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How banks fleece customers

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Ogubunka said rising complaints by users of ATMs who were charged N65 even when they did not use other banks’ ATMs beyond three times should justify ongoing concerns about the fees’ implementation.

To him, banks are not the only economic entities affected by declining crude oil prices and market turbulences.

He said: “CBN ought to know that banks and other economic entities are operating within the same environment and what affects one, affects the others. It will be improper and unfair to short-change one against the other in the guise of maintaining viability and stability of the banking system.”

Ogubunka wondered how the banking system will be stable if customers, who lay the proverbial golden eggs, are ‘killed’.

“In fact, bank customers and the various sectors of the economy they operate need to be viable and stable for banks and the banking industry to see the light of the day. It is not fair to ‘rob customers of banks to pay banks’. That is not the type of protection bank customers expect from the CBN,” he said.

Ogubunka called for the stoppage of the implementation of the policy and immediate refund of all previously taken fees to allow customers enjoy the free CoT regime.

A civil servant, Ibeabuchi Lazarus, who operates an account with United Bank for Africa (UBA) Plc., said that contrary to the stipulated guidelines, the bank took N50 stamp duty fee on his savings account after a cash deposit was made into the account.

He said: “I went to the CBN website to check the rules and found out that savings and salary accounts are not meant to pay the fee. I am still waiting for the bank to reverse the transaction because this type of action will hurt the cash-less policy and discourage people from going to the banks.”

Lagos State chapter President, Nigerian Association of Small Scale Industrialists (NASSI), Segun Kuti-George, said the charges will affect businesses with small cash flow and discourage small savers from  banking.

“It will definitely affect savings culture among bank customers. The charges are too many and should be reduced because customers are already paying other heavy taxes and levies,” he said.

Sunday Chukwu, a Lagos-based vehicle spare parts dealer, who banks with FCMB Limited, described the new fees as arbitrary and sudden.

His words: “The fees were unexpected.  Nobody knows what we are paying for. They are making me to change my banking plans because anyone with money in the bank has purpose for it. And when you want to execute the plan and the money is not complete to solve the problem, you will not be happy.”

He urged banks to deepen their loan portfolios and make more money from lending instead of relying on cheap and unnecessary fees from customers’ accounts.

According to Chukwu, said the banks do not offer any service for free, hence there is no need for customer to pay maintenance fee.

“Even if you want to get a new cheque booklet, it will be paid for. Nothing is given out free. If you forget your cheque book at home and you need to make withdrawal from the bank, you will be issued with a counter cheque which will be paid for. We even pay for services banks not being offered. For instance, they now charge fees on domiciliary account withdrawals,” he said.

He said that with these charges, any money taken to banks will not come out the same way.

“Even though the banks claim they pay interests on savings deposits, that is not true because if they pay one per cent as interest on deposits, they take five per cent as charges on the money. It amounts to nothing,” he said.

CBN, banks, others react

Former CBN’s Director of Corporate Communications, Ibrahim Mu’azu, said the Stamp Duty Act has been in existence for more than a century and therefore it is not new. Nigeria, he said, had the Nigerian Postal Service (NIPOST) Act 2014, which was the modification of the first Act.

He explained the stamp duty is N50 per transaction and not N50 on every N1, 000 worth of transaction as being claimed by some people.

“A customer that makes a deposit of N10 billion will pay N50 stamp duty. For a customer that made N1, 000 deposits, it is still N50 stamp duty charge that will be paid and that is fair enough,” Mu’azu at a conference in Ibadan recently.

Mu’azu, now the Director in charge of Strategy Management Department at the CBN, admitted that the regulator was inundated with series of complaints from customers, alleging excessive and in some cases, illegal charges from their respective banks.

According to him, the apex bank has investigated over 6,000 complaints relating to unauthorised charges brought to its notice, afterwhich it compelled banks to refund over N6.2 billion to affected customers last year alone.

But, Managing Director, Nigeria Interbank Settlement System (NIBSS), Ade Shonubi, said he would be surprised if any bank customer complains about the quality of e-payment services.

He said that NIBSS, owned jointly by all licenced banks, provides the infrastructure for automated processing, settlement of payments and fund transfer instructions, discount houses and card companies in the country.

“I am not sure you will find so many customers complaining about e-payment. So, there are different levels of dissatisfaction and from the e-payment perspectives, there should not be much complaints. In the payment space, I will be surprised that customers are complaining,” he said.

Standard Chartered Bank Limited’s Executive Director/Chief Finance Officer Mrs. Yemi Owolabi said banks have suspended CoT charges. She pointed out that the maintenance fee is not a replacement for the CoT.

