Electronic Payment as Catalysts for Banking System Development

14 Nov 2012

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With the growing patronage recorded in the use of electronic payment platforms in the country, Obinna Chima writes on the need for continuous collaboration among stakeholders
The advent of technology has unarguably made lives easier. Technology has also brought about an unprecedented growth in online transactions. One of the biggest technological innovations in the area of banking, finance and commerce is electronic payment (e-payment). e-payment refers to the technological systems that enables bank customers perform financial transactions electronically.

This form of banking, which has continued to gain recognition and acceptability in Nigeria, has several advantages compared with the traditional means of payment
That is why experts and operators in the e-payment industry have stressed the need for a strategic agenda to consolidate recent gains and fast track the country’s move towards an efficient electronic payment system.

This was the submission of experts that spoke at the second annual conference of the Committee of Head of e-Banking Industry Heads (CeBIH), tagged: “Developing a market structure that works: Challenges and Prospects for the Nigerian Payment System,” that was held in Calabar, recently.

This strategic agenda, they said must incorporate: a programme of incentives for e-payment usage; a balancing of cooperation with competition, massive education and enlightenment; expansion of service offerings on electronic payment channels, especially point of sale (PoS) terminals; a business approach to e-payment as well as full adoption of e-payment by government.
Overcoming e-Payment Challenges
Deputy Director, Banking and Payment System, Central Bank of Nigeria (CBN), Mr. Emmanual Obaigbona, noted that while there were still a lot of challenges in the quest to move the country from cash to e-payment, there have been significant achievements especially in the deployment of e-payment channels such as automated teller machines (ATMs), internet banking, PoS and electronic money transfer.

According to the CBN official, the achievements recorded so far was as a result of the product of collaboration among stakeholders, adding that to consolidate on that requires also requires collaboration.
Obaigbona added: “The cashless policy was primarily aimed at enthroning electronic payment. And we are making progress but we need ideas. We have to come together because CBN encourages collaboration.

“We need to hear from you ((CeBIH). You are the experts on electronic payment. It is from your own perspectives that a lot of things happen. You tell us your own views, we look at them and discuss."

To the Managing Director, Nigeria Interbank Settlement System (NIBSS), Mr. Ade Shonubi, developing a payment system that works required unbiased regulation and oversight over the financial system practitioners by the regulatory authorities as well as collaboration between major stakeholders in the e-payment value chain.
However, Chairman, CeBIH, Mr. Chuma Ezirim, argued that while collaboration was needed to set standards and build infrastructure to reduce cost for the industry, there is also the need to balance cooperation with competition.

Ezirim said: “Centrally-agreed common features can sometimes hamper product and/or service differentiation and innovation at the individual service provider level. A key question is what factors the authorities and key stakeholders should consider in balancing cooperation and competition in retail payment systems.”

He noted that while it was the responsibilities of central banks to provide oversight and regulatory functions to deal with conflicts of interest and balance cooperation and competition in order to achieve optimal availability and affordability of payment instruments, the regulator however should not unduly interfere in the provision of e-payment access services in the country, saying that this is an area that gives banks the opportunity to compete for product/service differentiation and innovation.”

Strengthening e-Payment
Division President, Sub-Sahara Africa, MasterCard Worldwide, Mr. Daniel Monehin, suggested that there should be a set of incentives that would compel cardholders and merchants to accept PoS.
“In my experience in markets like South Korea, what was used there was a dual approach. What I see mostly in Nigeria is a single approach,” Monehin observed.

He added: “In Nigeria we see the stick, we see the penalties, we see the charges, but we don’t see the carrots, like telling people, if you embrace e-payment, here is the pat you will get on your back. The picture of merchants that keep PoS under the table will be very uncommon if you have programs in place that motivates that merchant to record a sizable portion of his revenue on that terminal.

“Such that it would be like the developed markets, whereby as you are opening your business, you will get your PoS connected because that is your gateway to your revenue.”
Monehin however noted that government’s active participation was critical to the enthronement of e-payment irrespective of the model adopted by operators and regulators.

“I am yet to see any government across the world, make bold moves in payment like the Nigerian government, the only difference is they are directing everybody to do it but they are not doing it. Until government begins to play in this, it is not going to work.

“You can put any model together for electronic payment but if government payment system, benefits payment, whatever payment that goes through the system, payments to the contractor, if it is not electronic, you can forget about any model you adopt, it will not work because in a developing market the government plays a major role as a catalyst,” he argued.

On his part, the Vice President, Sales, Africa and Middle East, VeriFone, United Kingdom, Martin Holloway, urged banks to change their approach to deployment of PoS to merchants.
According to Holloway, banks need to be brave in their deployment of electronic payment channels especially PoS, saying that they should not be discouraged by the apathy of merchants.

“A lot can be done with the PoS. It can serve as platform for advertisement; loyalty program, amongst other. And it is the duty of banks to make merchants see the value of PoS so that they can make money from it,” he said.

He noted that another way to facilitate electronic payment was to connect PoS to mobile payment, such that people could use their mobile phone wallet to pay for goods and services through PoS. He said this would not only fast-track electronic payment but also facilitate financial inclusion.

For instance, he said his firm had developed and deployed the kind of PoS with multiple functions in several countries, saying that VeriFone was working with the NIBSS to deploy such PoS in Nigeria.
To the Country Manager, DataGroup IT, Mr. Victor Ajua, there were numerous models for achieving efficient electronic payment system. But he stressed the need to find the right model that suits the Nigerian environment.

“I think the banks need to sit down with CBN and NIBSS and fine tune whichever model they want to adopt. I have heard so much about different models, but we need to find the right model that suit our environment and move the economy,” Ajua said.
Mr. Sam Kolajo of Enterprise Logistics Limited challenged the banks to concentrate on the enormous opportunities the Nigerian economy offers for e-payment business and explore it to their benefit.
“We see improvement in electronic payment system, we see there is guaranty of security, we see that electronic payment system is going to have a more deeply effect on the population.

"Change is the only thing that is permanent and it depends on the way you look at it. Rather than mourn and say this is it, try to see the good in what is coming, which is the reason why a company like ours is partnering with the industry to move this forward.
“So rather than look at these challenges, you can take it upon yourselves and began to address them one by one and kick them out of the way. What I want the banks here to do is to see the wonderful environment in which you live and turn it around”, he said

Tags: Business, Nigeria, Featured, Electronic Payment

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