, some fintech companies say they are having the best year of their lives. OPay, a mobile payment service, whose motorcycle hailing-service suffered some setbacks when the Lagos State government banned the use of motorcycles in most parts of the state, said it has recouped some of the losses between January and May 2020.
The company said in a recent interview with TechCabal that payments grew over 400 percent in April 2020 compared to a year ago. Transaction volume grew over 40 percent from January to May, both offline and online.
BuyCoins Africa, a local cryptocurrency exchange, also said it was seeing growth in the number of users on its platform to the extent that the platform is overwhelmed.
“We’ve been getting a good amount of new users (with actual trading activity) in the past few months at BuyCoins Africa,” said Timi Ajiboye, co-founder and CEO of BuyCoins Africa. “As is common with significant growth spurts, things break more than you’d expect. I just want our users to know that we know and are working on it.”
Apart from BuyCoins, other fintech firms like Carbon also experienced system downtimes at different times. On June 1, the company admitted that it was aware of the difficulties the customers were experiencing.
“We’re aware a few of our customers are experiencing difficulties initiating payments in the app. We’re working on this and hope to be back up and running soon. In the meantime, you can still make payments via your social app using Carbon Express,” the company posted on Twitter.
While fintechs work in the short term to keep transactions smooth, the long-term solution of deploying pervasive broadband infrastructure may be too capital intensive, reckons the Oxford Business Group, in a recent post. It said a country like Nigeria can tap its humongous mobile phone penetration to provide simple mobile money services like Quick Response (QR) code payments.
Ghana introduced a universal QR code system in May, the first on the continent. Ghana’s Central Bank not only waived fees on digital channels like Nigeria did, it eased guidelines for opening mobile-money accounts, allowing citizens to use their existing mobile phone details to register with the major digital payment providers, according to a March 18 Bank of Ghana release.