Her words: “The maintenance fee takes care of the cost to maintain the customers’ accounts. The Value Added Tax (VAT) does not come to the banks. It goes to the government. The banks are simply collection agents,” she explained.

According to her, the stamp duty is part of government revenue being collected by the banks.

“The banks owe government a responsibility to support its infrastructure development drive. Each bank has a designated as NIPOST stamp duties account into which all charges collected are paid while other financial institutions remit to any commercial bank of their choice,” she told her audience at a conference organised by the CBN in Ibadan.

Also speaking, Head, Consumer Protection Council (CPC), Lagos Office, Joshua Nggada, backed the CBN and Federal Government on the fees.

He said: “It is not every charge levied on a consumer that is meant to cause unnecessary burden on such consumer. There are charges that are meant to give consumers the services that will benefit them. There are certain charges that are always associated with banks and are meant in such a manner that it will make it possible for the banks to continue to provide the services they are giving to consumers”.

Nggada said CPC will defend customers where their accounts are overcharged and after the customers would have exploited other resolution mechanisms.

“I don’t see any reason why consumers should complain about the stamp duty. It is the same Federal Government which established policies to protect consumers that also established the stamp duty and therefore consumers should comply,” he said.

Financial inclusion/

e-fraud matters

Analysts insist that the increase on fees charged on customers’ accounts and rising cases of electronic fraud are inimical to the objectives of the National Financial Inclusion Strategy (NFIS) which was launched by CBN in October 2012 to reduce the number of adults excluded from financial services from 46.3 per cent in 2010 to 20 per cent in 2020.

Globally, estimated credit card fraud stood at $11 billion in 2012, making it one of the most significant criminal developments in modern times. The CBN’s report for the first half of 2014 noted that there were 2,678 fraud and forgery cases involving banks valued at over N21 billion.

This represented an eight per cent increase over the previous year,  but a significant increase in value of over 200 per cent from 2013, when the cash-less banking policy was introduced.

General Manager, IBM Africa, Taiwo Otiti, noted that the rise in e-fraud prompted Visa International and other global payment firms to increase the sophistication of technology deployed in the country.

He said during an interview at IBM headquarters in Lagos: “The standard for Visa in Nigeria is the strictest in the whole payment system worldwide. The Visa stipulated a very, very high standard for Nigeria.

“We have seen syndicates work with internal members of staff of banks to transfer funds to fraudulent accounts. The easiest way is to get a normal card, open an account and get someone internally to transfer funds into the account. The funds are withdrawn mainly through the ATMs.”

Otiti explained that in other cases, online fraudsters could compromise a customer’s account by cunningly demanding for his token. He said that with these happenings, banks are still vulnerable to hacking, nearly three years after migrating to chip-and-pin technology from magnetic stripe cards.

According to him, it is the duty of banks and global payment companies to ensure data security and protect cardholders from fraud and achieving e-payments that are safe, simple and secure.

The Global Economic Crime Survey 2014 by PwC Global showed that fraud; identity and password infringement and accounting fraud have damaged the reputation and integrity of financial institutions and also discouraged honest investors.

These practices have caused job losses, forfeiture of retirement benefits, untimely death, and closure of businesses. They continue to affect the stability of financial institutions as well as economic growth of the country.

But, CBN’s Director, Banking Payment and Systems ‘Dipo Fatokun, insisted that in many cases, customers are to blame because they expose their account details to third party.

Fatokun said: “We have seen a situation where a customer was asked by fraudsters to give them his account number, ATM card details, and even generate soft token.

“These details were sent severally to the fraudsters who emptied the customer’s account while assuring him that the transactions will be reversed.”

He urged bank customers to be vigilant and protect their card accounts from fraudsters.

A mobile analyst with global money transfer app, WorldRemit, Mrs. Alix Murphy, believes that making serious money and reaching the unbanked have not always gone hand-in-hand. To her, mobile money, financial technology and financial inclusion will push global economies forward. She warned stakeholders against using high fees to discourage grassroots banking.

“We are now witnessing a major shift in thinking as big players in payments and other industries are talking openly about the huge opportunity in reaching unbanked customers – and not just as a corporate social responsibility gimmick,” she told The Nation.

Mrs. Murphy went on: “In 2016, international remittances are expected to rise to over $600 billion. But, most are still sent in cash informally or via risky high-street agents.

“As mobile money continues to gain popularity in the developing world, instant mobile-to-mobile transfers will become the global standard for funds transfer across distances.”

According to her, majority of Nigerians are still unbanked, so offering a variety of pay-out options, including direct-to-bank account and instant cash pick-up, is extremely important to reach everyone in the society. But these, she said, have to come with minimal costs otherwise they will not be acceptable to customers.

