MR. Adeyinka Adeyemi is the Managing Partner/Chief
Executive of Intermarc Consulting, the organiser of the yearly CardExpo
Africa and a former banker with specialisation in electronic banking and
card payment systems. In this interview with CHIJIOKE NELSON, he
assesses the e-payment system’s developments so far, saying that while
the policies have made huge impact, there is a need to review some
issues around Automated Teller Machines (ATMs) and Point of Sale (PoS)
transactions. Excerpts.
How would you assess the implementation of payment system’s reforms so far?
To start with, I like to state categorically here that the policy of the Central Bank is an initiative that was long overdue, even as at the time that it was implemented. Don’t forget that the industry already has history of 10 to 12 years before that policy came to be. Since that policy was implemented, we have seen tremendous growth in terms of the transactions. And that is really the basis to adjudge any implementation. From the time it was implemented, we have seen transactions growing in six months to N1.3 trillion in terms of electronic transactions in Nigeria, which is huge and I am talking about June to December. Now if you look at where we were before the implementation of the cash-less policy, nothing nears that figure. Once government steps into any policy to begin to drive the implementation, you will begin to see massive action in the direction and that is what we have seen. We have also seen the Nigeria Electronic Transfer System (NETS) run by Nigeria Interbank Settlement System (NIBSS), as well as NIBSS Instant Payment transaction rise to N40 billion.
Now this would have never been possible without government policy on implementation of the cash-less policy. Before this policy came to be, it was free market, every player was doing what they wished to do without enforcement of regulation, yet regulation was there but we didn’t realize its enormity and how that would impact the general economy. We can now see the response both on the business side and on the market. So, I think it is something that is quite commendable that CBN’s leadership came up with the initiative to ensure that Nigerians enjoy the benefit of electronic transactions in terms of security, speed of transactions and convenience.
You know before now, it was very difficult for people to do business. They had to carry huge amount of cash in “Ghana-must-go bags,” not just politicians alone, but even in commercial sector, to buy cars and every other thing, but today you wire money seamlessly without even thinking about it. So, this has come to impact on the larger economy. And it will surprise you that one of the indices of measuring development of any economy is how business is conducted. There is a measurement by the economic commission where if you are below par in your electronic transactions, you are rated below average. So, since that has become a global indices of measuring development, I am sure that is where the wisdom of CBN must have come from to begin to promote this policy. So, in a nutshell, it is very commendable and very encouraging for the players in the industry.
Do we have enough supporting policy in place to sustain the cash-less policy?
Don’t forget that cash-less policy also has other successes. For instance, the policy of mobile banking in Nigeria. There is another one in the pipeline, but I am not sure it has been ratified yet- Agent Banking, which will support mobile payment system. There are policies on PoS and ATMs. So, if you put all of these together, you will then begin to appreciate the intentions for regulations in this sector. Cash-less policy is not just about the limits of withdrawals, N300, 000 for individuals, N3 million for corporate bodies. If you drive down into the details, you will then begin to see how that policy is actually aimed at reforming the entire financial system and one of the things I find very interesting is that almost overnight the bullion vans have disappeared from the system. Two years ago, you would not go on the streets on a daily basis without hearing the sirens and bullion vans pulling through but today they have practically disappeared. And the infrastructure costs banks a lot of money, the same thing with cash sorting center and cash handling. So, banks were actually being constrained by a lot of cost going into managing cash that would in turn hit the bottom line. Now through the wisdom of CBN, all of that has been removed and banks can actually perform their functions on a more profitable basis. And I think that’s just smart.
There has been a significant policy change from the CBN, particularly in respect of ATM charges. What is your take?
Well, I can understand where the CBN is coming from, even though I am not fully convinced that it is the right way to go. From the point of view of CBN, if we would want to expand electronic banking or electronic payment in Nigeria, why are we putting constraints in terms of fees, especially if you want to provide service to customers? That is essentially where CBN is coming from and they are saying that to make this electronic payment more accessible to the common people, they may not be able to afford this fee that we are talking about. So, it is a game of numbers, lets drop the fees may be transactions would increase. However, I am of the opinion that in the place where banks are providing values to the customers they need to be compensated for the service. Maybe, from a N100 to N50 is a different story. Banks are providing convenience, speed and security for customers as a result of ATMs and so, it should be paid for. That is number one. Number two, is that I don’t think it is proper for CBN to come up instantly with that decision overnight to say remove the fee because ATM is actually not a full e-payment device. My understanding of electronic payment is that you do not pay with cash. But with ATMs, you withdraw your cash and then pay with cash. That is still not electronic transactions as far as I am concerned. So, I would imagine that CBN would have left that fee as penalty for people who want to collect cash and spend, and then do something about PoS. Telling me PoS is zero fee to customers because you want to encourage PoS transactions for people actually using their cards to buy goods and services is understandable. So, there has been argument in the industry on exactly what CBN is trying to push. Is it cash transactions via ATM or is it electronic payments via PoS? But I am sure that over a period of time, CBN would rethink and correct that policy, because the support should be for how we can grow PoS, mobile banking and make it less expensive for the customers and even for the operators.
If the CBN sustains this policy, what is the implication for banks and the development of e-payments?
The cost is huge from three angles. One angle is loss of revenue. I know some banks that lost up to N4 billion. It’s actually anything between N500 million and N4 billion in terms of actual loss arising from the removal of that N100 fee. Number two is that banks have to continue to support the ATMs in terms of the connectivity fees, maintenance costs and ATM’s depreciation provision. These are costs to banks and it is huge. So, besides the fact that you are losing revenue, your costs are still there. So, you are losing on both ends. But the implication to the industry would be the fact that banks would be discouraged from further investments on ATMs. So, if a bank has a plan to deploy 50 ATMs per year in their budget, while the deployment is supposed to be funded by this fee, now that revenue has disappeared overnight, then it has to be looked at again. This means slowdown on further deployments of ATMs. These are the few implications as far as I am concerned.
