The introduction of cashless policy by the Central Bank of Nigeria (CBN) has brought about a revolution in terms of financial inclusion and ease of monetary transactions. However, the policy has come at a huge cost to many bank customers, as criminals and other bad eggs within and outside the banking halls have continued to take advantage of loopholes in the system to steal customers’ hard-earned savings. LUCAS AJANAKU reports.
For Mr Kokumo Ajanaku, July 7, 2022, will forever remain fresh in his memory. An information technology (IT) professional, a desultory chat on Facebook with an old classmate of his working with an agency of the United Nations based in the United States had led to the transfer of N200,000 to his bank account to cushion the effect of spiralling inflation in the country.
An elated Ajanaku, who said he had never received such a gesture from friends even when he extends such to others, was, however, shocked that at exactly 2.39am the following day, N100,000 was deducted from his bank account. The alert details showed: PG-SPORT PAY LANG. Shortly after the stealing, another message came that read: “Please use the OTP Code: 24604127 to complete your transaction. OTP code expires after 10 minutes.” On the same day, at exactly 2:06pm, another message came: “Please use the OTP code 16176641. To complete your transaction; OTP expires after 10 minutes.” Another was sent again: ‘Please use the OTP Code: 501117 Sport Pay: Amount N15,000.”
A resident of Abesan Estate in Alimosho Local Government Area of Lagos State, he quickly rushed to a branch of the bank around Pako Bus Stop to block his automated teller machine (ATM) card. A day after the blockade, the crooks continued to pester him. This made him go to a bigger branch of the bank in Town Planning Way, Ilupeju. It was at Ilupeju that it was discovered that the thieves have been subscribing to Netflix at N4,400 monthly over the past five months from his bank account. “Well, I receive transaction alerts but since I use the USSD code regularly, most times when I receive alerts, I assumed it was for previous transactions. It was beyond my wildest imagination that my card could be cloned and used to steal my cash because as an IT practitioner, one of the lessons I teach people is keeping their ATM cards’ details close to their chests. I live with my wife who is a nurse; my three kids are young adults in private universities. So there was no way I could have fallen victim of insider sabotage,” he said.
After 45 working days, the bank wrote to absolve itself of any complicity. “Based on the outcome of our review, we hereby inform you that the bank is unable to accede to your request for a refund,” the letter insisted.
Another customer, Ifi Alexander’s mother, lost over N1,079,995 in her account domiciled in one of the old generation banks on August 4, 2022. Alexander said his mother, Akozor Emily Nkoyenum, had a transaction at a point of sale (PoS) stand in Abuja, where she withdrew N20,000. According to a report by the Foundation for Investigative Journalism (FIJ), after leaving the PoS stand, his mother received multiple debit alerts for a total of N1,079,995.00 from First Bank without carrying out such transactions.
“It happened that my mother made use of a PoS machine in Abuja on August 4, 2022, to withdraw N20,000. She left the PoS shop and left for her destination. My mother could not reach out to the bank until the following day. We had to go together to their Bolingo branch on Friday, August 5, and they blocked her ATM card after receiving her complaint. We were told that the case would be referred to their fraud desk and asked to return in a week. We were also told that the transactions were carried out from a First Bank mobile app. This revelation came as a surprise to us, as my mother has not linked her account to the bank’s mobile app. She only uses USSD if she needs to make a mobile money transfer.
“Following our August 4 visit, we went to the bank twice again and they told us my mother’s money was transferred to OPay accounts belonging to different persons. My mother’s statement of account reveals that the money was transferred to the following OPay account numbers: 9033864988 belonging to Aisha Jibril, 8060687339 belonging to Ayuba Apagu, 9063576003 belonging to Oluchi Mbaeri, and 8131289303 belonging to Esther Uwah,” he said.
It was discovered that Aisha Jibril lives in Nasarawa and Oluchi Mbaeri is in Ubiaruku in Delta State. “The last time we went there, the bank said they had not got a reply from OPay.”
He also said the thought of not getting a favourable response from the bank led him to escalate the complaint to the CBN through its consumer protection department, but the apex bank failed to take any action on the complaint. “When the bank was prolonging the issue and we thought we might not get a good response on time, we resolved to explore the CBN’s complaint channel.
“We reported to CBN’s consumer protection department on October 4, 2022, and we only got an automated response. No follow-up message has been sent to us from the CPD since then, and we are confused now,” he said, adding that the incident devastated his mother.
Another customer, Esther Kokumo, attempted to use a PoS machine in Abesan Estate. When she gave her card to the PoS operator, he asked her to input her PIN after which he said there was no network. He removed the card, slotted it into another and gave a similar verdict of no network. Forty minutes after getting home, N25,000 was withdrawn from her account. Efforts to trace the cash proved abortive. “Even my bank could not trace where the money entered. What the bank printed for me was neither here nor there,” she lamented.
