Debit card payment system as a panacea for bank robbery in Nigeria

By Olu Adeoti, Department of Business Administration & Management Studies, The Polytechnic, Ibadan

Olu Adeoti

A payment system is the process by which consumers pay for goods and services.

Traditionally in Nigeria, most goods purchased or services enjoyed are paid for through cash. This traditional system of payment for goods and services is usually insecure and inefficient. The ultimate goal of any payment system is to ensure that exchange of monetary value is achieved using a secure payment system. Safe and efficient systems are major precondition for financial stability and economic prosperity in a country (Nkole, 2005).

This security has a fundamental role regarding the use of a payment instrument. Consumers and merchants will adopt a new payment system only if the related operational risks (including fraud risk) and time taken to learn how to use the payment instrument and cost of adoption are lower than those associated with the traditional payment instrument (Kotler, 1999).

Today’s payment instruments have evolved from barter to commodity-based, to currency and coin, to card-based electronic network based system with the employment of information and communications technology (lCT). Like most payment systems around the world, the Nigerian payment system is dynamic. The dynamism arises from frequent changes in constitutions, instruments, character, quality, and quantity of participants. However, the Nigeria payment system that is cash-driven cannot and has not guaranteed the much needed security of life and properties.

In spite of the practice of modem payments system in the world with their attendant advantages for both consumers and financial institution, it has not become acceptable in the mainstream of Nigerian economy.

Nigerian consumers and banks apparently still regard “in-person banking” as a more important method of financial transactions. This cash-based payment system is responsible for the N1.16 trillion naira cash currently in circulation (CBN, 2004). This represents about 90 per cent of the total volume of cash in circulation compared to four and nine per cent in the United Kingdom and the United States of America respectively (Ovia, 2005).

The ultimate social and economic costs (risks and inconveniences) associated with cash transactions are alarming. The most obvious has to do with insecurity due to the daily loss of life from the activities of armed robbers and fraudsters as encouraged by cash payment system. There is also the inconvcnience and risk of carrying large volume of currency notes. Safety of carriers of huge amount of money may not be guaranteed, moreso in a pauperized, corrupt and inefficient transportation system which at present is being operated in Nigeria. With armed robbers, and poverty stricken people at every corner in Nigeria, carrying money around is perilous and dangerous. Also, the volume of money in circulation is a function of societal economic transaction; where economic activities are based on cash and carry, there is tendency for a large sum of money to be in circulation. This also serves as baits to the money launderers who cash in on the situation through the injection of fake and counterfeit money into the nation’s economy.

Historical evolution of payment system in nigeria
Historically, societies world over had used various means of exchange before the cash and cheque system. Over decades, payment system had passed through a lot of transformations. In fact, before 700 BC when cowries were introduced in Asian minor, barter remained the only medium of exchange. Trade was carried out by goods being exchanged for other goods (barter) before money came to be used (Taiwah, 1998)

Effects of high demand for cash
This act of keeping raw cash is tempting to the armed robbers. And they have been taking advantage of this peculiar habit, since their major target is cash. Armed robbery has become a ‘lucrative’ and “profitable” business in Nigeria. As marketers will put it - “no market, no business”. Armed robbery has become a cankerworm or a killer disease that has been taking lives like the much dreaded HIV and AIDS. The men of the under world, over the years, have studied our payment system that is cash-based and thus identified their “good” target market as banks, institutions, companies, churches, mosques, the rich individuals etc. No day ever passes without a report of bank robbery, especially in cities such as Lagos, Ibadan. Abuja, Port-Harcourt Aba. Onitsha, Enugu, Kaduna, Kano, Jos and Warri to mention a few. In the course of looking for cash (major target), human lives are wasted with impunity. Therefore, there is need to arrest this ugly situation through the development of an alternative modem payment system.

The concept of electronic payment system
This is a system that enables funds to be transferred electronically between and among individuals, financial institutions and government agencies (Amedu, 2005). Aprominent feature of the electronic age is the plastic card which is used to identify customers and convey information to machines to initiate a paper or electronic payment (Patrick, 1995). In the late 1970s, various articles and books on the idea of a cashless society created a rash of interest (David, 1982). The central theme was the idea of a society without paper money but some form of plastic card serving as a means of payment.

Mechanism which is enhanced by the ICT, a technology that merges computing with high speed communications link carrying data, sound and video (Alabi, 2005). These innovations have made electronic payment system possible via electronic banking.

Electronic banking
Electronic banking, otherwise known as cyber banking, on-line banking, virtual banking, home banking or internet banking is the carrying out of vanous banking activities from home, office, or on the road instead of a physical bank location. It saves time and money for users.

Banking activities that can be carried out on-line include checking current/saving account balance at any time, electronic payment system, downloading account transactions, transferring money between accounts, balancing accounts, communicating with banks through e-mail, accessing and handling finances while traveling, paying cheque or money into a customer’s account in a bank through another branch of the same bank, withdrawing money from one’s account in a bank at another branch of the same bank, obtaining charge and credit and statements

Nature of electronic payment system
An electronic payment system is a process that describes how value (usually money) is exchanged for goods and services. The technology is designed to record, transfer, store and process data about goods and services purchased and their monetary values. It is an intemet-based, on-line, real time transaction which operates on double entry accounting principle. It is made possible by the existence of electronic money which can be defined as a store-value in which a record of the funds or value available to the consumer for multipurpose use is stored on an electronic device in the consumer’s possession. This electronic payment and fund transfer schemes are now replacing the traditional ones in the developed and developing world

The electronic payment system focuses on the following:
• Electronic fund transfer (EFT) • Electronic fund transfer at point of sale. •Electronic cheque •Electronic letter of Credit •Electronic cash •Electronic billing •Automated Teller Machine •Credit card •Debit card. Debit card

A debit card physically resembles a credit card, and like a credit card, it is used as an alternative to cash when making purchases. However, when purchases are made with a debit card, the funds are withdrawn directly from the purchaser’s current or savings account at the holder’s readable and encoded plastic card. (Carow and Staten, 1999).