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Wednesday, July 27, 2005

ICT, key to e-payment solution

Features
Participants at the recent two-day forum on Smartcard and e-payment in Lagos, observed ICT infrastructure as key to propelling electronic payment (e-payment) in the country, reports REMMY NWEKE.

RISING from a two-day fifth edition of Smartcard exhibition and Electronic Payment (e-payment) forum 2005, recently in Lagos, participants made one point that must not be forgotten in a hurry.

The point being the consensus that Information and Communications Technology (ICT) is the key to the nation’s long-standing quest for global relevance, especially in this e-payment era through deployment of smartcards.

Electronic payment involves the deployment of ICT tools in the transaction system, but this dream seems to be obstructed by a lot of inadequacies including lack of infrastructure, awareness and usage, respectively.

Welcoming participants to the events, with the theme “Discover the World of payment,” chairman of Intermarc Consulting Limited, organisers of the event, Mrs. Ibukun Awosika, said that this year’s programme was built around the consumer. She also said that a lot of changes have taken place in the banking industry as a result of automation.

“The advent of e-Banking and increase in capitalization entails that banking business is now becoming less manual and more electronic,” she said, decrying the situation where about 70 per cent of transactions today in the country are cash-based.

According to her, the essence of the forum was to change this trend through the use of Automated Teller Machines (ATMs) and smart wallets. She was of hope that by using the card technology, a strategy to bring forth the informal sector into the mainstream economy, a mission the government has been finding difficult to achieve.

Stressing that the use of cards would enhance business operations in the West African sub-region when common currency issues have been sorted out

In his opening speech, Minister of Science and Technology, Prof. Turner Isoun, represented by the Director, Research and Development (R&D) at the National Information Technology Development Agency (NITDA), Mr. Emeka Ezekwesili, pointed out that ICT revolution presently has gone beyond the industrial revolution in impact and speed as it affects the digital global economy, hence, the theme is apt at this time.

He however, noted that security questions in online payment systems are instrument to the realization of this revolution, therefore, it is necessary to facilitate the law on cyber security that seeks to create a favourable legal and other environments for a successful e-payment systems.

The minister also stated that the e-payment system through cards is transparent, a trend that leads to a cash-less society with an added advantage of deterring armed robbers. He encouraged Nigerians to follow the global trend, by imbibing the culture of electronic payment.

The Director, Banking Operations, Central Bank of Nigeria, Dr. (Mrs) Sarah Alade, who was represented by Mr. Chris Odiaka, in a keynote address, said the forum is timely as it seeks to enhance financial intermediation through migrating the economy from cash-based to card payment system.

She enjoined the fora to recognize the critical mass as the hallmark of the success of the system and encourage the citizens to move fast towards imbibing the system in their hearts. Just as she noted the some challenges in the area of implementation of the card system to include low income base of Nigerians, infrastructure shortages, which she hopes a Public-Private Partnership could address.

Additionally, the CBN Director, noted what the apex bank has been doing in terms of helping to develop firm infrastructure so as to reduce systematic risk in the industry through the N25bn capitalization directive.

Emphasizing that the new challenges which the use of card may introduce into the monetary policy in the measurement of money supply needed to be identified and addressed.

Managing Director, Nigeria Inter-bank Settlement System Plc, Mr. Paul Lawal, also in his keynote, raised an alarm that over N500 billion in circulation in the country are outside the banking system. This, he said, equals to more than 20 per cent of the total monetary liabilities of the Central Bank of Nigeria (CBN) that are in currency outside the system.

“Electronic payment is the order of the day in all industrialized economies. Nigeria, and indeed all emerging economies, must deploy all appropriate resources to develop their respective payment systems,” he asserted.

Mr. Lawal also examined the state of the nation’s payment system, and said that the N500b represents about 90 per cent of the money supplied into the system as at the first quarter of this year.

Champion Infotel recalls that the country’s COB hovered between N300 billion and N400 billion.

He pointed out that this figure amounts to 20 per cent of the total monetary liabilities of CBN, against 4 per cent in the United Kingdom and 9 per cent in the United States. Stressing that the nation’s payment system is generally characterized by high cash payments volume and high resistance to new initiatives, resulting “in adequate data for planning”. This in effect causes the missing of economic development opportunities, even as low depth of financial intermediation also pervades the banking industry and the nation as a whole.

