It was a lovely surprise to receive in the mail this past February a cheque from my bank. The letter went on to explain that after an audit they found out that the customer service I received in 2016 fell short of their standards and the amount presented in the cheque as compensation for their failings. I thought that was very noble of them and highlights the good banking relationship I have had with my bank and an account I had maintained with them since my university days at the University of Warwick.
As an active advocate of financial literacy and sustainable banking practices in Africa and recognizing that financial literacy is key to sustainable development, it is disappointing to read the numerous stories on social media of the horrific treatment metered out to banking customers in Nigeria.
Mrs. U wrote on March 24th: “It has been more than a week since I complained about a failed air-time transaction. You people have been investigating something that can be resolved in less than 24hrs. Please I am still expecting my refund. You gave me some request Id – xxxx”
Mr. A wrote on Feb 21, 2021: “If you do not want to be stranded in the middle of important trans-actions, especially for business, MOVE YOUR MONEY FROM xxxBank NOW!”
Mr. Y wrote on Feb 17, 2021: “Since December 22nd, 2020 XXXBank refused to revert my 15k from a declined POS transaction, this is after visits to the banks and several emails to that effect. I still can’t believe this yet, Nigerian banks engage in theft too? Nowhere is safe….”
Mr. S wrote on Feb 26, 2021: ”Please XXYBank and XXYZBank, please I beg of you both, please return my money, it’s more than 45 days now, N27,918 is not a small money o, don’t let me introduce heavy curses to this thing… I’ve been to the bank, filed complains after complains, still nothing.”
I was able to keep a record of over 100 complaints posted on social media in the last two months involving all of the top 5 banks in Nigeria. Many stories of money disappearing from customers ac-counts, poor customer service, long queues at the customer service desks including a frustrated customer who purchased the domain name uselessbank.com to vent his frustration on one of the Tier 1 banks; and another who stood outside a bank with a placard inscription: “stop stealing our money.”
Who will come to the aid of these frustrated banking customers and act upon all the complaints on poor banking services in Nigeria? The Central Bank of Nigeria (“CBN”) has shown itself to be passionate about ameliorating the pains of bank customers.
On May 29, 2020, the Central Bank of Nigeria issued new guidelines for the operation of electronic payment channels titled “Reduction of chargeback period for ATM, POS and Web Transactions” (the Guidelines). The Guidelines aimed to improve service quality for banking customers and address the frustrations and complaints highlighted above. The guidelines were very clear and stipulated the following:
1. Failed ATM transactions when customers use their cards on their bank’s ATM ( “on- us transactions”) should be reversed “instantly” and where the instant reversal fails due to technical issues manually reversal should be actioned and completed within 24 hours.
2. Failed ATM transactions when customers use their cards on a bank’s ATM other than their bank ( not on-us transactions) should be reversed within 48 hours.
3. Refunds on disputed/failed POS/Web transactions should be resolved within 48 hours.
The Guidelines went on to stipulate that “failure to adhere to the above” will attract “appropriate penalties.”
The Guidelines came into effect on June 8, 2020, yet 10 months later and from the incidents of complaints recorded on social media from January -March 2021, the Guidelines have not been implemented by the banks with reversal of failed charges taking months instead of the 24-48 hours stipulated by the CBN. I also reached out to the Consumer Protection Department at the CBN to find out if any penalties had been issued in line with the Guidelines but at the time of writing, though my inquiry was acknowledged I had not received a definitive response.
The guidelines also reiterated the need for the industry to have an integrated dispute resolution platform for the industry to support the banks’ Consumer Complaints Management System (CCMS). Banks via the CCMS are to process each customer’s complaint and generate a unique reference code for each complaint lodged. CBN has warned that failure to log and provide the code to the customer will amount to a breach and is sanctionable with a penalty.
To have an idea of the level of penalties that can be issued, reference is made to the Banks and Other Financial Institutions Act (BOIFA), Part 64, which states that the Governor of CBN may impose a penalty not exceeding N2 million or suspension of any licence for failure to comply with any rules, regulations, guidelines or administrative directives given or issued by the CBN.
Again there has been no update from CBN at the time of writing if any commercial bank in Nigeria has been issued any penalty for any breach of the June 2020 Guidelines or the December 2019 guidelines, “Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions” which referred to the management of the CCMS.
If the penalties imposed range from N1 million to N2 million per breach, this could easily translate into hundreds of millions of naira a month for a bank based on the number of reports and complaints from customers. This level of penalties will be a deterrent for the banks and an epiphany for the urgent need for good customer services. So why are we not seeing banks being penalised?
The Nigerian Inter-bank Settlement System (NIBSS) revealed on March 22, 2021, that the value of online transactions in Nigeria reached a record $116 billion in 2020. This signifies that cashless banking is here to stay and no doubt the CBN has done well to enhance the resilience of the electronic payment systems in Nigeria by introducing relevant reforms. However, these reforms will be dead on arrival if not carefully monitored by CBN and full implementation supported by the Bankers Committee. Acute attention must be given not only to meeting the financial inclusion target of the National Financial Inclusion Strategy (NFIS) to ensure that 80 per cent of “bankable adults” in Nigeria have access to financial services, but also to the quality of services provided to avoid the increase of dormant and inactive bank accounts.
In 2018 alone, NIBSS reported that 10 million bank accounts became dormant and that inactive bank accounts rose by 28 percent to 46.7 million in 2018 from 36.7 million in 2017. That implies that in just one year, ten million bank accounts recorded zero transactions. The statistics further revealed that the number of inactive bank accounts grew faster than active bank accounts in the past five years 2014 – 2018. Inactive bank accounts grew by 73 per cent while active bank accounts grew by 35 percent. These figures do not in any way support sustainable banking practices.
If we are to hold commercial banks in Nigeria to a standard for sustainable banking, penalties must be enforced when breaches occur that undermine consumer protection. Compensation to customers, for poor customer services, should also be considered. It is hoped that the June 2020 Guidelines issued by CBN will be robustly adopted by the banks and implemented without delay.
Olakanpo, a lawyer and sustainable development consultant, writes from London, UK.
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