Category: Payment Cards

Adedeji Olowe’s take on debit, credit, and prepaid cards. You could read about technologies, business models, and other industry stakeholders for cards.

5 things you don’t know about Nigerian ATMs

Just a few years ago, we practically begged people to use ATMs instead of queuing up at the banking counters, but that brought its own set of odd questions. Here are some answers to those random ATM inquiries that have been lingering in your mind.

Just a few years ago, we practically begged people to use ATMs instead of queuing up at the banking counters but at least that has changed. But then the change came with friends, family and other random people asking me random questions why they can’t brew a nice cup of coffee at the ATM.
Some of the oddities are explained here.

#1 Why doesn’t the ATM retract cash?
If you forget to take your cash abroad (places where the snow falls in January) the ATM simply takes it back and then reverses the amount. Sounds convenient and nifty for forgetful souls like me.

Why doesn’t it do that in Nigeria?

Well, it started that way until some dudes figured out that they could take out a bit of the cash and trick the ATM to withdraw everything back, crediting the full amount.

Warri no dey carry last!

#2 Why doesn’t the ATM accept cash?
I remember walking into a NatWest Bank when I was in school and feeling funky with myself, deposited some scraggy notes into the ATM instead of bothering with the dour looking cashier. It went smoothly and I got my credit almost immediately.

Some random banks tried it in Nigeria but the experiment reminded me of Icarus. Icarus thought he could fly, strapped on some wings and jumped. It was his last jump.

Cash accepting ATMs have to count the cash, scan the notes and determine the currency by staring at it. Unfortunately, the cash notes in Nigeria have been to more places than I could safely describe on the Internet without getting my HR to invite me for a serious conversation. NSFW!

The ATMs choked on the cash and the experiments went south. Simply put, we mangle our cash in Nigeria and no ATM made of man has been able to overcome that. A few banks are still struggling with these devices, but I know as long as we still roll up our notes, write things on them like jotters or stuff them inside sostén then cash accepting ATMs will never work.

#3 Why do I have to input my PIN for another transaction even when I haven’t removed my card?
There is something funny that happens in countries like Nigeria where you need lots of notes from the ATMs for even the simplest purchase. In the US, usually maximum withdrawal is $300 and nobody apart from Nigerians take that much cash.

Equivalent of that amount here is N84,000, that depends on who you ask though. Since ATM cannot just open its guts for you to point and select your cash, it can only push out at most 40 notes. So an average transaction in Nigeria needs multiple withdrawals.

What if you forget your card and it doesn’t require PIN for the next transactions? Actually that’s the way it was and suddenly forgetful people, who have taken their cash and gone, are separated from the rest of the money in their accounts by the next dude on the queue.

Their wailing and gnashing of teeth made banks to reconfigure the terminals. The wailing stopped but not the gnashing of teeth.

#4 Why does the ATM have blue background and yellow text by default?
The engineers who configured the first set of ATMs in Nigeria have no taste. Next!

Fortunately some banks have since seen the light and have gone on to do graphical interface designs. Nothing impressive at this time though. One of these days when I have less to do, I may wander around comparing screens.

#5 Who is the girl that talks on the ATM?
I don’t know her! I swear, she ain’t my cousin.

While she loves to say “Thank you for banking with us”, I know she’s saying exactly the same at other banks; she’s probably promiscuous and has no loyalty.

Nota Bene
You can ask me other random question on anything you want to know about ATMs and I will do my best to answer them. I’m not an expert so don’t scream blue murder if I try to pull the wool over your eyes.

Digital "Fluffy" Banking

Digital Banking seems to be the new buzz word these days. I love buzz words; they are necessary distractions in the agonizing world we live in.

But what’s digital banking? Nobody seems to know. Just like those mischievous boys in the bible – customer service we know, value for money we know but what the heck is digital banking?

A thousand definitions exist but basically everything points to a fancier electronic banking services.

Maybe people need to understand what we customers need.

We don’t need pretty names or fancy titles. We don’t care if you are a tier 1 or tier X bank. We don’t care if you are a boutique bank and cater for some fancy niche. We don’t think about innovation. We just want the damned services to work and you not to fleece us while at it. When things go wrong let us know. When our money is missing return it before we squeal. When we visit your branches or call, treat us like royalty.

You want to know what customers really want? Check here.

