There is no doubt that banks play significant roles in the economy of a nation. Banks are considered indispensable elements in the economies of all market-oriented nations, which depend on the efficient operation of complex and delicately balanced systems of money and credit. Therefore, the economic well-being of any nation is tied to the advancement, as well as the development of its banking industry.
Prior to emergence of banking, Africans stashed money in sacks, even while traveling long distances to execute business transactions. The situation exposed many to untold hazards, namely the possibility of robbery attacks.
But with the introduction of modern banking system and attendant technological innovations that followed in the twentieth century, succour came the way of nonplussed citizens who had long waited for foolproof solutions to meet the challenges of a largely cash-based society.
The banking industry is making steady progress following the 2004 consolidation exercise initiated by the Central Bank of Nigeria (CBN) governor, Chukwuma Soludo. While it is much easier today to conduct banking transactions, Nigerians thankfully recall the long-gone days of tallies when customers needed to rush to the banks as early as possible to submit their tellers in exchange for tallies so as to avoid the long delay characteristic of that era.
Analysts have said that the long queues and inefficiency of that era was a result of the manual processing of data, which by courtesy of modern developments in information and communication technology has given way to automated, faster and more seamless processing.
Though financial deregulation began in the country in 1987, the impact was not immediately felt because many challenges still confronted the banking industry due partially to regular economic policy somersault, severe political instability, virulent inflation, worsening economic financial conditions of corporate borrowers, and increasing incidence of fraud by banks.
All these necessitated calls by the wary public on government to institute practical policies that would restore confidence in the banking sector. In his address to the Special Meeting of the Bankers’ Committee on July 6, 2004, Soludo disclosed that most banks in Nigeria had a capitalization of less than $10 million. He said further that, even the largest bank in Nigeria had a capital base of about US$240 million compared to US$526 million for the smallest bank in Malaysia.
While describing the situation as worrisome, Soludo announced a turnaround policy that saw banks in Nigeria recapitalized to the tune of N25 million by the end of December 2005. The new policy made it possible to prune down the number of banks from 89 to 25 through mergers and acquisitions.
Justifying government’s decision to have strong and healthy banks, Soludo had asked the question: “Where is Nigeria – Africa’s most populous country and potentially its largest economy?” Answering, he painted a picture; “In Nigeria, we have 89 banks with many banks having capital base of less than US$10 million, and about 3300 branches.
Compare this to 8 banks in South Korea with about 4500 branches or the one bank in South Africa with larger assets than all our 89 banks.” He concluded then that the Nigerian banking system remained marginal relative to its potentials and in comparison to other countries – even in Africa.
In an article titled “Banking Consolidation: Foreigners’ Perspective” published in ThisDay of Wednesday, June 11, 2008, Anver Versi traces the greatest transformation in the business history of modern Africa, which is Nigeria’s astonishing banking revolution. Going down the memory lane, Versi described the Nigerian banking industry as “grossly corrupt and inefficient until only five years ago” but today, the industry has become one of the world’s fastest-growing sectors.
The CBN governor, Chukwuma Soludo, has repeatedly in the last few months, confirmed Versi’s statement that the Nigerian banking sector is now one of the fastest-growing in the world.
Today, the story of the banking industry in Nigeria has changed for good. Industry watchers and analysts are happy with the development, especially with the technological innovation and creativity brought into the dynamics of banking operation in the last few years. One of such trends is the introduction of the e-payment systems.
With e-payment acting as precursor to e-banking, there is a renewed and growing confidence in the banking sector. The financial services industry, which has traditionally been dominated by banks, is being opened up, thanks to the development of Internet and e-commerce that have provided alternative and new payment systems.
e-Payment has promoted card technology, which is helping to reshape the future of banking in the world today. The industry players have adopted card technology and switching applications to integrate delivery channels, which in turn have resulted in the development of a close relationship with customers by offering them access to multiple accounts such as debits, credits, investments or stored value for e-cash on one card.
The technology enables the analysis of information about customer segmentation, demographics, product usage, transaction behavior, thereby helping to improve banks’ profitability and increase market share. Industry analysts believe that the mobile phone revolution would introduce a new dimension to banking and payment system because of its ability to assist the industry overcome the need of high investment in terminals, especially the cost of upgrading ATMs, which is said to be high.
In this new era, banking management is said to have leapt several generations to rank among the most effective and imaginative in Africa. ATMs are gradually spreading across the country while an increasing number of branches are being linked by sophisticated computer-based systems, drastically cutting down transaction time and costs.
Contrary to what used to obtain, banks now introduce a number of innovative products and services in partnership with key players in the e-payment sub-sector while their focus now extends beyond national borders.
Watchers of the new trends in the Nigerian banking industry have come to agree that government must collaborate with the players to ensure a collapse of the walls between African countries and other countries of the world for there to be a smooth transition to the much-desired cashless society. The world is now a global village, and Africa cannot afford to be left behind.
This calls for countries’ adoption of e-Government strategies as a means of increasing the convenience and simplicity of citizen’s interaction with government. On the other hand, governments’ need for cost reduction and GDP growth as well as the desire to be more transparent are expected to lead to more joint ventures between card technology industry players and public sector organizations.
It is understandable that governments of some countries are afraid that the introduction of e-cash (through smart cards) could portend a risk of money laundering since the transfer of payment value is now in the form of digital information. The fear notwithstanding, it is imperative that governments get involved from the outset and act as catalyst by introducing efficient market-driven mechanisms to promote accelerated diffusion of e-cash (and by implication e-commerce) into the national economy.
Examples abound of countries which have adopted the initiative for the good of their people. In Australia and the Czech/Slovak Republic, the government has taken the initiatives in experimenting with the use of smart cards in the medical system, educational application, transportation cards and so on.