These are but a tip of an ice berg in the volume of massive theft that is going on in the country, no thanks to the cashless policy implementation of the CBN. A survey carried out by Agusto & Co showed that 59 per cent of bank customers sampled indicated that they had fallen victim to fraud. According to the survey, 41 per cent said their accounts hadn’t been compromised, “however, the remaining had been victims through phishing emails, data breaches, unauthorised access to accounts through USSD, and others.”
Agusto & Co, in its ‘2022 Consumer Digital Banking Satisfaction Index,’ also called for investment in cyber security and awareness to avert bank customers falling victim to breaches in their accounts. “Approximately 59 per cent of survey respondents have been fraud victims on the digital platforms of their respective banks. This suggests that more investments in cyber protection by banks are required to combat the growing exposure to cyber security risks on digital platforms,” the report stated.
It noted that a large percentage of the survey respondents are satisfied with the level of security provided on their respective digital platforms.
“Based on the digital banking satisfaction index’s parameters, Access Bank Plc recorded the highest user experience score of 94.6 underpinned by comparably higher estimated transaction success rates, ease of navigation, and awareness and active usage of services provided. United Bank for Africa Plc (UBA) scored the second highest (94.4), while Guaranty Trust Bank Limited (GTB) was third with a user experience score of 91.4. Perceived security strength, range of platforms known, and ease of navigation on the platforms were strong ranking factors amongst respondents. Zenith Bank Plc recorded the highest percentage of respondents who perceive their bank’s respective digital platforms to be secure. UBA and Access Bank were the second and third highest respectively,” the survey showed.
The survey stated that approximately 70 per cent of the survey respondents indicated that they are not willing to switch to another bank’s digital platform. “This is less than the 82 per cent of respondents recorded in our 2021 survey. Customers cited pain points to be high service fees, poor customer service, frequent downtime on the digital platform and as the main reasons they were willing to make a switch to another bank’s digital banking platform.
“We expect the increasing competition in the digital space from Fintechs and neo-banks to further spur more innovation and expanded service offerings by banks. Also, given the macroeconomic headwinds, which have reduced the appetite for lending to some extent, we expect more emphasis on non-interest income from electronic banking channels to sustain profitability. Overall, we expect more digital transformation as banks compete to grow and retain market share,” it stated.
Boom in cashless transactions
As the rate of fraud increases, there has also been a steady rise in the volume of cashless transactions in the country. Between January and November of 2022, transactions have hit N318.66 trillion, according to data gathered by Nigeria Inter-Bank Settlement System (NIBSS), by monitoring amounts processed at PoS terminals and the Nigeria Instant Payment System (NIPS).
The new figure marked a 45.75 per cent increase compared to the N224.79 trillion recorded in the corresponding period of 2021. The new figure, therefore, suggests a strengthened uptick in Nigeria’s digital payments as N6.85 trillion was recorded under PoS transactions, while N311.81 trillion was recorded as NIP transactions. The NIBSS had earlier disclosed in a report that since the COVID-19 pandemic, the adoption of instant payments advanced as bank customers tended to use electronic payment channels to exchange funds while the country was under lockdown.
Even after the COVID lockdown, there was no going back as people were becoming already used to the ease of the alternative system. In 2012, the CBN introduced a policy that would encourage the adoption of electronic-based transactions in the payments for goods and services and in the transfer of funds. The policy was also supposed to discourage the handling of cash and decrease the amount of physical cash in the economy.
Benefits outlined in the policy include: drive financial inclusion by providing more efficient transaction options and greater reach; modernise Nigeria’s payment system in line with competing economies of the world; improve the efficiency of monetary policies in the management of inflation, thereby driving economic development and growth. It was also hoped that the policy would help contain the risks involved in the usage of physical cash. According to the World Bank, the COVID-19 pandemic has spurred financial inclusion – driving a large increase in digital payments amid the global expansion of formal financial services. This expansion created new economic opportunities, narrowing the gender gap in account ownership, and building resilience at the household level to better manage financial shocks, according to the Global Findex 2021 database.
As of 2021, 76 per cent of adults globally now have an account at a bank, other financial institution, or with a mobile money provider, up from 68 per cent in 2017 and 51per cent in 2011. Importantly, growth in account ownership was evenly distributed across many more countries. While in previous Findex surveys over the last decade much of the growth was concentrated in India and China, this year’s survey found that the percentage of account ownership increased by double digits in 34 countries since 2017.
The pandemic has also led to an increased use of digital payments. In low-and middle-income economies (excluding China), over 40 per cent of adults who made merchant in-store or online payments using a card, phone, or the internet did so for the first time since the start of the pandemic. The same was true for more than a third of adults in all low- and middle-income economies who paid a utility bill directly from a formal account. In India, more than 80 million adults made their first digital merchant payment after the start of the pandemic, while in China over 100 million adults did.