Damn it! Do you guys get it now? To hell with electronic and digital banking.
My bed has 3 wrong sides and just a good one, which incidentally is the side against the wall. I couldn’t get off from that good side this morning.

Telcos to the Mobile Money Rescue

The Central Bank recently relaxed the rule on Mobile Money (MM) participation by giving out telcos invite to the party. Yes it’s a party but then everyone’s gone home.

Specifically telcos are now allowed to be Super Agents, which means they could use their thousands of retail touch points to serve MM customers. But unlike what most people are clamoring for or what some think CBN did, telcos cannot operate MM systems, they cannot accept deposits or give loans.

While we may want to quickly apply a generous dose of cane to CBN’s butt, we should for once understand their position and what it portends to the industry.
The problem, in my own opinion only, is that telcos cannot serve two masters and with some of them so powerful and rich, turning them to banks (banks collect deposits, :-)), is creating a monopoly. The NCC, a very strong regulator, is the umpire for the telcos while CBN patrols the financial sector. Trust me, nobody wants to mess with both of them.

Should that be allowed to happen, who controls who? What happens when CBN issues a counter memo to what NCC has issued? What about deposit insurance? If a telco is doing well providing voice and data services but tottering under banking related issues, can CBN move in and take over to prevent an implosion?
What about very large telcos that are like industry to themselves?

MTN is the obvious example here. While they control just about  62,813,111 active lines as of June 2015 which is 42% of 146,486,786 nationwide, data from other sources such as banks suggest that 75%+ of customer main lines are from MTN. Their 2014 $2.6B profit is a testimony to that. I believe that such a single entity controlling the bulk of telecoms and banking would simply be impossible to manage.

Another thing is CBN simply takes a more serious, no-nonsense approach to regulation. While getting hit by her stick might be painful, the disciplined stance has been of benefit to everyone. As we speak, there are clear laws by CBN barring banks from entering into the telecoms market. Oh, there are wider rules barring banks from doing anything apart from banking. #EnoughSaid.
This takes me to another point – what made the original efforts to skid of the track?

Transaction Charges
MM transactions are expensive for the target market and sincerely there are no feasible means of making it cheaper. There are no incentives for agents to cash in and cash out for free. If this is the case, how will it be different when telcos are super agents?

So you ask, how are banks able to do cash in and out for free? It’s simple – banks make money from lending the deposits they have. Click here to know a bit about banking. Unfortunately the advantage of float isn’t available to MM operators (MMOs) whose settlement accounts are ring-fenced. Visit the CBN website to read about guidelines of MM operations and pay attention to article 9. Don’t worry, you won’t lose your mind from reading it, it’s actually in next-to-everyday language.

Interoperability
MM died slow and painful deaths because they simply can’t connect to each other even though the CBN mandated it. Today everyone takes it for granted that you can easily zap money from Bank A to Bank B using common standards (NIBSS and QuickTeller) but try to do that for MM and you are out of luck. Try to move funds from Bank A to MM B, and you may get slapped. NIBSS has fixed the major interconnection issues but maybe its 3 years too late, maybe not.

Cash Out
Today you don’t think twice before using any random ATM of any random bank. After all, the worst is you get wacked with N65 from the 4th adulterous transaction on an amorous ATM. To do that with MM is just almost impossible as there isn’t any national standard for ATM cash out that’s bank agnostic. InterSwitch has been working on something for eons but as the target customers are dumping MM in droves, there hasn’t been any incentive to roll it out across all banks. And by the way, if that ever happens, MM customers will pay N100 per transaction as against free for ordinary bank customers.

Shopping
Whether online or in store, your card is always there to make you poorer. Unfortunately that can’t be said with MM. Even if you had N1B in your MM wallet today, you are probably going to die of hunger as the next restaurant doesn’t have any means of accepting your payment. Oh, if you told them you have N1B in MM they probably will beat you up as nobody will believe you.
Same problem exists online – you can’t pay for anything on all the major Nigerian websites. Paga made some in-roads but then how many people are on Paga and how many online stores even accept Paga? When you are shopping online and you want to pay, you don’t select banks, you merely select UPSL or InterSwitch, Visa, Verve or MasterCard.

International Acceptance
Ok, this is taking it too far. Your MM money dies right there at the airport. Even if you sneaked out through Seme Border, you can’t use it as Cotonou. Case closed.

