Electronic Payment/Transactions in Nigeria | e-payment in Nigeria
In this article we are going to talk about electronic payment system in nigeria, effect of e payments system to nigerian banks, impact of e-payment in nigeria and also problems of e-payment system in nigeria. Electronic payments in Nigeria is a relatively new phenomenon. A lot of transactions in Nigeria are carried out with cash. The reason for this is because cash transactions still remain the preferred medium for payment in the country. Little or no electronic payment solutions, ignorance, lack of trust, poor banking culture, illiteracy, and the love for status quo have been identified as the reason for the high level of cash transactions in Nigeria.
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More Info about E-Payment?
Here we presents to you history of e-payment in nigeria. For many years, cheques have been the only way to cash money in the country. Nevertheless, merchants have not accepted the cheque option because of the high level of corruption and the resultant mistrust that it brings. Cases of bounce cheques became very high making it difficult for merchants to accept cheques. The lack of electronic means of verifying cheques was also the eason for this. Another issue was the weak interconnection between banks and a lack of an electronic system for clearing cheques.
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Today however, banks now have their branches interconnected together. Also introduced into the system by the Central Bank of Nigeria (CBN) is the inter-banking electronic cheque clearing system which has greatly brought to a minimum the period it takes to redeem cheques. However, the fate of paper cheques in the country seems to have been sealed despite these positive developments.
However, for any payment system to be able to replace cash or even compete with it, then it must win the trust of merchants in the country. For this to take place then there must be a way for merchants to verify the validity of the purchase. The payment system should also be easily changed to cash since a lot of merchants in the economy are in business on subsistence basis. There must be a way to use the cash they made to buy what they need for the day or the following day.
This is where the e-transaction or e-payment solutions come in. These payment options target most of the concerns of merchants and more. But e-payment solutions have not gained much ground despite its advantages. But it is our hope that the new efforts by the Central Bank of Nigeria to turn Nigeria into a cashless or cash-lite economy will work. Sequel to that is the introduction of a daily deposit/withdrawal limit and focus towards e-payment solutions like mobile money and debit cards.
ATM leads to more cash
The most popular e-transaction solution in Nigeria is the Automated Teller Machine (ATM). This is because with ATMs, withdrawing money and checking account balances is a lot easier.
Nevertheless, the Automated Teller Machine has done very little in reducing the amount of cash in the economy despite its popularity. This, we can say is because a lot of Nigerians use the ATM only for cash withdrawals. Even as the ATM can perform other transactions like mobile phone recharge, fund/cash transfer, cash withdrawals, bills payment, balance inquiry, the ATM remains the most popular application preferred by users in Nigeria and this is mainly because of the ignorance and absence of merchants in the country.
Some of the leaders in ATM deployment in Nigeria are ETranzact, Quickcash, InterSwitch and VPay. Most banks in the country today are connected by the network provided by InterSwitch. This is the reason why we can use their cards in virtually all bank branches nationwide and in almost all Automated Teller Machines. For instance, InterSwitch allows for the use of Visa and MasterCard on her ATMs and vice versa.
Since ATMs are mostly used for cash withdrawals, they are not enough to turn Nigeria into a cashless economy. The machine makes it easier for more cash to be in the economy and this is because of the ease with which depositors can withdraw cash. Now, to make Nigeria a cashless economy, we need more than just ATM cards. We need debit/credit cards.
E-wallets and Debit cards are key
In as much as ATM cards make cash withdrawal easy, thereby contributing to the problem, Debit cards, Credit cards, and e-wallets (mobile money) makes cashless shopping very easy. Therefore to turn Nigeria into a cashless economy, the drive should be towards credit cards, debit cards and e-wallets. Just as credit and debit cards require a Point of Sale (POS) terminal, ATM cards require Automated Teller Machines to function. The POS terminals are located at authorized retail shops or merchants. These businesses accept credit/debit cards as means of payment by customers. Credit and debit cards like InterSwitch, Visa and MasterCard can also be used to buy from merchants through the internet.
It is also pertinent to note that some ATM cards like InterSwitch and VPay can also be used as Debit cards and vice versa.
Valuecard and InterSwitch are forerunners when it comes to e-payment solutions in Nigeria. The InterSwitch cards are supported by all banks in the country. InterSwitch ATM/debit cards also allows cardholders to purchase on the internet from merchants in the country.
Valuecard has the Vpay which is an online chip and pin card which in addition to being used at POS terminals for electronic payments can also be used to buy from local merchants on the internet. Vpay can perform the tasks of either credit or debit cards and can also be used for cash withdrawals at ATMs.
Valuecard is the joint acquirer of Visa International in Nigeria. The provide Visa payment solutions to their customers. Visa enables card holders to be able to buy from any merchant anywhere in the world where Visa is accepted and that includes anywhere in the world.
The Verified by Visa Service (VbV) is also promoted by Valuecard which is simply a password protected identity-checking service that makes buying on the internet safer. Verified by Visa Service allows Vpay and Visa cards to be used for safe internet payment worldwide from all visa merchants. The VbV also allows Nigerian based merchants to sell to card holders worldwide.
E-payment solutions for Vehicle licensing and revenue collection have been introduced by some state governments and this should be emulated by more states to strengthen the electronic payment option.
But the electronic payment system in Nigeria has encountered a worrying trend. This is the drive towards one transaction pin based card. Some merchants in Nigeria now make available electronic payment solutions that can only be used in their locations.
Merchants like examination bodies JAMB, WAEC and NECO all provide electronic payment scratch cards that can only be used to register for exams and to check results for their examination. This implies that an average SSS3 graduate will require a scratch card each for each of the three exams. Universities too are not left out.
Also introducing an electronic chip card for electricity bills payment is the Power Holding Company of Nigeria (PHCN). Same as the one transaction payment cards, the PHCN chip cards can only be used to pay for electricity bills.
The advantage that the e-payment solutions have over cash have been rendered useless by these one transaction payment cards. Making us to imagine what will happen if more transaction cards flood the economy. This could result in an average Nigerian owning more than 10 different transaction cards.
This is the reason why it is important that we promote and deploy multi transaction cards. There’s no reason why an average Nigerian should not be able to use a multi transaction card like Visa, Cashcard, Vpay, InterSwitch or MasterCard for registering WAEC, NECO and JAMB exams. Also nothing should hinder these cards from being used to recharge the PHCN prepaid meter.
Merchants and others still contemplating one transaction payment solutioms should be engaged by multi transaction companies like Valuecard and InterSwitch in order to educate them on the advantages of their systems. These cards shoukd also be made easier to get by these companies so as to put as many of these cards as possible in the hands of consumers.
Cash has remained dominant even with the availability of electronic payment solutions. The reason being the unavailability of enough POS termonals. You must get local merchants to accept it in order to get people to use credit or debit cards. POS terminals should be made available in places like shops, fast food joints, super markets, restaurants, hotels, filling stations and other places.
It is also important to educate merchants and card holders on the positives of electronic payment. Also the need to educate them on how to use the ATM, credit/debit cards so as to reduce the phobia for such technologies. To protect card holders, Electronic Transaction Security education should be intensified.