Rising fraud threatens POS business
PoS

By AYOOLA OLAOLUWA

The high patronage of electronic transfer and Point of Sales (Pos) services by Nigerians during the current lockdown over the COVID-19 pandemic has led to their incessant failure, thus worsening their psychological trauma, BusinessHallmark findings can reveal.

It would be recalled that all the commercial banks in the country have suspended physical banking operations following the lockdown of the country to forestall the spread of Covid19, forcing desperate Nigerians needing one form of financial service or the other to resort to online banking.

Owing to the lockdown, collecting or transferring funds inside banks have stopped, while physical payment of bills and services like power and cable TV is impossible as the doors of most companies are shut.

The situation is worsened by the decision of the Central Bank of Nigeria (CBN) to suspend cheque clearing, leaving all Nigerians, both rich and the poor with no other option than to embrace online banking. Nigerians who were before accustomed to cash transactions are now forced to turn towards digital banking.

The development, BH checks revealed, has resulted in heavy traffic, as well as high level failed or incomplete transactions.

According to a report by the Nigerian Inter-Bank Settlement System (NIBSS), the volume of transaction performed using mobile (Inter-scheme Transactions) increased from 8.2 million in February to 8.8 million in March. The total amount of transactions performed using electronic payment like Point of Sale (POS), internet banking, USSD and web payment using cards also increased significantly.

The total value of transactions performed using mobile increased by 14.5% in March. The value rose from N148.3 billion in February to N169.8 billion in March.   Similarly, the value of transactions performed using PoS also increased from about N42.8 billion to record a total of about N368.8 billion in March.

The number of transactions performed using NIBSS instant payment (NIP) was over 135 million in March. This is a 12.5% increase from the 120 million transactions recorded in the previous month.

NIP is an account number based online real-time interbank payment solution. This means that more than 135 million bank to bank transfers were completed in March.

The value of transactions performed using NIP also increased significantly. The value rose by about N1 trillion, jumping from N9.9 trillion in February to about N10.9 trillion in March. This indicates a reduction in the volume of cash to bank transfer.

NIBSS numbers show an all-round increase in the use of different digital banking solutions in the last month. The increase appears to have been caused majorly by the fact that millions of Nigerians who are stuck indoors are forced to leverage technology.

Also, a data by NIBSS on its website on Friday said as at 1.21 pm on April 24, 2020, out of the total volume of 9,822 PoS transactions initiated, 1, 161 failed. While the failure rate is 11.82%, average processing time took 2.25 seconds. In other words, for every 100 PoS transactions made 12 failed.

On the hand, the failure rate in the electronic transfer is far worse. As at 1.21 pm on Friday, April 24, out of the 669,751 transfers made, 90,701, representing 13.73 per cent failed. In other words, in every 100 transfers made, 14 failed.

The situation, according to BH findings, is worsened by the fact that the accounts of cardholders initiating the transaction are debited and the reverse credit is usually not executed within 24 hours as stipulated. It would be recalled that the Central Bank of Nigeria (CBN) had in September 2018 reeled out a riot act on banks meant to rein in on failed electronic transactions.

The CBN had imposed a punitive fine on banks where they failed to reverse a failed transaction as expeditiously as within 24 hours.

According to the CBN, any failed Nigerian Instant Payment (NIP) transaction not reversed into the customer’s account within 24 hours, based on a complaint of the sender and/or beneficiary will attract a fine of N10, 000.

The CBN circular on the Regulation on Instant Inter-Bank Electronic Funds Transfer Services in Nigeria,” was issued to all Deposit Money Banks, microfinance banks, other financial institutions, mobile money operators, development finance institutions, payment service providers and other stakeholders.

It also stated that the delayed application of inward NIP into beneficiary’s accounts beyond four minutes would attract a penalty fee of N10, 000 per item.

“The sanctions above and any other prescribed in the Nigeria Bankers’ Clearing System rules or any amendment thereto, shall apply.”

