Why Nigerians withdrew N4.7tr through ATMs – Heritage Bank

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Heritage Bank’s Divisional Head, E- Business and Collections, eBank, Olusola Longe-Okenimkpe highlights factors behind the huge volume of cash withdrawals through ATMs  despite the cashless policy, stressing that the recent introduction of eproducts like mCash and mPOS will curb this phenomenon.

By Babajide Komolafe

NIBSS reported that Nigerians withdrew N4.7 trillion through ATMs in 2016. Why are we will still depending so much on cash despite cashless policy initiatives?

You will recall that the Central Bank of Nigeria initially set policies for the cashless state in Nigeria but later amended the goal to a Cashlite one. So the intent of the policy is to reduce the amount of cash used for our day to day transactions.

In a sense, an element of success has been achieved in this regard as transactions done via the cashless channels have increased over time.

Payment acceptance

•Olusola Longe-Okenimkpe, Heritage Bank

However, we have cases where due to failure of the payment acceptance touchpoints consummating transactions, customers have gone ahead to withdraw cash from the ATMs to make payment for their purchases.

A school of thought has advocated that ATMs are not part of the cashless initiatives as they only lead to more cash flowing into the payment space.

One of the reasons for the reduced traction of the policy is the willpower of the regulators to push through needed incentives to enhance behavioural change. When the policy started, the CBN set cash handling charge on daily cash withdrawals that exceed N500,000 for individuals and N3,000,000 for corporate bodies. Equally, thresholds were also set for cash deposits.

The charge was later reduced due to political pressure and that removed the bite and some of the incentives to drive merchants to alternative payment methods.

Another impediment is the high cost of the POS terminals for payment acceptance.   A lot of the transactions carried out are of small value and justification for these devices became a hard sell. However, the introduction of Mcash, mPOS and MasterPass will cater for these target market and would lead to greater success in our cashlite initiatives

Despite increased roll-out of PoS and mobile app, lots of merchants (petrol stations, traders, etc) do not have or offer e-payment channels to customers. Why is this so?

Like I mentioned earlier, the high cost of the devices is one of the reasons. A second reason is network instability which reduces confidence in the system. Also, settlement failures also contribute to the problem. Some of the merchants also run away from the merchant discounts, the amount deducted from their sale price during settlement.

Some merchants have problem with the T+1 (transaction date + 1) settlement for their goods when with cash they get immediate settlement (mCash and MasterPass will take care of this fear)

Some banks,  in recent times have launched various mobile payment applications. What is the prospect that Nigerians will embrace the culture of using the phones for payment?

The fact of the matter is that 85 percent Nigeria internet traffic is through mobile devices. According to the Guardian, Mobile phone penetration in Nigeria is about 94 percent which means almost everyone has a mobile phone. There is a concerted effort to acquire merchants for the POS embedded in Mobile phones (Mcash and Masterpass) and the good thing about it is that customers can pay directly from their bank accounts and wallets without the use of debit cards. The prospect that we will embrace the culture is high given that on the merchant side, they get immediate settlement like cash and on the consumer side they just use what they carry around with them all the time. 

The world has witnessed upsurge in the rise and use of  virtual currencies like Bitcoin. In your view, what should be the appropriate response from the banking industry and the government? 

Many virtual currencies like bitcoins have emerged in the last 10 years. There have been concerns that criminals will use the money to hide proceeds of criminal activities.

The Central Bank should seek to understand the methodology of the currency and the exchanges and institute proper regulation within the context of the currency’s interaction with regular financial instruments.

Then the banks can easily deal with them as one of the regular financial instruments. Also, the regulators can also insist on some form of insurance to protect users in the different markets.

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