The present cash drought across the country occasioned by the redesigned naira policy of the Central Bank of Nigeria (CBN) has shown that banks’ investment in digital infrastructure is below par. CHIMA NWOKOJI writes on how bankers failed to heed warnings from a university don and the need to ramp up investment and adoption of more proactive customer experience systems.
Two years ago, Managing Directors and Chief Executive Officers of banks and other financial institutions were gathered at Oriental Hotel Lagos for the usual annual Bankers Committee meeting.
Different presentations were made including that of the Governor of the Central Bank of Nigeria. But there was one that stood out. It was more of a warning than advice on what to do to withstand the quantum of electronic transaction that will characterise the future of banking in Nigeria come 2025.
Prof. Ken Ife is London Enterprise Ambassador, co-Chair, EU-Africa Business Task Force Summit Group (Trade Working Group), Brussels, Senior Policy Adviser to the President, Africa Business Round Table/NEPAD Business Group and Lead Consultant to ECOWAS Commission (Private Sector Directorate).
He reeled out data to substantiate the fact that banks should begin to quadruple investment in digital infrastructure for efficient customer experience.
One would have thought that the bank MDs, having made a lot of profit from e-channels transactions during the COVID-19 era, will be proactive enough to declare a state of emergency on not only investment in digital infrastructure, but human capital development that will attract and retain the best tech brains. But the situation today says it all. Professor Ife projects that this will happen in 2025, but it has come much earlier and banks’ infrastructure is caught napping.
For instance, the popular Unstructured Supplementary Service Data (USSD) which many banks brag about has failed Nigerians. So has other electronic payment channels.
Professor Ken Ife, like a prophet, foresaw today. He could be likened to Nostradamus, ‘the man who saw tomorrow.’
Nigerian Tribune reminded him what he predicted two years ago and he replied, “I told them that we projected an over 500 percent increase in electronic transactions by 2025. “At that time Nigeria was number six in global electronic transactions at 1.8 billion transactions per year ahead of Brazil (1.6 billion) and US (1.2 billion). Last year, it doubled to 3.5 billion transactions per year involving turnover of N200 trillion.
“The naira redesign obviously created a spike. I also warned them not to take the CBN investment in digital payment infrastructure such as USSD, licensing of telcos and their lukewarm uptake of e-naira as the end of it all.
“I warned them that if their strategy includes increasing Automated Teller Machines (ATMs), they will have fewer ATMs. If they are thinking of employing more staff, they will have fewer staff. If they are hoping to open more branches, they will have fewer branches.”
From Prof Ife’s submissions, one may ask, what should they have thought of doing and what should they do now? What technologies will help them harness the opportunities ahead?
To answer these, experts say banks can use Artificial Intelligence (AI) to transform the customer experience by enabling frictionless, 24/7 customer service interactions. Indeed, some have AI-powered chatbots but there are limitations to what chatbots can do.
It is the inherent attitude of the fire briggade approach to issues that has made banks tp keep using industrial-age structures to drive knowledge and digital age transactions.
Eleni Digalaki, a tech expert at Business Insider Intelligence listed areas banks can apply AI.
Front- and middle-office AI applications offer the greatest cost savings opportunity across digital banking.
Banks are leveraging algorithms on the front end to smooth customer identification and authentication, mimic live employees through chatbots and voice assistants, deepen customer relationships and provide personalised insights and recommendations.
AI is also being implemented by banks within middle-office functions to assess risks, detect and prevent payments fraud, improve processes for anti-money laundering (AML) and perform know-your-customer (KYC) regulatory checks.
The winning strategies employed by banks that are undergoing an AI-enabled transformation reveal how to best capture the opportunity. These strategies highlight the need for a holistic AI strategy that extends across banks’ business lines, usable data, partnerships with external partners and qualified employees.
In the heat of the naira redesign policy and associated difficulties, the Association of Corporate Affairs Managers of Banks (ACAMB) was jolted by a barrage of complaints from customers who accused banks of not investing enough on digital infrastructure.
In defence, ACAMB said Nigerian banks have invested in excess of N100 billion in setting up and maintaining cutting-edge electronic channels over the past few years “as part of an ongoing commitment to seamless customer experience and real-time digital financial transactions.”
Today, with more Nigerians using electronic payment channels as a result of acute cash shortage in the economy, customer experience in banking transaction is now characterised by failed mobile networks, declined transactions, seized debit cards, endless wait for reversal of wrong debits, unavailability of service on USSD, multiple debits, untraceable funds between banks and PoS merchants, unexplainable bank charges, endless queues and different kinds of disappointing messages.
Nigeria’s payment system, we are told, is one of the best in the world. But now the transactions are here, bankers are on the run.
This is clear evidence that the purported N100 billion investment is a drop of water in a mighty ocean. The situation also evidences the brain-drain problem facing the sector.
Corroborating the situation, the Director of Operations/head of the ICT division at PPC, Nigeria’s leading ICT and infrastructure development company, Patrick Ede, observed that the inadequacy of the e-payment channels to withstand the deluge of transactions orchestrated by the surge in the use of such channels for payment is causing many failed and unsuccessful transactions.
He added that the congestion and resultant system downtime are negatively affecting the commercial activities of merchants as transactions have become slow, delayed and sometimes incomplete due to the fact that banks were never ready for the level of surge they are currently experiencing.
Need to be proactive
In an earlier interview with Nigerian Tribune, the immediate past president of the Association of Telecommunications Companies of Nigeria (ATCON) and the National Coordinator for the Alliance for Affordable Internet Engineer, Olusola Teniola, said most of these technological equipments used in banks are only tested in the laboratory and so when launched in the public, “we become guinea pigs.”
