Slashing banks’ charges as was recently done by the Central Bank of Nigeria (CBN) has been applauded by experts as a good omen and an assurance that the regulator is not only alive to its responsibilities, but also proactive enough to rein in banks’ excesses, preventing them in the process from taking advantage of their customers and end users of their products and services.
Financial services providers have been very witty and smart over the years. They have devised all manner of schemes and strategies to cut costs and raise margins.
The advent of the inevitable ATMs, mobile money transfers, the PoS, internet banking and the retinue of the other e-banking platforms are pointers to this.
All these new blanking platforms and many more, have come at a cost to the end users, their attendant benefits notwithstanding.
And because the charges are denominated in such small fractions of the currency, they are usually ignored, or overlooked, but the cumulative cost to consumers, if they care to calculate, is huge and the returns to banks, massive.
A customer once received an advice from his bank that the use of his debit card in other banks ATMs has cost him over N2,800 in charges in just a month.
Being mindful of the trend and knowing that these transaction costs will ever be on the increase as e-banking is the norm, the CBN, as part of its regulatory role, stepped in about two months ago with a new set of measures resulting in transactions cuts, providing some modicum of relief to customers and consumers alike.
In slashing banks’ charges, the CBN in a statement on December 20, last year by its Director, Corporate Communication, Isaac Okorafor, said the revision of the charges was necessitated by continued evolution in the financial industry, which has spurred innovation and the introduction of new products and channels,” saying these developments have made it imperative for continued vigilance by the regulatory authorities to ensure the protection of consumer rights as more individuals are financially included, whilst encouraging market forces to increasingly drive pricing for financial products.”
The step taken by the CBN is apt, given the high patronage the various e-platforms have enjoyed since they came on stream.
These innovations supported by a sound regulatory framework, Okorafor said, have indeed transformed the financial landscape, which has driven financial inclusion and the increased use of electronic payments across several channels by bank customers.
This is aptly validated by data from the Nigeria Inter Bank Settlement System (NIBSS) which showed that PoS transactions in the past few years increased by 4,692 per cent between 2012 and 2018 from N48.46 billion to N2.3 trillion, while electronic transfers increased by 1,967 per cent from N3.8 trillion to N80.42 trillion. Paper based cheque transactions declined by 32 per cent from N7.48billion to N5.03billion.
Statistics from NIBSS on electronic transfers from June to November last year also showed that the number of transfers below N10,000 accounted for 61 per cent of the number of electronic transfer transactions.
This is an indication that the reduction of the charges for micropayments has huge potential for financial inclusion.
The revised Guide to Charges is thus yet another move by the CBN to build an inclusive banking system that adequately caters for the needs of the banking public, while preserving the financial sustainability of banks and other non-bank financial institutions, Okorafor said.
Part of the incentives envisaged in the reduction of bank charges is to incentivise stakeholders, especially those making micro payments, to further embrace electronic banking channels, thus improving financial inclusion.
It was also intended to reduce cost of banking services to customers, so as to deepen access without much impact on bottom line of regulated institutions.
Some of the changes in the revised Guide include; a graduated fee scale for electronic transfers to replace the current flat fee of N50. Accordingly, transfers below N5,000 will attract a maximum charge of N10; transfer from N5001 – N50,000 -N25; and transfers above N50,000 are expected to attract N50 charge Also, Card maintenance fee on current account has been removed as the accounts already attract account maintenance fee, however, Savings accounts will attract card maintenance fee of N50 per quarter, as against the previous regime of N50 per month. In the same vane, Annual Card maintenance fee on foreign currency (FCY) denominated cards is reduced to $10 from $20, the same way that Remote-on -Us ATM charges are reduced to N35 after third withdrawal within a month from N65
Other charges, including those for hardware token, will now be on cost recovery basis subject to a maximum of N2,500 as against the previous maximum charge of N3,500.
The CBN also indicated in the guidelines that Fee for SMS mandatory alert will be on cost recovery, as against the previous maximum charge of N4.
Also, Bill payment via e-channels will attract a maximum charge of N500 from 0.75 per cent of transaction value, and this is also now subject to a maximum of N1,200.
The CBN did not leave non-compliance to these new regime to chance, neither did it assume automatic buy-in by banks.
It made necessary provision for appropriate sanctions for any infraction which is the hallmark of any effective regulation, or law worth its name, expectedly to deal with instances of excess, unapproved and/or arbitrary charges.