How would you assess the implementation of payment system’s reforms so far?
To start with, I like to state categorically here that the policy of the Central Bank is an initiative that was long overdue, even as at the time that it was implemented. Don’t forget that the industry already has history of 10 to 12 years before that policy came to be. Since that policy was implemented, we have seen tremendous growth in terms of the transactions. And that is really the basis to adjudge any implementation. From the time it was implemented, we have seen transactions growing in six months to N1.3 trillion in terms of electronic transactions in Nigeria, which is huge and I am talking about June to December. Now if you look at where we were before the implementation of the cash-less policy, nothing nears that figure. Once government steps into any policy to begin to drive the implementation, you will begin to see massive action in the direction and that is what we have seen. We have also seen the Nigeria Electronic Transfer System (NETS) run by Nigeria Interbank Settlement System (NIBSS), as well as NIBSS Instant Payment transaction rise to N40 billion.
Now this would have never been possible without government policy on implementation of the cash-less policy. Before this policy came to be, it was free market, every player was doing what they wished to do without enforcement of regulation, yet regulation was there but we didn’t realize its enormity and how that would impact the general economy. We can now see the response both on the business side and on the market. So, I think it is something that is quite commendable that CBN’s leadership came up with the initiative to ensure that Nigerians enjoy the benefit of electronic transactions in terms of security, speed of transactions and convenience.
You know before now, it was very difficult for people to do business. They had to carry huge amount of cash in “Ghana-must-go bags,” not just politicians alone, but even in commercial sector, to buy cars and every other thing, but today you wire money seamlessly without even thinking about it. So, this has come to impact on the larger economy. And it will surprise you that one of the indices of measuring development of any economy is how business is conducted. There is a measurement by the economic commission where if you are below par in your electronic transactions, you are rated below average. So, since that has become a global indices of measuring development, I am sure that is where the wisdom of CBN must have come from to begin to promote this policy. So, in a nutshell, it is very commendable and very encouraging for the players in the industry.
Do we have enough supporting policy in place to sustain the cash-less policy?
Don’t forget that cash-less policy also has other successes. For instance, the policy of mobile banking in Nigeria. There is another one in the pipeline, but I am not sure it has been ratified yet- Agent Banking, which will support mobile payment system. There are policies on PoS and ATMs. So, if you put all of these together, you will then begin to appreciate the intentions for regulations in this sector. Cash-less policy is not just about the limits of withdrawals, N300, 000 for individuals, N3 million for corporate bodies. If you drive down into the details, you will then begin to see how that policy is actually aimed at reforming the entire financial system and one of the things I find very interesting is that almost overnight the bullion vans have disappeared from the system. Two years ago, you would not go on the streets on a daily basis without hearing the sirens and bullion vans pulling through but today they have practically disappeared. And the infrastructure costs banks a lot of money, the same thing with cash sorting center and cash handling. So, banks were actually being constrained by a lot of cost going into managing cash that would in turn hit the bottom line. Now through the wisdom of CBN, all of that has been removed and banks can actually perform their functions on a more profitable basis. And I think that’s just smart.
There has been a significant policy change from the CBN, particularly in respect of ATM charges. What is your take?
Well, I can understand where the CBN is coming from, even though I am not fully convinced that it is the right way to go. From the point of view of CBN, if we would want to expand electronic banking or electronic payment in Nigeria, why are we putting constraints in terms of fees, especially if you want to provide service to customers? That is essentially where CBN is coming from and they are saying that to make this electronic payment more accessible to the common people, they may not be able to afford this fee that we are talking about. So, it is a game of numbers, lets drop the fees may be transactions would increase. However, I am of the opinion that in the place where banks are providing values to the customers they need to be compensated for the service. Maybe, from a N100 to N50 is a different story. Banks are providing convenience, speed and security for customers as a result of ATMs and so, it should be paid for. That is number one. Number two, is that I don’t think it is proper for CBN to come up instantly with that decision overnight to say remove the fee because ATM is actually not a full e-payment device. My understanding of electronic payment is that you do not pay with cash. But with ATMs, you withdraw your cash and then pay with cash. That is still not electronic transactions as far as I am concerned. So, I would imagine that CBN would have left that fee as penalty for people who want to collect cash and spend, and then do something about PoS. Telling me PoS is zero fee to customers because you want to encourage PoS transactions for people actually using their cards to buy goods and services is understandable. So, there has been argument in the industry on exactly what CBN is trying to push. Is it cash transactions via ATM or is it electronic payments via PoS? But I am sure that over a period of time, CBN would rethink and correct that policy, because the support should be for how we can grow PoS, mobile banking and make it less expensive for the customers and even for the operators.
If the CBN sustains this policy, what is the implication for banks and the development of e-payments?
The cost is huge from three angles. One angle is loss of revenue. I know some banks that lost up to N4 billion. It’s actually anything between N500 million and N4 billion in terms of actual loss arising from the removal of that N100 fee. Number two is that banks have to continue to support the ATMs in terms of the connectivity fees, maintenance costs and ATM’s depreciation provision. These are costs to banks and it is huge. So, besides the fact that you are losing revenue, your costs are still there. So, you are losing on both ends. But the implication to the industry would be the fact that banks would be discouraged from further investments on ATMs. So, if a bank has a plan to deploy 50 ATMs per year in their budget, while the deployment is supposed to be funded by this fee, now that revenue has disappeared overnight, then it has to be looked at again. This means slowdown on further deployments of ATMs. These are the few implications as far as I am concerned.
No comments:
Post a Comment