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Banks under pressure to restore public confidence over system upgrade chaos   

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Banks under pressure to restore public confidence over system upgrade chaos   

It may take a while for absolute normalcy to return to Nigeria’s banking landscape following circumstances arising from system upgrade being carried out by a number of deposit money banks (DMBs) across the country. 

Most Nigerian banks recently conducted upgrades to their core banking applications in a bid to keep up with the ever-evolving banking system, a development which has made banking a harrowing experience for many Nigerians. .

Core banking migrations refer to the process where a bank upgrades or replaces its core banking system — the central software that manages its most critical operations like account management, transactions, loans, and payments.

This system is the backbone of a bank’s services, and upgrading it increases security, efficiency, and an institution’s ability to handle new technologies. As banks try to stay competitive and meet customer demands for faster, more reliable digital services, these migrations become necessary.

The trend began with Sterling Bank on September 10, when it migrated to a new core banking system called SeaBaaS. As a result of its migration, the bank’s customers experienced some challenges and were unable to have access to their funds for weeks.

Following the bank’s switch to a new core banking system, fellow financial institutions like Zenith Bank, Guaranty Trust Bank (GTB) and First Bank also took similar steps.

The banks’ actions ultimately led to several service disruptions, failed business transactions, customers getting stranded and customers’ inability to pay for services or make purchases.

However, while some banks have announced the completion of their technology upgrades, others are still navigating the ongoing migration. The disruptions caused by the system upgrades have left many customers unable to access essential banking services, raising concerns about the banks’ overall preparedness.

Before the widespread system upgrade, which primarily seeks to improve customer experience, banks had over the years relied on foreign companies to manage their IT infrastructure, spending significant amounts on maintenance in foreign currencies.

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However, Sterling Bank, a tier-2 lender with a market capitalisation of N115.16bn, according to the latest industry data, switched from the Switzerland-based Temenos T24 system to SeaBaaS, an indigenous solution developed by Peerless. The upgrade left more than 3 million of its customers unable to access any of its channels during the transition.

GTBank, a tier-1 bank, transitioned from ICS Financial Services to India’s Finacle system by EdgeVerve Systems. The bank warned its customers of potential service disruptions on October 13. Meanwhile, Access Bank postponed its system upgrade, initially scheduled for October 12, to avoid further inconveniences.

Zenith Bank also faced similar challenges, with customers experiencing login issues for three days following an October 1 system update. FirstBank customers encountered even longer delays, unable to access digital services for six days due to their upgrade.

Lamentation

Commenting on the situation, a Lagos resident, Peter Adeyemi (not real name) shared an embarrassing experience he had last week: “It happened to me in Navy Town Satelite, Lagos. After eating at a restaurant. I was about to pay and the bank decided to mess up. Inside Navy Barracks fah! It wasn’t funny at all. But thank God for a compassionate woman at the restaurant. Maybe I would have been locked up in a guardroom.”

Another respondent narrated how his debit card from another bank could not work after he had purchased fuel at a filling station. He resorted to begging and eventually, another customer offered to pay on his behalf.

A bank customer, Sola Akinwande cautioned that banks should have given longer notice to avert the inconveniences.

“Banks doing any upgrading simultaneously and with short notices is not customer-friendly at all. It has caused a lot of inconveniences to us. This process should have been staggered”, he said.

Another bank customer, Chidi Nwachukwu, is not convinced that even the migration will end the persistent problem of failed bank transactions.

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He said: “GTBank sent out notifications to their customers yesterday that they have successfully migrated to the core banking system, and that customers could once again begin to enjoy seamless transactions, but I tried transacting on their mobile app and USSD yesterday, but neither of them functioned. That for me was deceptive and misleading.

“When will they fix this wahala and relieve Nigerians of stress? How can Nigerians be suffering on this massive scale. Everywhere and everything is tough, yet people cannot access their hard-earned money in the custody of the banks.

“I really do not see any sense in all these needless sufferings. Everyone who is responsible for making policies that affect the masses (whether government or individuals) should do well to always take the general interest of the masses into consideration.”

In his intervention, President of the Bank Customers Association of Nigeria (BCAN) and former Registrar of the Chartered Institute of Bankers of Nigeria (CIBN), Dr. Uju Ogubunka, expressed frustration over the limited communication from banks regarding these disruptions. He pointed out that banks should have better-informed customers about the potential impact of these upgrades.

Ogubunka said, “The ultimate aim is to improve the system and services to customers, but whether all these upgrades should happen simultaneously is debatable, as it’s causing major disruptions. Additionally, many banks failed to give enough notice to their customers, leaving them unprepared.

“Banks are making money and for competition, they are making so much noise about their gains. One wonders why the consumer protection department of the Central Bank of Nigeria has not waded in considering the pains and frustration of bank users. Certainly, this is the time to do that.”

Fintechs to the rescue

Expectedly, in the peak of the downtime, many customers sought alternatives by turning to fintech platforms, such as OPay, PalmPay, and Monie Point for their financial transactions.

Unlike traditional banks that rely on legacy systems, some of which date back decades, fintechs use flexible, scalable software that can be easily updated without overhauling the entire system.

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Since their technology stacks are designed to be agile and adaptable, fintechs do not need to pause operations to perform large-scale migrations. They can make incremental updates and improvements in real-time, ensuring that services remain smooth and uninterrupted for users.

“From transaction speeds to easy accessibility, fintechs like OPay have arguably better services than most traditional banks. This superiority has played out well in the past few weeks”, an industry player, who pleaded anonymity, told our correspondent.

“However, this does not diminish the importance of traditional banks in Nigeria’s financial system. While they may not have the agility of fintechs, they have deep-rooted expertise, regulatory compliance, and long-standing trust with customers.

”Traditional banks have also been instrumental in the growth of fintechs. Fintechs leveraged partnerships to offer certain services before regulations were created to cater to those services.’’

Also raising concerns, an ICT expert, Mr. Abiola Jimoh, praised the role of fintech in alleviating some of the pressure, noting that newer, tech-driven banks helped during the system disruption.

“If not for the new banks and fintech players stepping in just like they did during the cashless policy period, the situation would have been much worse,These delays affect trust in the entire banking ecosystem”, he stated.

“Fintechs are complementing the efforts of traditional banks. We need to continue supporting them to ensure better user experiences and greater stability in the system.”

The Nigeria Inter-Bank Settlement Systems (NIBSS), reported that licensed mobile money operators, such as OPay, PalmPay, and 15 others, processed a staggering N46.91tn in transactions in 2023.

Rising IT investment

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In the first half of 2024, five major Nigerian banks collectively invested N178.77bn in enhancing their information technology infrastructure, according to the analysis of their financial statements.

Zenith Bank, Access Bank, GTCO, Wema Bank, and UBA demonstrated a strong commitment to upgrading their digital capabilities, with IT investments increasing by an impressive 203 per cent from N58.8bn during the same period last year.

In August, many financial institutions announced their plans to raise capital, with intentions to allocate more funds towards technological investments and bolstering their cybersecurity measures.

Meanwhile, FirstBank has reassured its customers that the upcoming transition to a new cloud-based procurement and financial platform, scheduled for Saturday, October 26, will not affect their banking services.

While the lender, which serves over 42 million customers, previously acknowledged that the migration may result in temporary service disruptions, these disruptions will specifically impact vendors, not customers.

The bank clarified in a statement on Thursday seen by our correspondent, saying, “This transition relates to the bank’s platform with suppliers only. It does not affect its banking systems, customer transactions, channels, etc.”

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