It said: “Financial Institutions are to note that any breach of the provisions of this Guide carries a penalty of N2million per infraction, or as may be determined by the CBN from time to time.
Failure to comply with the CBN’s directive in respect of any infraction shall attract a further penalty of N2million daily until the directive is complied with or as may be determined by the CBN from time to time.”
An addendum to these charges is the Consumer Protection Regulations, providing clarity and eliminating doubt on roles and responsibilities of all participants in the industry.
It sets our minimum standards on fair treatment of consumers, disclosure and transparency, business conduct, complaint handling and redress in order to protect the rights of consumers and to put all financial services providers in check.
Two months into the life of the reduced charges regime, the question is: how far have the rules impacted on the system and consumers?
While commending the CBN for the insight in introducing these measures, the fear, or rather doubts, still hover in the air that unless the Central Bank takes extra measures to monitor operators, the expectation that banks will comply, will remain a mere wish, the sanctions notwithstanding.
As one bank customer who asked that his identity be veiled, remarked: “These charges are programmed and systems generated, I do not envisage that the banks will be so honest, or willing enough to go through the re-programming necessary to effect these new guidelines as required, rate-for-rate.
These banks are too profit focused for me to imagine that all of them will have done the needful to ensure total compliance.
For a N2million fine, I can bet some of them will be willing to test the waters until they are caught, adding, “ there may be exceptions nonetheless.”
He said considering the huge customer base of these banks and the unbridled appetite for Return-On-Investment (ROI), the fine for some of them may just turn out to be a bait they may be willing to swallow considering that charges bring returns in billions of ‘’near free cash in transactions,” he said.
However, a banker in First City Monument Bank (FCMB), who spoke on condition of anonymity as he was not authorised to speak, assured that most banks have complied with the guidelines.
He said there is a likelihood that banks may suffer some downturn from the measure given that the reduced charges cut across many schemes that register huge transaction volume, saying nonetheless that the banks are also taking proactive measures through the social media platform to bridge the expected income shortfall.
He said the online and e-banking platforms offer much appeal to the youth, as a result, banks are leveraging on that to harness the huge potentials in that segment, which at the end, in his opinion, would mitigate whatever drawback the reduced charges will have on banks bottom line.
Also, a Lagos-based Financial Analyst, Kingsley Monye, said the CBN should be commended for helping the banks to think more creatively.
He said the policy has once more helped banks to understand that it is not just about making cheap money through charges, they also need to add more value to their customers through improved products.
“I think the CBN has done well,” he said, adding: “ I advise the apex bank to monitor the banks to ensure full compliance with the rules as contained in the revised guide to bank charges.”
A former senior banker adjudged the revised guide to bank charges as being a step in the right direction, saying it is one policy that will raise public confidence in the financial services sector.
He said only banks that are creative will find ways to recoup lost earnings through innovative products, pointing out that many banks were already taking that initiative.
True to his assertion, many banks have risen to the challenge to check and arrest the potential impact the policy may have on the bottom line by introducing new products and engaging social media platforms to induce a turnaround in their financial fortunes.
And they are winning. Some banks have gone into Facebook banking, social lending and partnership with global payment and technology firms, to not only bridge the gap, but also to up the ante.
For instance, Zenith Bank is promoting its zero account self-opening option, the same way that Wema Bank parades Alat, a digital platform, to enable it capture the grassroots customers and the youths.
Firstbank, Fidelity and Union banks have partnered PayPal to enhance online payment for shoppers, the same way that United Bank for Africa (UBA) has introduced Leo, a chat banking personality on social media platforms, while Access Bank, Visa and shoptomydoor.com, an online shipping company are collaborating to give Visa cardholders opportunity to shop online globally.
UBA Group Managing Director/CEO, Kennedy Uzoka, described Leo as a solution developed in collaboration with Facebook with people’s lifestyles in mind, saying Leo is the UBA Chat Banker who enables customers make use of their social media accounts to carry out key banking transactions.
“Leo being an intelligent personality will give you feedback instantaneously as you transact your business on the platform. It is a solution that is from the customer’s standpoint and is easy to use by anyone,” he said.
Beside the recourse to social media outlets, some banks have on their own further lowered lending rates, taking advantage of the CBN’s 65 per cent Loan-Deposit-Ratio (LDR) to induce customers in preferred areas, including the power sector projects, mortgage, agriculture and education businesses, amongst others to come forward and have access to cheap funds with a view to improving Return On Investment.