CBN KYC Tier
I don’t know if this is a problem but according to CBN, banks are allowed to open accounts for everyone irrespective of race, religion or net worth. The target market of MMOs are better served by banks and unless they are cretins, which they are not, they wouldn’t touch an MMO with a 10 foot pole when all they get are hassles, fees and lack of interoperability.

How Can We Fix This?
It shouldn’t be all woes. I believe the Central Bank can fix the financial inclusion problem but it may be tough:

  • Allow telcos to to do MM. All they need do is develop a robust framework with NCC. They may also make the telcos to create Chinese walls between their different operations
  • I know it sounds dull, but CBN may have to wade in and review prices of transactions to allow the business to grow. Cash outs and cash ins should be free but agents to be reimbursed by MMO. Transfer will incur charges
  • Implement a common ATM cash out standards and ensure all banks comply within a reasonable time frame.
  • Implement a common purchase standard on POS and online and ensure banks, merchants and switches comply. Within a reasonable time of course.
  • Tie in the card schemes and make it easy for MMOs and customers to latch on without having to put up their relatives for sale on OLX.
  • Bar banks from having customers at the lower tiers of KYC.

Some of my recommendations sound despotic but then what do you expect from me on a Sunday afternoon?
 

Cashless Nigeria by Force, by Fire!

I was recently reviewing a CBN report on Cashless Nigeria and it is scary to know that 65% of Cash in Circulation is outside the banking system. I guess everything the CBN can do to cajole those who have ecstasy at the sight of cash wouldn’t work. Time we did it differently. What will happen if the CBN changes the Naira design with 1 year for everyone to comply or the Ghana-must-go of cash becomes an anthropological artifact? The whole cash would have to come to the banks to be changed, isn’t it?

What if the CBN puts a cap on the amount you can get back as cash but the rest has to be paid into some accounts, even if it is a mobile wallet? What if there is no penalty for pay in but there is for cash out?

We have done even crazier things in Nigeria and we can pull this off. The whole Cashless stuff is kind of tiring when you consider the efforts guys have put in but then nobody said it’s gonna be easy. The rest of the country is going to be on Cashless in few months and I hope we can drag them kicking and screaming into the new dispensation.

Crashing the Cost of Banking: The Bitter Sweet Experience

The Central Bank (of Nigeria, if you really want to know) has been at the fore-front of financial inclusion, and oh, at the forefront of cashless economy.

Obviously they decided to mash the two together.

Kudos can be given to CBN for forcefully yanking our sorry backside from comfortable banking to make things really cashless. Considering that government and regulators are not known for speed or innovation, this is extremely commendable.

So, the CBN started the cashless thingy, did a million road shows and I guess the people we hardly see, the real banking customers, complained about the cost of everything. CBN came back and said, “From December 17, 2012, thou shalt not demand for N100 when your customers use other banks ATMs again!”

What?

You see, the N100 from ATM is almost synonymous with N20 collected by Askaris. You can’t dodge it. But then it cost money, I mean real money – mostly in Benjamins, to make the ATMs and other e-things work. Nothing goes for nothing.

The NCC came around and said, “From February 2013, thou shalt not collect more than N4 from SMS sent within Nigeria.” That is going to hit the pretty backside of SMS alerts. That itself is a story for another day.

Well, the CBN is not done yet – there wouldn’t be any minimum balance any minimum balance anymore. By this time, bankers are looking around bewildered.

Ok, so where do this all lead to? Simple English: Financial Inclusion.
The reality is, the cost of banking could be a barrier to quite a number of customers. Better put, most customers. Take the annoyances – COT, minimum opening balance, minimum balance, ATM fees, transfer fees, bla bla. Customers simply run for the gates. By crashing the fees, CBN is making sure no one has a real excuse for not having an account.

I can see this game evolving over time – I expect that CBN might banish some other fees, put a max on interest that can be charged on loans, a minimum percentage that must be lent to SME (wait, what happened to that 10% of PBT to be invested in SMEs?). Some even think the days of COT are numbered.

The take from everyone is this – in the short term, there would be a dip in revenue but with rapidly growing number of customers flocking to the banks and e-channels, the revenue and potentials will pick-up. This happened in telecoms, I hope and sincerely pray it happens in banking.