In Nigeria, according to Teniola, “we are too reactive. Maybe the systems are tested only in the laboratory and so when launched in the public, we become guinea pigs and even the bankers themselves are trying to understand the system. That is why they can’t attend to you immediately because there are errors they can’t account for.”
He made this observation while reacting to rising cases of debits on customers’ accounts after printing transaction failure notice at Point of Sales (PoS) terminals and delays in reversals by commercial banks,
Nigerians have been expressing strong dissatisfaction over services rendered by the majority of commercial banks through PoS terminals and other transaction channels.
Some bank customers took to social media to express their frustration.
A few twitter users tweeted that “The only bank working in Nigeria now is power bank, the other banks are having problems..The worst thing that can happen to anyone in Nigeria now is having bank problems.
“The old guard dislikes innovation, growth and change as long as it doesn’t affect their pockets, no need to upgrade. Just like Kainji dam, it is difficult for them to upgrade it.”
A herd of industry watchers have advised the banking public to always try to do their transactions in the morning or at night, because “if anything, we have come to realise with the recent cash policies, it is that bank networks are actually weak.
“When the networks get congested at mid-day, sending and receiving money becomes difficult. Hence, it is better to do your transactions in the morning or at night. Don’t depend on bank alerts.
“Sometimes, you can send money to someone and the person does not receive a credit alert SMS from their bank but the person has received the funds in their account.
“Always check your account balance. Use your bank app; don’t wait for an alert. You must rely on data to build your products,” Johnson Ojo, a bank customer, advised.
Twitter is awash with names of banks that are dealing serious blows on their loyal customers. There is a general opinion that no matter the technology banks have deployed, what matters is how satisfied the people are using such.
Victor Asemota is a technology entrepreneur and investor who serves as a board member and advisor to leading fintech and investment firms across Africa and globally.
Reacting to the harrowing experience Nigerians are passing through, he said though the production side of transactions business is one of the most stressful places to ever be, a lot can still be achieved because “I have seen platforms ramp up from zero to 2000 tps.
“I have seen people start from having tests and production in the same physical machine to having 11 production servers and load balancers. Support is the less glamorous part of tech. It is what keeps everything running.”
According to Asemota, the first experience working with banks was with serious international banks who had major offshore infrastructure and he thought that local banks would have learned something.
“I was disappointed at our first interaction. They were totally clueless. Mobile transactions are a 24/7/365 business,” he tweeted.
The brain drain syndrome
One of the problems Asemota identified is that people who suffer the stress of fixing mobile transactions consistently will leave because there is very high demand for them from those who can afford to pay much more.
He said, “They won’t want to hear that there is some fabulous plan that you have for them. It is not business as usual. It is extremely hard work.
“One thing I didn’t factor that we would have to do beyond keeping things running was fighting hackers and fraudsters. Once a platform is at scale, the attacks grow exponentially. The attacks come from within and without. Again, it is not child’s play. It is very hard work.
“When I heard that Nigerian banks were losing support staff, I told someone that if they had any sense they would outsource that layer. It is how telcos managed to grow and scale. The problem is that their software providers all lie and want to squeeze more money from them.
“Even startups have started to outsource infrastructure and build upon others. The problem is not with the Nigerian Interbank Settlement System (NIBSS), it is with banks. I kept telling Nigerian banks that each bank had everything to do better than Interswitch but they didn’t get it. Interswitch thrived because of people.
“It is people that make all the difference. It is not the tech. People support people. That is what Nubank of Brazil got right. It is what Nigerian banks get wrong. Nigerian banks are using industrial-age structures to try to run digital-age businesses. It can’t work. It is why we are where we are today; old ideas and old thinking.”
A wake up call
The rising e-channel transaction is a wakeup call to banks and their boards in terms of upgrade of extant infrastructure. It is no longer business as usual.
Data released by NIBSS shows that the volume of transactions performed electronically by Nigerians surged 55 percent in January 2023.
Further analysis indicates that the number of NIBSS instant payment (NIP) users increased to 541 million in January 2023 from 348 million in January 2022, highlighting the growing trend toward a cashless society.
In value, the industry data reported N38.7 trillion in January this year, a 45 percent rise from N26.6 trillion recorded in the corresponding period of last year.
Tajudeen Ibrahim, Director of Research and Strategy, ChapelHill Denham, said a major driver to the surge is the naira redesign policy, “As cash in hand became scarce, most Nigerians had no other option than to adopt the available electronic channels as NIP is the most preferred platform in use.”
Looking at the challenges faced by e-payment in the previous month despite its surge compared to what was reported in January 2022, Ibrahim noted that the robustness of this electronic platform to accommodate a large number of users and transactions at the same time, was a major challenge.
According to NIBSS, over the years, Nigerian banks have exposed NIP through their various channels, that is, internet banking, bank branch, kiosks, mobile apps, Unstructured Supplementary Service Data (USSD), POS, ATMs, etc., to their customers.
Chairman, Association of Licensed Telecom Operators of Nigeria (ALTON), Mr Gbenga Adebayo, said, “We provide the pipe for transportation of all financial transactions between banks and their customers. What happens at the interconnectivity end of the financial transaction is not under the control of the telecom operators whose infrastructure the banks are using to provide digital financial services to their customers.
“All other online applications like Unstructured Supplementary Service Data (USSD), e-commerce, website and internet browsing, are working perfectly except for mobile apps used for financial transactions, which I think, is as a result of increased volume of transactions on the mobile apps of banks because the ATMs are no longer dispensing cash as they should and the banks are not releasing cash across the counters, leading to cash crunch in the economy.”
Adebayo told newsmen that the banks need to build more capacity and strengthen their baking applications to make the apps resilient enough to accommodate the pressure
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