Banks earn big in e-payment charges, customers raise ethical questions

Section 2 (2) of the Consumer Protection Framework of the Central Bank of Nigeria (CBN) states that financial institutions shall act in the best interest of consumers in the provision of advice and execution of transactions.The same framework in Section 2 (5) espouses fair treatment, warning that contract terms must not undermine the rights of consumers, giving financial institutions undue advantage.

The principles behind “acting in the best interest of consumers” and not taking “undue advantage” in the execution of transactions call for ethical practice. For one thing, the customer is not fully aware of what constitutes the entire charges and what gains have been made from the customer in each transaction.

Indeed, some gains made out of agreed transactions may be legal, but still lack moral principles. So, should the banks continue to charge customers for transactions at the same rate or even higher, when investments costs have been recouped?The nation’s payment system landscape has really changed and for good, courtesy of the evolving financial technology. Despite operational hitches, which are currently being managed, there is no alternative to seamless, convenient and relatively affordable means of transactions than the evolving electronic payment (e-payment) channels.

An e-payment system is a way of making transactions or paying for goods and services through an electronic medium, without the use of cheques and physical cash. This system has gained increased traction over the last decades due to the growing spread of internet-based banking and shopping.

The e-payment channels have become a veritable source of earnings for banks and the associated payment service providers. By the end of 2018 financial year, the banking industry’s record of earnings through the e-payment channels were in excess of N190 billion and considered a staggering feat, given that the potential is still running at less than full capacity.

For example, about 36.8 per cent of the country’s adult population remains outside the financial inclusion bracket and a sizable number of the financially included adults is not fully active in the e-payment space. These can only be harnessed with sound ethics that consider the welfare of customers.

The channels embodied in e-payment system today, include the Automated Teller Machine (ATM); Point of Sale terminal (PoS); Web (Internet); Mobile Payment; Nigeria Inter-Bank Settlement System Instant Payments (NIP); Nigeria Electronic Fund Transfer; Mobile Cash (m-Cash); Electronic Bills Pay (e-BillsPay); Remita; NAPS; and Central Pay.

According to the National Bureau of Statistics (NBS), in its report on “Electronic Payment Channels in the Nigeria Banking Sector”, a total volume of 616.53 million transactions valued at N39.15 trillion were recorded in fourth quarter (Q4) 2018.Of this number and value, NIP dominated the transactions, recording 228.21 million valued at N23.57 trillion in the period under review.

Transactions through the Automated Teller Machine (ATM) were 225.5 million, worth N1.72 trillion, while mobile payments (transactions on mobile phone) were 26.25 million, valued at N592.94 million.The Point of Sales terminals deployed across the country by banks, garnered 89.1 million transactions valued at N714.35 billion and a breakdown of the month-on-month activities within the quarter, showed that volume and value were on sustained rise.Web (Internet) channel recorded 17.38 million transactions, put at N221.53 billion, while m-Cash had 58,855 deals worth N180.64 million.

Others were e-Bills Pay at 260,743 deals, worth N128.19 billion; Remita, 13.25 million deals at N4.95 trillion; NAPS, 13.86 million transactions put at N5.97 trillion; and Central Pay, which had 530,971 transactions, estimated at N2.55 billion.Of course, all these channels had one thing in common- sustained increase in volume and value, an indication of public acceptance, adoption and enhanced Economy of scale for banks. It is therefore, not surprising that the banking industry churned out hundreds of billions from the segment.

Indeed, there are complaints of multiplicity of charges and sometimes, fees that are adjudged high, unnecessary and unethical, by customers, against banks.So far, banking industry charges, cutting across e-payment transactions, include the card maintenance fee, beside account maintenance fee, which banks are now charging on monthly basis on current accounts. There is Value Added Tax (VAT) virtually charged on every fee against bank customer, including the SMS alert charge.

There are also charges for online transfers; over-the-counter; and mobile App; Remote-on-Us (charges incurred for using other banks’ Automated Teller Machines to withdraw money more than three times in a month); and the controversial stamp duties charge. Some banks have also reviewed upwards the cost of acquiring cards from N600 to N1000, with VAT charge afterwards. Mrs. Ruth Nnadi, who lives in Houston Texas, United States, said she observes with surprise how Nigerian banks toll their customers, even in transactions that can ordinarily be absolved by mere banking relationship.

“I agree that operational environment, in terms of infrastructure and legal framework, is not the same. But banking stands mostly on international best practice. Comparing the charges on my account in Nigeria and what obtains in U.S., I can clearly see ethical challenges.“Yes, the charges might be allowed, but are they in the interest of sustained relationship? You know that something can be legitimate, but lacks moral stand and that is the case of ethics,” she said.

While the operations of e-payment is structured as “users’ cost”, given the market size (users), the service offerings and payment service companies involved in the process, questions remain: “Why the sustained high charges when investments on the processes have been recouped, as evident from profit declarations? Is it not antithetical to financial inclusion drive? Is it not possible to remove charges on some, as obtainable in other climes?

Besides, the relationship is mutually beneficial in terms of service offering and payment of fees in return, although the banking side remains opaque due to the operational nature. So, leaving the cost, as though it is non-negotiable, despite expanding scale of adoptions, is prohibitive, unethical and tends towards extortion, customers charge.

Of course, the e-payment system has come to stay and can only be better, as it continues to evolve, with new modals that are aimed at reaching the global best practice and standards, but the consumers’ interest would also need to be retained.The Chairman of the Association of Securities Dealing Houses of Nigeria, Pat Ezeagu, while expressing gratitude for the nomination of the Central Bank of Nigeria’s Governor, Godwin Emefiele, for second term in office, he said: “The market has become used to his policy and person, but we want him to give attention to e-payment issues.”

Mr. Chinda, who runs an electronics shop, with three workers, said that fears of making mistake, unpleasant charges, learning the operations and general awareness are keeping many away from keying into e-payment system, particularly the mobile banking.
“For us that do many transactions, though relatively small amounts, we see charges in different forms. I can tell you that I pay up to seven different charges for being active in e-payment transactions.

“I enjoy the services, but I also know that there are millions of others, who do too, but if the charges can be reviewed downwards from time to time, there would be good stories to tell those who are afraid.“I know that there is something called economy of scale, which supposed to lead to crash of charges. Holding the charges steady or even increasing them, while declaring huge profits makes it look more like rip-off,” he said.

For Elias, who runs a dry cleaning shop, “these institutions are just taking advantage of the ignorance of the majority. Many things are going wrong and hidden in the relationship. They do like they don’t care about us, except what they make from us.“If they are making these huge profits, it means they can cut some charges to encourage more people, but they want to get everything. Why is it that Mobile App transfers cannot be N40, having been N52.50 for years?” he queries.

Arguing that some charges are ordinarily removed to cement customer relationship, Dapo, who lives in London and maintains two accounts in two of top Nigeria banks, said the financial institutions operate in uniformity, that is, they do almost exactly what the other does.“Over here, nothing is free, but the way Nigerian banks levy customers on almost every transaction, it looks like some things are free here. I use to wonder the meaning of account maintenance fee, card maintenance fee and reason for fee to obtain credit/debit card.“Card is like a compliment for banks to lure you into doing transactions with them. I see some subtle rip-offs against customers,” he said.