In Korea, Hong Kong and Singapore, the government has taken many initiatives to support the development of e-cash schemes to open up new challenges, which are believed to increase consumer response to the e-cash as a revolutionary means of payment transmission.
In Russia, Visa (one of the global card technology companies) partnered with the Moscow City Government to develop a multi-application card, which provides a variety of services such as pension payments, access to medical insurance and government subsidies, and public transit. Other governments in various countries of the world are gradually buying into the e-cash culture and are weaning out cash-based forms of transactions in favour of e-payments. Africa ought not to be left behind.
To achieve a cashless society is a task that must be done, and eTranzact, a multi-channel payment mechanism, conceptualized and driven by a Nigerian, Valentine Obi, is already providing the leadership role that should usher the continent into that era of cashlessness. The journey has just begun with a number of initiatives and more are still expected to be done to achieve the desired result.
At a recent Banking Technology Conference held in Lagos tagged “Competing in a borderless world”, the chief executive officer of eTranzact, Valentine Obi, in a paper titled “Creating a financial ecosystem across African borders”, traces the genesis of business models for payment in African countries. He divides the transaction phases in Africa into three, which basically reflected the past, the present and the future.
Obi traces the era of traditional business model for payment, which he describes as predominantly cash dependent with very little alternatives to effective ways of trading amongst individuals, organizations and countries.
He observes that this model was responsible for the slow growth of trading relations amongst Africans within and outside the various African countries, as Africa lacked what it took to embrace the then emerging technologies in the payment industry.
The traditional payment model was the “Brick and Mortar” system, which was the same as expansion of bank branch networks necessitated by compulsory appearance of customers in the banks to consummate transactions. This system was riddled with a number of challenges, chief among which were insecurity, inconvenience, high cost of transaction, inability to access real-time information, cumbersomeness and high business risks.
The search for a more robust system of business transaction led to the present where innovation rules, leading to tremendous transformation occasioned largely by technological advancements, a more sophisticated customer base and high rate of global economic growth. The effort to reposition Nigeria, and by implication Africa, has been a conscientious one, and eTranzact has been at the forefront of the e-payment revolution bridging the gaps amongst countries in the continent and beyond.
eTranzact identifies the growing need by consumers to have a single applications platform that provides access to multiple accounts – ATM/cash cards, electronic transfer of funds (ETF), point-of-sale (POS) as well as debit/credit cards.
eTranzact’s applications are home-grown, and are being exported to neighbouring West African countries and into other regions. eTranzact’s innovative applications have been successfully deployed in Zimbabwe, Ghana, Cote d’Ivoire, and the number is growing. eTranzact’s applications have also been deployed in Europe and the United States of America. For its leadership role and innovative products and services, eTranzact won the Computerworld Honors Award USA in 2003, and the Central Bank of Nigeria (CBN) Award for the Most Innovative Product of the Year 2007.
eTranzact understands that the business strategies to launch the new payment innovation have to be aligned with IT strategy, which requires collaboration among competing organizations so as to achieve a level of diffusion capable of generating a revolution. In doing this, Obi believes that players would be able to focus on shared benefits rather than proprietary benefits. As the pioneer of e-payment technology in the country, eTranzact has constantly reiterates the need for collaboration in the industry because the market size of e-payment is too large for any innovator to capture by going it alone. Obi states that with the CBN’s declaration that there is 80 percent cash outside the banking sector, and that less than 24 million out of a population of 140 million Nigerians are banked, there is a new challenge for the players in the e-payment sub-sector to reach the unbanked urgently.
Providing further explanations regarding the CBN’s declaration, Obi says, “factors responsible for the status quo are diverse. One, cash transactions are risky and the hitherto payment systems do not provide adequate security and comfort for users. Two, international payment systems are expensive and out of reach of most African people. Moreover, international payment systems are elitist and discriminatory, designed to suit the West.”
To address the issue, Obi says eTranzact has been able to respond by providing a home-grown technology to suit the specific needs of the African people. eTranzact, by that token, has helped to remove inconveniences associated with the brick and mortar system with its provision of credible alternative integrated channels of payment using modern technology like the Internet and the mobile phone. As a result, customer can transact business in a risk-free mode (not carrying cash), conveniently and over huge distances and boundaries. eTranzact has a total of 21 banks on its platform while intensifying efforts to connect the remaining four banks as soon as possible.
eTranzact’s services, according to Obi, are bridging gaps across different interfaces and the impact has been tremendous. “eTranzact,” he says, “offers services for the banked and unbanked; for payoutlets; for corporate organizations (CorporatePAY) which make large volumes of transactions; for merchants (eREMIT) who need to make local and international remittances. These services are cost-effective, convenient, secure and they offer credible alternatives to the traditional model.”
A number of significant domestic applications have aided basic transactions within countries. These applications include: bill payment where payments can be made from cell phone to cell phone (P2P), from cell phone to business/merchant (P2B) especially for the payment of utility bills, school fees, taxes, parking, cable TV, etc., and from business to cell phone (B2P) whereby salaries, grants and allowances are paid to both banked and un-banked workers. Another application on the eTranzact platform is automated teller machine/point of sale (ATM/POS) transactions, which enables the use of a single card in many countries. With the secure mobile banking, it is possible to check account balance, get mini statement, make funds transfer to any bank account, mobile phone or card. There is equally mobile top-up, which enables one to recharge one’s mobile phone and top-up family and friends’ phone as well. To this end, customers now enjoy convenience, safety and lower transaction costs when they connect to the eTranzact network.
eTranzact, in facilitating choice, trade across borders, convenience and security, is helping to prove that technology is vital at helping to put Africa on the same pedestal with the developed nations.
---
Autor(en)/Author(s): Oluwaseun Ayantokun
Quelle/Source: Nigerian Tribune, 16.07.2008
