The e-banking system: The journey so far

LOOKING back, prior to the advent of e-banking in Nigeria, one would think the banking public had been in darkness.

Then, it was the norm, for the simplest of banking transactions, for one to head straight to the banking halls.

Name it, from withdrawals, deposits, to even checking of account balances, one must of necessity, take a trip to the banks.
But, thankfully, all that changed with the introduction of the e-banking initiative into the nation’s financial industry.

Speaking on the development, the Central Bank of Nigeria (CBN) had in its Economic Reforms and Monetary Policy explained that the reforms in the financial sector created certain salutary effect on the  system. Some of which include improved service delivery through innovations and product development. The use of modern technology enhanced service delivery and eliminated queues in banking halls, which used to be the common feature of banks in Nigeria.

Also, Automated Teller Machines (ATMs) were installed at designated points across the country to further reduce customer traffic to banks for cash withdrawals. The use of debit and credit cards was also being popularised by some banks to reduce the risk of carrying cash for transactions. Thus, the 1986 reform introduced e-money in Nigeria’s banking lexicon.

The apex bank also hinted that, the Nigerian payments underwent substantial modernisation of the process for handling payments with the implementation of the Magnetic Ink Character Recognition (MICR), which involved the phased adoption of MICR technology for processing of inter-bank transfer and in-house cheques.

This, it said, was followed by the establishment of Automated Teller Machine (ATMs) by most banks for cash dispensing, account balance enquiry and payment of utility cheques. The ATMs, in addition, provided the basis for setting up electronic links to on-line customers and other accounts system among bank branch network to facilitate payments service.

To further improve the efficiency of the payment system, the CBN in 2004 issued the broad guidelines on electronic banking (e-banking). E-banking practice in Nigeria will continue to be promoted in line with global trend, the apex bank recalled, noting that, it will continue to encourage banks to install ATM machines for cash withdrawals.

Also, in order to encourage the use of electronic money (e-money), in line with international best practices, the bank continues to issue specific guidelines on standards and use of e-money products such as credit cards, debit cards, digital cash etc, it said. Adding that, with the recent revolution in the telecommunication sector, the environment for efficient e-banking service delivery has been laid.

The CBN also said it has continued to promote the automation of the payments system to reduce delays in the clearing of payment instruments, reduce cash transactions, and enhance the transmission mechanism of monetary policy. In order to deal with large-value payments and settlements, the CBN has embarked on the implementation of Real Time Gross Settlement (RTGS) system. The RTGS will eliminate the risk in large-value payment, and increase the efficiency of the payment system.

As a result of these developments, all the Nigerian banks initiated moves that enhanced their e-banking platforms.
For instance, all the banks came up with innovative products to showcase their strength in this area.

One of the banks, for instance, Intercontinental Bank Plc, improved on this score, as it emerged winner of Postilion’s 2008 & 2009 Award for Growth based on the highest percentage growth in transaction volumes and 2009, winner of the Best e-payment Bank of the Year and Best e-payment Team of the Year awards for 2009, organised by InterSwitch Limited at the Annual Techno Interactive Conference.

Based on this, in 2009, Mr. Mitchell Elegbe, the managing director/CEO of InterSwitch explained that the awards were in recognition and celebration of financial and non-financial institutions that have distinguished themselves in the last twelve months in the areas of deployment and usage of e-payment to enhance service delivery to their customers.

Similarly, the bank has one of the largest networks of ATMs and POS in the industry coupled with innovative use of e-payment products, deployment of various card schemes, business and educational portals, channels schemes and services and is also the first bank to launch Verve card, demonstrated growth in the e-payment business since it has the highest number of Verve cards and processes the highest number of transaction via the switch.

In 2010, investigation carried out revealed that the bank is still leading in terms of Verve card issuance and usage, which makes it easily the leading bank in e-banking product deployment in the Nigeria.

This is because during the year under review, the bank emerged Leading Bank ATM transactions, Leading Bank in Mobile Transfer, Leading Bank in Bill Payments, and Leading Banking in Mobile Top up.

Other feats are; 2010, Leading bank Verve Card Issuance, 2010, the first bank to launch Hajj Card for Islamic pilgrimage, and 2010, issuing Bank for Rotary ATM card in Africa.

Besides, the bank’s management explained that it has reviewed its retail banking strategy to pay greater attention to customer-friendly products deployment, adding that this is expected to be driven by electronic banking and backed by efficient service delivery at all levels.

Meanwhile, reviewing the impact of e-banking in Nigeria, Adeyinka Adeyemi, managing partner at Intermac Consulting during the presentation of the 2008 e-banking Customer Survey Report had noted that, Nigeria’s slow adoption of electronic banking practices is rapidly changing for the better, adding that awareness of electronic payments in Nigeria is increasing and it accounted for N360 billion worth of transactions in 2008.

According to him, it seems the practice of carrying bags of bank notes around is changing with the Automated Teller Machine Industry Association identifying Nigeria as the fastest growing ATM market in Africa. Around 6 000 ATMs have been installed in the country thus far.

Adeyemi said that 7 500 point of sale terminals have been installed across Nigeria – a figure that is set to double within the next six months. Mobile banking and Electronic Funds Transfers (EFTs) are also gaining popularity.

According to the survey, 97 per cent of Nigerians that are aware of ATMs use the service; of the 67 per cent of the respondents that were aware of SMS banking only 48 per cent used it; and of the 45 per cent aware of Mastercard, only 10 per cent use the service.

It can be said that, so far so good, however, a lot of improvement is required.