But the CBN, at the start of the pandemic, ordered banks to temporarily suspend the processing of all transactions disputes on ATMs and PoS until normalcy is restored. However, following the backlash from the order by affected Nigerians, the CBN reversed the other, ordering banks to open portals for the resolution of issues emanating from failed transactions.

Despite the apex bank intervention, findings revealed that while it takes two to three days for some banks to reverse the funds, others take up to two, even three weeks. It was however gathered that a two-party transaction (same bank transfer/withdrawal) has a lower failure rate and a timely reversal resolution timeline of two to three days.

Investigations revealed that the two major causes of failed transactions are the sudden spike in the number of people and inadequate capacity on the part of electronic payment operators to cope with the rising volume of transactions.

A bank official, who spoke to our correspondent, however, blamed debit and credit card operators like Interswitch, Visa and Mastercard. He noted that while PoS transaction failure is frequent with Verve cards operated by Interswitch, the problems associated with electronic transfers should be blamed on all the operators.

Reacting, the acting Managing Director/Chief Executive, NIBSS, Mr Niyi Ajao, while blaming the failures on overstretched infrastructure, promised that stakeholders are making efforts to address the challenge.

“Before the lockdown and upsurge in electronic activities, the PoS failure rate has always been in double digits because of the complexity of the PoS network. In the best of times, we record a 12 per cent failure rate, with six out of this 12 being caused by insufficient funds (in cardholders’ account).

“Stakeholders are currently working together to improve performance and the efforts are yielding good results as can be seen in the NIBSS real-time monitoring dashboard available to the public on NIBSS web site,”  he said.

The Chief Executive Officer (CEO) of Trium Networks,  Adedeji Olowe, while noting that though the nation’s electronic payment system could still cope with the pandemic,  a long time lockdown could be a problem.

“The challenges we are currently facing are still within control. Where we could get into trouble is if this continues for a long time that the national diesel supplies get disrupted, cell sites could go down and we won’t have access to phones or the internet; bank networks would go down and ATMs won’t work,” he said.

After encountering failure on other electronic channels like PoS and mobile apps, more Nigerians now resort to the use of Automated Teller Machines (ATMs) to withdraw or send money. This has resulted in long queues at the few banks’ branches where the ATMs are located. Several banks ATMs in Ogba, Jankara, Ijaiye, Agbado Kola and Fagba visited buy our correspondent last week were not functional at the time, while the few working were thronged by agitated customers waiting to withdraw money.

“A customer at the Fagba branch of First Bank Plc, Bayo Abidemi, told BH that he was forced to join the long queue at the ATM due to his inability to get money through PoS.

“PoS and banking apps have been epileptic these days. My N50,000 was swallowed on April 4. It was just reversed yesterday April 22). Thank God I had other funds on me. I am now low on cash and I don’t want what happened then to happen to me again. That is why I am here.

“Though ATMs are also swallowing people’s money after debiting them, the rate of failure is still very low. I have been here for the past 30 minutes, and only 7 out of the almost 50 people were debited without getting money. I will wait and bid my luck”, Abidemi said.

However, some of the banks have devised means to solve the challenges posed by the sudden surge in electronic banking transactions and its attendant hiccups. Several of them sent messages to their customers apologising for the transaction failures and availing them of options at their disposal to resolve the crisis.

Access Bank, while apologising to its teeming customers, advised them to send a mail to [email protected], with the subject ‘Decine Receipt’, for the reversal of failed transactions.

Our Correspondent, who experienced two failed transactions in the week, forwarded a mail to the address and was told that the problem would be resolved within 72 hours. However, the funds were reversed within 42hours.

Fidelity Bank also in its notice to its customers advised them to avoid using other banks or vendors’ platform until the situation improves.

“We, therefore, advise that you use Fidelity Bank ATMs for your cash withdrawal and also opt for online banking NIP and instant banking in making payments instead of PoS during this period.

While other banks have also announced ways of resolving the problems faced by their customers, any list has predicted that the situation could get worse if the government extends the lockdown.

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