Lagos Business School (LBS), supported by Bill and Melinda Gates Foundation, is addressing regulatory gaps and market structures hindering financial inclusion for the unbanked Nigerians.

Already, both institutions have launched a multi-million dollar research project to address the regulatory gaps and market structures disabling financial inclusion for the unbanked Nigerians.

Deputy Director, Bill & Melinda Gates Foundation, Kosta Peric, said the foundation’s collaboration with LBS reflects its vision for the country.

To him, having an account or financial wallet is the first step for the unbanked population to move out of poverty line and any policy that discourages this step is distasteful.

Peric called on banks and government to avoid any steps that would discourage the poor Nigerians from embracing banking services.

LBS Dean, Dr. Enase Okonedo, agrees with Peric that financial inclusion is a key driver for economic development and growth even as access to financial services improves the lives of the poor. She is canvassing the broadening of the reach of low-cost digital payment systems, particularly in poor and rural areas so that in by 2020, the rate of financial inclusion in Nigeria will grow from the present 60 per cent to 80 per cent.

She said: “There are numerous challenges to overcome if Nigeria must meet its goal. It means at least 18 million new users of financial services must be signed on in the next four years. But, achieving this will require government and banks making banking attractive to the poor and avoiding policies that discourage grassroots banking.”

LBS Academic Director, Dr. Olayinka David-West, said there is need to build the economic models that could work for the poor. She said some of the factors impeding the success of digital financial services are regulatory and sometimes, cultural.

She said the needs of rural and unbanked dwellers are different from the currently banked population.

“So, there is the need for innovation, there is also the need for investing heavily in infrastructure to be able to establish digital payment platforms that serve in a reliable way this population,” she said.

According to Dr. David-West, getting more people to use banking services is becoming difficult by the day.

She said: “Actually, in the last year, the numbers got worse by two million. So, something indeed is not working right or can be improved. There is need to break the jinx over return on investments and boardroom politics and let the banks realise that there is a bigger pie if they all take a smaller share of the cake.

“They can deepen the market, products and services that they are offering and all together, collectively make money.”

Managing Director, Enhancing Financial Innovation & Access (EFInA), a financial sector development group, promoting financial inclusion in Nigeria, Ms. Modupe Ladipo, said that sustaining development is hinged on ensuring that at least 80 per cent of all adults have access to affordable financial services as well as the right environment within which to flourish economically.

She informed that two billion people around the world do not use formal financial services and more than 50 per cent of adults in the poorest households are unbanked, even as financial inclusion as a key enabler to reducing poverty and boosting prosperity.

“Financial inclusion promotes innovations that allow countries to build credit, savings and insurance products for low-income households so as to drive inclusive growth,” she said.

Ms. Ladipo insists that financial inclusion is achieved when adults have easy access to a broad range of formal financial services that meet their needs at an affordable cost.

Managing Director/Chief Executive Officer, Psaltry International Company Limited, Mrs. Oluyemisi Iranloye, said a cassava starch producer is a good example of the value financial inclusion can add to the lives of the poor and economy.

After a N770 million loan from the CBN-backed agriculture credit loan, which she obtained from First Bank of Nigeria Limited, the company has been able to supply cassava starch worth $5 million annually to local breweries saving the country huge import bill.

Mrs. Iranloye also helped 64 rural farmers from Alayide/Wasinmi village in Ado Awaye, Iseyin Local Government Area of Oyo State, to obtain smaller loans to boost their farm yields and profitability.

She said: “It took us lots of pains to get the loans for the farmers because of the challenges of administering the Know Your Customer (KYC) forms on them. The farmers did not have any address, utility bills, and signature or even know their names.

“Since their signatures were not regular, they had to thumbprint. We thought them how to thumbprint and their phone numbers were used for their account numbers. But, the good thing is that they got the loans.”

The cassava firm was able to inGDP of the community by $1.94 million per annum while also raising the average product yield of farmers.

“With training, the average yield has increased from six to 10 or 20 tons. Farmers have increased their average profitability per hectare by N40, 000 with average farmer making between N250, 000 to N300, 000 per annum. The big farmers make up to N2 million annually. We have about 2,000 farmers under our network,” she said during a visit to her farm and factory in Ibadan,” she said.

Dr. David-West is calling on banks and other financial institutions to take advantage of the huge untapped potential in the smaller towns and cities and provide them with the required type and form of financial services.

She urged the government to formulate appropriate policies to encourage and facilitate technological research and innovation that will make financial services not only accessible, but cheap and secure.

“That remains the best way to pacify millions of customers, grumbling about their missing billions of naira in banks’ vaults due to excessive bank charges,” she said.

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