Nigeria: Bank e-Payment Glitches Continue Despite Soaring Transaction Volumes

Although, the volume of e-payment transactions increased significantly in February 2023, rising by 121 per cent year-on-year, electronic payment glitches have continued unabated, thereby pulling down the value of transactions consummated in the second month of the year. Latest data by the Nigeria Inter Bank Settlement System (NIBSS) show that, while the volume of NIBSS Instant Payment (NIP) rose by 45.5 per cent last month, the value of transactions consummated via the channel declined by 5.12 per cent.

LEADERSHIP recalls that during the period of scarcity of new naira notes, a lot of Nigerians turned to internet banking to carry out their banking transactions, thereby putting more pressure on the internet banking platforms of banks, and creating traffic that over-stretched the inadequate online banking infrastructure of Deposit Money Banks (DMBs).

The reason for the poor internet banking services experienced during this period of cash crunch is simply because Nigerian banks do not have solid technology or infrastructure to manage the rush, the co-founder and project manager of VPD Money, a digital fintech, Mohammed Adeleke, told LEADERSHIP.

Adeleke disclosed that most of the banks are running on old technology, hence the reason they are not able to manage the rush.

“Imagine all of people trying to pass through a tiny door, it is either they break the door or they slowly pass through it. That was what happened. The infrastructure in most banks could not manage the rush. That was why transaction was not going. You want to send money, but the internet banking platform is not opening. Even if you successfully send money, it takes days for it to reflect in the receivers’ account or bounce bank to your account. The simple explanation for this is that the banks are still operating on poor technology,” the co-founder explained.

Unlike the incumbent banks, fintech companies like VPD, was able to come to the rescue, during this biting period, Adeleke averred, adding that, “When you use fintech companies like VPD, etc, to send money, it goes speedily. Our customer based increased tremendously during this period, because our platforms are reliable and transfer are free of charge. Within the blink of an eye, the receiver has received his money. The incumbent Banks will charge you, yet, will not give a satisfying service.”

From all indications, the co-founder said the Central Bank of Nigeria (CBN) will not achieve its cashless policy if it only relies on the incumbent banks, while urging the apex bank to be flexible.

“CBN should not be rigid; it should collaborate with fintech companies who have the technology, technical know-how and data to drive the cashless policy,” he added.

He also urged incumbent banks to collaborate with fintech companies, adding that in less than 10 years, most banks in Nigeria would diminish but fintech companies will grow.

“Fintech companies are growing rapidly, providing financial solutions even to rural communities. For instance, the value of Flutterwave is worth seven (smaller) Nigerian banks combined together. The banks that will stand the test of time are those who will collaborate with fintech companies now,” he said.

Experts in the telecommunications industry are displeased with the failures of the e- transactions following the cashless policy imposed by the CBN, which has caused so much pain and losses to hapless Nigerians.

Speaking to our correspondents, executive secretary of Association of Telecommunications Companies of Nigeria (ATCON) Ajibola Olude, said the chaos triggered by the policy was caused by the haste with which the apex bank tried to implement the policy.

He said, “What happened was that the CBN is in haste in the area of implementing the cashless policy and this has resulted in a lot of transactional failures on the part of various channels. And the reason for this is that the banks, I want to believe, were not carried along when the CBN wanted to implement this. Because before now when you do transactions using apps and the rest of them, we don’t experience this volume of failure that we have now.

“But because the banks were not properly carried along, they need to expand their storage with data centre people. You cannot not use the storage for 20,000 transactions for 80, 000 transactions; they need to widen the scope of the storage with a data centre. This is what led to the failure you are talking about,” he said, adding that the scope of their rack at those data centres were not upgraded.

“It is just like you are trying to force more data within a limited space,” he said.

He said further that a lot of people want to make use of USSD and apps but “you have not widen the scope of their storage, and as result of that their transactions could not go through.”

On the way forward, Olude said the banks were not prepared for the chaos the policy has brought about even as he lamented that so many people have lost their jobs, with the SMEs the worst hit by this crisis.

He urged the banks to do a new level of investment by widening the scope of their data storage and enhancing their capacity to resolve the present painful experience.

