Technology makes life more comfortable but it does not necessarily make life cheaper. This is not truer of any other sector than it is of banking services.
Time was when depositors would drive out of their neighbourhoods miles away to deposit money or make withdrawals. Those were the days when savings also attracted decent interest rates. Then, the working-class individuals saved for a new car, home purchase, children’s education and sundry ambitions. When they needed to liquidate the amount accumulated, they visited banking halls with withdrawal booklets.
Alas! Those days have gone. Now, your smartphone is a banking hall while an app is a withdrawal booklet. Rather than picking up a booklet, one only needs to swipe an app to check account balances. Statements are delivered to you while you are yet asleep. In place of cheques, you simply pick up your mobile phone and do instant transfer while you watch the process as it delivers in a matter of seconds.
Times have changed, but it is also a change that has reduced the true worth of an account holder. The banks promise convenience and comfort at your doorstep. But they do not want you to know that you will now pay them to keep your money.
A customer is charged for every transfer, after which she is notified that she has been charged N26 or whatever amount is applied as the service fee. Then, she is notified of both the transfer and the fees in separate SMS, both of which attract separate fees.
A depositor is charged to produce a debit card, which attracts a quarterly maintenance fee notwithstanding the usage status. When he uses it at a third-party bank more than thrice a month, he is charged. And if the poorly-serviced automated teller machines (ATMs) scrape off the card’s security chip and render it invalid, he is debited for a replacement.
When Emeka transfers N10,000, for instance, to Bode via his mobile app, Emeka is charged a transfer fee plus value-added tax (VAT) on the fee paid while Bode receives N9,950 as N50 stamp duty is withheld by the bank for the remittance to the Federal Government. At both ends, SMS notifications – a service plugged in on a new account by default – are delivered and charged.
It does not end there. If Bode decides to settle his commitment with Ahmed through a transfer, the two men are charged for both service and SMS notification (plus VAT). The transfer frenzy could continue but at some point, a party or two may choose to turn his portion into cash and approach agent ‘bankers’, which have become the ‘go-to’ for cash. Again, they are charged by the merchants for their services while they are notified by their banks through an SMS, a service they must also pay for.
There are other arbitrary and hidden charges that customers only get to know about when their account statements are properly audited, which, to the advantage of the bank, rarely happens. For borrowers, the charges could be endless and irritating but most of them are only activated when the loans have started running.
And here comes the new racket: a go-between arrangement was introduced by the Central Bank of Nigeria (CBN) some years ago to deepen financial inclusion known as agent banking. The scheme was conceived as a strategy to reach the unbanked in remote areas. The merchants are now to bank depositors what the call centre operators were to telecoms consumers about two decades ago. And they are gradually assuming the status of vampires, sucking dry the traditional cash dispensing outlets of banks, even in cities. But it is not only the conventional cash payment system they are feasting on.
Pockets of depositors are also being milked. The banks are actively promoting the model while pulling back on ATM servicing, leaving cash drawers at the mercy of the new predators.
According to sources familiar with the antics, the banks consider agent banking an option cheaper and less risky than direct cash handling. Hence, they are deploying retail marketing operations towards promoting the model.
Already, different banks are rolling out campaigns that are targeted at attracting more jobless youths into the cash-handling business in the guise of agent banking. This will ultimately reduce banks’ cash risk exposure but will certainly increase transaction costs for helpless customers.
In the next few years, agent banking, which is growing at an unprecedented rate, could become the most visible cash transaction window of increasingly risk-shy deposit money banks (DMBs). In Lagos, Federal Capital Territory (FCT) and Port Harcourt, the service is taking a shine off in-bank and ATM cash transaction activities.
Also growing side-by-side with this emerging trend is ‘cashback’, an informal transaction where regular sale PoS handlers trade cash for transfer to earn a ‘commission’. ‘Cashback’, a child of necessity, is mainstreaming into the city lifestyle.
While these options make banking more convenient for depositors, they are increasing the cost of banking. Agent ‘bankers’, which are adding to the obscenity of Lagos streets and highways, are expected to charge N100 per transaction not exceeding N10,000, which they share with their principals. But findings have shown that some operators charge as much as N500 or above when demand peaks, especially during festive periods. This suggests that the new service is already benefiting from the Nigerian factor.
During #EndSARS protests, for instance, agents charged as much as N1, 000 for an N10, 000 withdrawal. Transactions during odd hours, also attract higher charges. But do bank depositors have any choice? Not when ATMs are only useful for checking account balances. Today, there is an inverse relationship between cash-striped ATMs and the proliferation of agent ‘bankers’.
The character of the proliferation of the operators seems to have also betrayed banks’ increasing low interest in servicing ATM cash operations. At the Ejigbo area of Lagos, an operator, who charges N300 for N10,000 transactions last weekend, operates right opposite an ATM gallery of a second-generation bank. A resident said the ATMs had not dispensed cash “in the past three days”. This paradox is replicated across different cities in Nigeria, raising the question of whether the ATMs are intentionally under-serviced to create a market for the cash merchants.
But a top banker at a new generation bank said there is more to ‘cash-less’ ATMs than the proliferation of agents. He said some banks need to reduce their cash risk exposure and that agent banking just becomes an alibi to achieve their desire.
During #EndSARS protests, ATMs were vandalised in Lagos and other cities. During the nationwide protests, most ATMs were disabled at night as part of the banks’ safety measures. Over a year after the epic protests, that has remained as a practice in many areas considered as crime-prone.
In-banking activities have been restrained since the COVID-19 outbreak. Even with the lifting of lockdown and full resumption of businesses, some branches shut down in the wake of gradual easing of the lockdown, have not resumed operations. Investment in new operation outlets is no longer a fanciful option for DMBs who are in a fat race to develop their virtual banking halls, confirming that the days of brick-and-mortar banking are fast becoming part of history.
To make matters worse, banks are rolling back physical presence in response to pressure from mobile banking. For instance, earlier in the year, Standard Chartered Plc confirmed it would close 50 per cent of its branches to free more investment in digital banking. Some banks will certainly toe a similar line of action while the few ones that would not are, certainly, not considering new outlets.
Already, there is a generation of Nigerians who do not know what the banking hall looks like. This is not because they are too remotely distant or primitive but because they are too tech-savvy to have anything to do with physical banks. For that generation, there is an app for everything in life – shopping, banking, gaming, learning etc. The fast-growing financial technology (fintech) industry exists for this category of people. The sluggish DMBs have suddenly realised the enormous threat of the intimidating shadow banks and every one of them is doing a catch-up. They are getting rid of any possible hindrance, including bloated physical presence.
Sure, depositors do have a viable option in the bank-on-the-go model. But its costs may not be as friendly as it is convenient.