Wednesday, July 16, 2008

eTranzact, bank and future of e-payment in Africa (1)

By Abayomi Awelewa

The journey to a cashless society must have been delayed in Africa but the flight that has since begun is bound to be in quantum leaps. At the forefront of this desirable project of a cashless African society is eTranzact, Nigeria’s first multi-channel real-time payment platform.

Though some believe that there could never be a truly cashless society, many others share the dissenting view that e-commerce is the future. e-Commerce has gradually dovetailed into mobile banking and mobile commerce.

There is no doubt that banks play significant roles in the economy of a nation.

Banks are considered indispensable elements in the economies of all market-oriented nations, which depend on the efficient operation of complex and delicately balanced systems of money and credit.

Therefore, the economic well-being of any nation is tied to the advancement, as well as the development of its banking industry. Back in the day, prior to emergence of banking, Africans stashed money in sacks, even while traveling long distances to execute business transactions.

The situation exposed many to untold hazards, namely the possibility of robbery attacks. But with the introduction of modern banking system and attendant technological innovations that followed in the twentieth century, succour came the way of nonplussed citizens who had long waited for foolproof solutions to meet the challenges of a largely cash-based society.

The banking industry is making steady progress following the 2004 consolidation exercise initiated by the Central Bank of Nigeria (CBN) governor, Chukwuma Soludo.

While it is much easier today to conduct banking transactions, Nigerians thankfully recall the long-gone days of tallies when customers needed to rush to the banks as early as possible to submit their tellers in exchange for tallies so as to avoid the long delay characteristic of that era.

Analysts have said that the long queues and inefficiency of that era was a result of the manual processing of data, which by courtesy of modern developments in information and communication technology has given way to automated, faster and more seamless processing.

Though financial deregulation began in the country in 1987, the impact was not immediately felt because many challenges still confronted the banking industry due partially to regular economic policy somersault, severe political instability, virulent inflation, worsening economic financial conditions of corporate borrowers, and increasing incidence of fraud by banks.

All these necessitated calls by the wary public on government to institute practical policies that would restore confidence in the banking sector.
In his address to the special meeting of the Bankers’ Committee on July 6, 2004, Soludo had disclosed that most banks in Nigeria had a capitalization of less than $10 million. He said further that, even the largest bank in Nigeria had a capital base of about US$240 million compared to US$526 million for the smallest bank in Malaysia.

While describing the situation as worrisome, Soludo announced a turnaround policy that saw banks in Nigeria recapitalized to the tune of N25 million by the end of December 2005. The new policy made it possible to prune down the number of banks from 89 to 25 through mergers and acquisitions.

Justifying government’s decision to have strong and healthy banks, Soludo had asked the question: “Where is Nigeria – Africa’s most populous country and potentially its largest economy?” Answering, he painted a picture; “In Nigeria, we have 89 banks with many banks having capital base of less than US$10 million, and about 3300 branches.

Compare this to 8 banks in South Korea with about 4500 branches or the one bank in South Africa with larger assets than all our 89 banks.” He concluded then that the Nigerian banking system remained marginal relative to its potentials and in comparison to other countries – even in Africa.

In an article titled “Banking Consolidation: Foreigners’ Perspective” published in ThisDay of Wednesday, June 11, 2008, Anver Versi traced the greatest transformation in the business history of modern Africa, which is Nigeria’s astonishing banking revolution.

Going down the memory lane, Versi described the Nigerian banking industry as “grossly corrupt and inefficient until only five years ago” but today, the industry has become one of the world’s fastest-growing sectors. The CBN governor, Chukwuma Soludo, has repeatedly in the last few months, confirmed Versi’s statement that the Nigerian banking sector is now one of the fastest-growing in the world.

Today, the story of the banking industry in Nigeria has changed for good. Industry watchers and analysts are happy with the development, especially with the technological innovation and creativity brought into the dynamics of banking operation in the last few years.

One of such trends is the introduction of the e-payment systems. With e-payment acting as precursor to e-banking, there is a renewed and growing confidence in the banking sector. The financial services industry, which has traditionally been dominated by banks, is being opened up, thanks to the development of Internet and e-commerce that have provided alternative and new payment systems.

e-Payment has promoted card technology, which is helping to reshape the future of banking in the world today. The industry players have adopted card technology and switching applications to integrate delivery channels, which in turn have resulted in the development of a close relationship with customers by offering them access to multiple accounts such as debits, credits, investments or stored value for e-cash on one card.

The technology enables the analysis of information about customer segmentation, demographics, product usage, transaction behavior, thereby helping to improve banks’ profitability and increase market share. Industry analysts believe that the mobile phone revolution would introduce a new dimension to banking and payment system because of its ability to assist the industry overcome the need of high investment in terminals, especially the cost of upgrading ATMs, which is said to be high.

In this new era, banking management is said to have leapt several generations to rank among the most effective and imaginative in Africa. ATMs are gradually spreading across the country while an increasing number of branches are being linked by sophisticated computer-based systems, drastically cutting down transaction time and costs. Contrary to what used to obtain, banks now introduce a number of innovative products and services in partnership with key players in the e-payment sub-sector while their focus now extends beyond national borders.

Watchers of the new trends in Nigerian banking industry have come to agree that government must collaborate with the players to ensure a collapse of the walls between African countries and other countries of the world for there to be a smooth transition to the much-desired cashless society. The world is now a global village, and Africa cannot afford to be left behind. This calls for countries’ adoption of e-Government strategies as a means of increasing the convenience and simplicity of citizen’s interaction with the government.

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