“The CBN should have done this implementation in phases and not this sudden approach. We should know that Nigeria is predominantly a cash economy but I don’t know the reason the CBN wants to rush Nigerians to get this policy implemented. A lot of people have lost their jobs as a result of this policy especially the SMEs who believe more in cash, and the buyers too could not buy things because the SMEs are not ready to take transfers, because most of them are not literate and they want cash. They are not used to transfer.

“For me the policy is ill-timed and CBN needs to go back to the drawing board and implement this policy phase by phase,” he said.

A fintech expert, Ade Atobatele, described the policy as a failed policy that brought untold hardship to Nigerians, adding that the CBN did not display good vision in the implementation of the policy.

“We did not have the capacity for what the system was asked to do overnight; we were gradually working our way up to bigger capacity. Every year, we were doing more and more capacity and then the CBN took away our money illegally.

“The system was serving us faithfully for what we need it to serve and we were growing the people running the system and adding enough capacity for it to grow, and all of a sudden, the CBN asked to grow overnight from a child to an adult. We went from 15 per cent capacity to 85 per cent capacity overnight. There was nothing that the CBN did that could not have been stretched out over a longer period of time. Because of CBN’s lack of foresight, lack of vision, we are now having dead people and many people becoming beggars,” he added.

When asked if the nation benefited anything from the policy, the expert said, “We did not benefit from this policy,” adding that people lost faith in the system when it started failing.

“The CBN perverted the system by asking it to do what it was not designed to do,” he said.

On the way forward, Atobatele said “We have to do a post -mortem and learn from our mistakes and go back to growing organically.”

The CEO, Precise Financial System, Mr Yemi Okeremi told LEADERSHIP that the banking technology in Nigeria is fairly sophisticated, with respect to the country’s level of development.

Okeremi added that, the naira redesign, leading to little fund in circulation and surge in the use of internet banking system have caused more harm than good, as the fragile infrastructure put in place by the banks have further depleted as a result of traffic.

“For me, we are not ready for the cashless policy. Before this time, we had enjoyed fairly good internet and mobile banking and that is because the banks had scaled up based on what was on ground. They know the number of Nigerians who have signed up for their internet banking services and they also have idea of the Nigerians that are banked and have put infrastructure in place to service them.

“All of a sudden, the CBN then came up with the idea that all Nigerians must go cashless. This is like double of the figures that were using their internet services. There are many Nigerians who have accounts with banks, but not using their internet banking services. These set of people were forced to start using internet banking overnight, which has slowed down servers, thereby delaying transactions or even declining them,” the CEO averred.

In addition to this, he disclosed that many tech experts have left the country for greener pastures, leaving the less experienced personnel to manage the infrastructure in the bank, adding that, “Most of these fresh graduates do not know the nitty-gritty on how to manage some of the software and hardware used in the banking sector.

“Also, poor internet connectivity has marred the seamless transition to cashless, in the sense that for cashless policy to work, people must transact and receive alert immediately. But the reality is not so, as some transactions take up to a day or two before the other party would receive alert.”

Infrastructure deficit, brain drain, and social problems, whereby every Nigerians now want to use internet banking at the same time, are the reasons why Nigerians are having issue with internet banking, the CEO explained.

He however urged CBN to reconsider its decision.

“We know cashless process is great for any economy to grow, however, CBN would have been gradual in the process of turning the Nigerian economy into cashless economy. The banking sector is doing the best they can do, because nobody envisaged the traffic of internet banking. I must commend them; however, I would appeal to them to scale up, to meet this present challenge.

“On broadband connectivity, the telecoms sector is doing its best, in that the industry is planning to scale up broadband connectivity level to like 70 per cent by 2024. If that happened, people will be able to receive alert of transaction on time,” he stated.

Speaking in the same vein, the head, operations, Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbolahan Awonuga, urged the banking sector to upgrade their capacity.

Awonuga said: “What the government is doing now is that they want a total cashless environment. We are taking about digital economy, but there must be some level of preparation. The banks should be able to accommodate the traffic flow of their customers.

“If everybody should go into cashless, the internet platforms of the banks should be able to manage the traffic. The reason we are experiencing delay in transaction or declined transaction is because there are lots of traffic at the backend. People want to do internet banking at the same time, however, because of the capacity, they cannot enter at the same time.”