Two-thirds of adults globally now make or receive a digital payment, with the share in developing economies grew from 35per cent in 2014 to 57 per cent in 2021. In developing economies, 71 per cent have an account at a bank, other financial institution, or with a mobile money provider, up from 63 per cent in 2017 and 42 per cent in 2011. Mobile money accounts drove a huge increase in financial inclusion in sub-Saharan Africa.
“The digital revolution has catalysed increases in the access and use of financial services across the world, transforming ways in which people make and receive payments, borrow, and save. Creating an enabling policy environment, promoting the digitalization of payments, and further broadening access to formal accounts and financial services among women and the poor are some of the policy priorities to mitigate the reversals in development from the ongoing overlapping crises,” World Bank Group President David Malpass, said.
For the first time since the Global Findex database was started in 2011, the survey found that the gender gap in account ownership has narrowed, helping women have more privacy, security, and control over their money. The gap narrowed from seven to four percentage points globally and from nine to six percentage points in low- and middle-income countries, since the last survey round in 2017.
About 36 per cent of adults in developing economies now receive a wage or government payment, a payment for the sale of agricultural products, or a domestic remittance payment into an account. The data suggests that receiving a payment into an account instead of cash can kick-start people’s use of the formal financial system – when people receive digital payments, 83 per cent used their accounts to also make digital payments. Almost two-thirds used their account for cash management, while about 40per cent used it to save – further growing the financial ecosystem.
Despite the advances, many adults around the world still lack a reliable source of emergency money. Only about half of adults in low- and middle-income economies said they could access extra money during an emergency with little or no difficulty, and they commonly turn to unreliable sources of finance, including family and friends.
“The world has a crucial opportunity to build a more inclusive and resilient economy and provide a gateway to prosperity for billions of people. By investing in digital public infrastructure and technologies for payment and ID systems and updating regulations to foster innovation and protect consumers, governments can build on the progress reported in the Findex and expand access to financial services for all who need them,” Bill Gates, co-chair of the Bill and Melinda Gates Foundation, one of the supporters of the Global Findex database, said.
In sub-Saharan Africa, for example, the lack of an identity document remains an important barrier holding back mobile money account ownership for 30per cent of adults with no account suggesting an opportunity for investing in accessible and trusted identification systems. Over 80 million adults with no account still receive government payments in cash – digitalising some of these payments could be cheaper and reduce corruption. Increasing account ownership and usage will require trust in financial service providers, confidence to use financial products, tailored product design, and a strong and enforced consumer protection framework.
In Sub-Saharan Africa, mobile money adoption continued to rise such that 33per cent of adults now have a mobile money account—a share three times larger than the 10per cent global average. Although mobile money services were originally designed to allow people to send remittances to friends and family living elsewhere within the country, adoption and usage have spread beyond those origins, such that three-out-of-four mobile account owners in 2021 made or received at least one payment that was not person-to-person and 15per cent of adults used their mobile money account to save. Opportunities to increase account ownership in the region include digitalizing cash payments for the 65 million adults with no account receiving payments for agricultural products, and expanding mobile phone ownership, as lack of a phone is cited as a barrier to mobile money account adoption. Adults in the region worry more about paying school fees than adults in other regions, suggesting opportunities for policy or products to enable education-oriented savings.
The Global Findex database, which surveyed how people in 123 economies use financial services throughout 2021, is produced by the World Bank every three years in collaboration with Gallup Inc. According to reports, going cashless not only eases one’s life but also helps authenticate and formalise the transactions done. This, in effect, helps to curb corruption and the flow of black money, which results in an increase of economic growth. In a populous nation like India, cashless policy challenges are also being tackled by bridging the technology gap and lack of civic education. These are matters of concern and the government or the financial institutes are addressing them to create a strong cashless economy.
Besides, companies and governments will get efficient and they can reduce costs as they no longer need the manual accounting work to be done. The costs associated with accounting and handling cash are very high. Businesses and individuals can also avoid other costs as well. Theft often leaves a big hole in the pocket. The risk of theft will continue until people cease carrying cash. This also leaves an impact on the government as they can then reduce the costs that it spends on nabbing the culprits. In countries like the U.S., burglary and assault have dropped by about 10per cent once the government shifted the payment made for social welfare to electronic transfer. The authorities, however, have to take measures to curb the online scam and identify theft incidents.
Less cash means more data. The government can use the data coming from the cashless transactions to improve and analyse their policies. By using such data, officials can predict or identify the patterns of activity and use such information for urban planning for sectors like energy management, housing and transportation, the report added. More spending helps improved economic growth. When a nation is taking a step towards a cashless economy, a boost in the economic growth can be expected. In countries like U.S. higher card usage has contributed a consumption of about $296 billion globally from the year 2011 to 2015, which is a 0.1per cent increase in the gross domestic product (GDP). Shopping online gets easy as one can use a number of payment options; from credit and debit cards to net banking. One can observe more spontaneous buying while making cashless payments.