He said that this amounted to critical reduction in the efficiency of monetary policy, coupled with rife in corruption, which have contributed to the decay of the nation’s payment system. Thus the cost of banking business is high, “so much investment in cash handling machines, insurance, cash storage among others,” standing as obstacle to the growth of the system too.

According to him, duplication of payment structures and lack of infrastructure were not helpful at all and add to high under-utilization of installed capacity. But then, there are potentials of an efficient payment system in the country, that is, until customers embrace electronic payment solution fully.

This, he said, would bring about drastic reduction in the amount of currency outside the banking system as more funds would be available for banks to support credit demands.

He further said that the nation has potentials to earn foreign exchange due to export of new payment process, personnel and technology. Mr. Lawal also lauded the recent payment solution initiatives in the country, including the implementation of the Nigeria Automated Clearing System (NACS), which he said, reduces the clearing days for local cheques, just as the introduction of Electronic Funds Transfer by NIBSS has been very helpful.

Pointing out that the establishment of electronic payment schemes such as Valucard, Smartpay, eTranzact, Interswitch, Mastercard, GloMobile among others into the system, as well as the Automated Teller Machine (ATM) network have been on the increase and is very encouraging for the system growth.

Addressing the occasion on ‘Payment and the Macro-economy’ the Managing Director, Intercontinental Bank Plc, Mr. Erastus Akingbola, represented by Mr. Adeyinka Adebiyi, noted that the Nigerian economy is mono product-based while consumption is import dependent, and payments made mainly by cash.

ePayment system, he said, affords simplicity and capable of using the same card for a number of transaction, consequently cost-effective, even as it would lead to employment. However, to encourage customer buy-in the current absence of reliable price information that mars market transparency should be put to a stop, whereas, interconnectivity problems expected to affect capacity utilization of installed card payment systems, and security issues must be addressed.

“Lack of credit cards in Nigeria is due to absence of credit bureau
and poor identification system for customers,” he said, outlining tools for economic growth using cards to include effective consumer awareness campaign, government creation of enabling policies to encourage use of cards, introducing discount/incentives to win competition, making use of GSM for e-payment to enhance reach and the legal system be overhauling.

Other speakers included the Managing Director of Nextzon Ltd, Mr. Mac Atasie, Mr. Deon LaGrange of ACI Worldwide, Mr. Noble E. Ekajeh of ATM Consortium Limited, and Dr. Olu Agunloye, chief executive, National eGovernment Strategies Limited (NeGSt).

Conversely, a communiqué issued at the fifth edition of the events warned that the nation’s quest would be in vain if proper recognition is not accorded ICT in the scheme of things, more so as the most populous and most endowed black nation in the world.

The communiqué endorsed by Managing Director of Intermarc Consulting, Mr. Yinka Adeyemi, also stated that electronic payment (e-payment) system is a missing link in the effort to achieve an ICT-driven economy and a vibrant e-commerce nationwide and in the West African sub-region.

He pointed out that e-payment system, being transparent and open to audit trail, could be an important antidote to corruption and robbery since it is also a vehicle for a cashless economy.

“The efficiency and sophistication of any payment system has a direct correlation to the level of economic advancement in the country, and banks have a central role to play in the evolution of any payment system, including e-payment, by providing a viable foundation upon which the system is built,” the communiqué read in part.

Expressing dismay over most transactions and payments in the country were still cash-based, regardless of the efforts to usher in e-government and credit culture, the conference noted that the citizenry could be encouraged to adopt this new systems, such as in using smart cards through incentive packages and policies.

He stressed that security issues abound in e-payment systems, and decried the absence of appropriate laws in the nation’s e-commerce environment and the non-enforcement of even the existing, relevant anti-breach provisions in the statutes.

Mr. Adeyemi further stated that the myriad of challenges such as poor infrastructure and e-culture, interconnectivity problems, absence of a unified and uniform citizen’s identification process and absence of enabling policies, all of which inhibit the entrenchment of e-payment culture.

Participants however, commended the federal government for the recent efforts on proposing legislation, which is expected to aid electronic transactions and criminalise unwholesome online and electronic activities.

This realization is gladdening in that the background of the forum is from the financial and banking sector, it goes to add that the other part of the economy, would make the sector to reposition as inclined to the core ICT issues such as in proffering financial facilities that would be amiable to the likes of software developers and hardware section of the community.

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