THE BANKING STAMPEDE AND THE NEED FOR DIGITAL CASHFLOW

THE BANKING STAMPEDE AND THE NEED FOR DIGITAL CASHFLOW

After so much grumbling and rancour, the Nigerian Government succumbed to pressure and relaxed lockdown in the three key epicenters of COVID-19 pandemic.

The May 4th indeed proved to surpass our wildest imagination. While the community spread continues and incidence cases projected to increase the government has let off the citizen to a seeming contest survival of the fittest.

While there have been a number of suggestions to embrace a co-habiting reality with Covid-19, one wouldn’t expect the universality of throwing caution to the winds as its being down at the moment.

The modalities for relaxing the lockdown weren’t well thought-out as seen in the directives flying around the media to kick-start the economy. One of such is the directive that the banks should open up with the full complement of services while other corporate are directed to operate at 60% capacity. The operational impracticality of the directives to the banks became obvious when banks sent messages that only a few branches would be open for business. This development was a complete recipe for failure as was since on Monday, May the fourth.

Given the apparent limitations of banking operations at this time such as the fact that banking staffs are also vulnerable to the ravaging virus and the fact that banking halls were not designed for prevailing circumstances yet without undermining the importance of banking services, alternative arrangements could have been made.

Alternative banking channels in the gamut of Digital Financial Services continue to offer risk-free alluring benefits to the Nigerian populace, the sooner we embrace it the better for all of us.

Agent banking rather surprisingly occupies a back seat in the litany of responses for this season. This is either a sincere omission or a continued foot-dragging policy disposition to mobile money cum agent banking network. In emerging markets, agents are a crucial asset for providers and have been key to the growth of the industry over the last decade. As of December 2017, there were well over 2.9 million agents and 690 million registered customer accounts worldwide. The industry now processes a billion dollars in transactions a day, and in 2017 generated direct revenues of over USD 2.4 billion, largely from agents performing cash-in and cash-out (CICO) transactions. In Nigeria, agent network development has been slow in spite of industry advancements and the market potential (EFInA 2018). Indeed, we have peddled the narrative of how mobile money cum change the fortunes of our national economy but If we are to be taken seriously about expanding the financial inclusion net, this is an auspicious opportunity to take the bulls by the horns.

Bank penetration is relatively low in Nigeria: some 60% of the population of 200 million remains unbanked, according to World Bank research in 2017.  Meanwhile, mobile phone penetration is high at 84%, according to a report published by Nigerian online retailer, Jumia.

Uptake and awareness of mobile money and agency banking services remain low at 1% and 16% of the population respectively, according to the financial sector development organisation, Enhancing Financial Innovation & Access (Efina). The Central Bank of Nigeria had aimed to raise the financial inclusion rate to 80% by 2020 and here is a unique opportunity to achieve that but we wonder what is keeping us back.

In other African countries such as Kenya, Uganda, Tanzania, Rwanda, Senegal and Ghana, mobile money has grown to include broader products such as credit, cross-border transactions, and insurance.  In Kenya, 93% of the population has access to mobile money payments, and nearly half of the country’s GDP is processed via M-Pesa.

Aside from the regulatory reluctance, other factors are worth considering in the light of stampede of May the fourth. Why do those numbers of people need to visit the bank; definitely, not because they want to withdraw or transfer funds?  A major factor is the high incidence of transaction failure during the lockdown. This is underscored, as of today with the ‘’full complete of services’’ and providers there is still a 17% failure rate on POS transactions according to NIBSS website. While some things are inevitable, the lack of effective complaints and other dispute resolution processes leads to mistrust within different categories of customers, hence eroding agent business viability and ultimately would result in a May the fourth stampede scenario.

NIBSS

The financial service providers should invest in enhancing communications and conflict resolution interface that will further build trust and promote adoption. The reported spike in digital transactions during the lockdown should serve as a premise to expand the agent banking and mobile money options and make them an attractive alternative to physical banking – especially with our present reality.

At the end of the day, cash flow is all we seek whether physical or digital. The catch is while the former engender health-related risks the later brings convenience, ease, and accessibility.

Charles Aborishade

I am a Digital Financial Services enthusiast, living in the precinct of payment technologies, driving for an inclusive society.

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