By Omoh Gabriel
Last week, Financial Vanguard had an interactive session with Ade Ashaye who is the regional director, Visa card in Lagos. He spoke on the role cards will play in Nigeria’s bid for a cashless economy, the difference between debit and credit cards, the deployment of SIM card-enabled and battery-powered points of sale terminals in Lagos.
Who is Ade Ashaye
I am the Country Director for Sub-Saharan Africa for Visa, my specific responsibility is the West African office, which is this office here, we look after Anglophone West Africa, that is; Nigeria, Ghana, Sierra Leone, Liberia and Gambia. We look after the relationship between Visa and the client financial institutions and the other stakeholders in these markets.
How big is this market?
(Cuts in) By what? How do you measure?
Well in terms of volume of business, in terms of financial outlay or what you get.
What I can say is that, just about every bank in Nigeria is a Visa member, with the exception of I think one, two small banks. So as a consumer, you can get Visa card from just about every bank in Nigeria and your card will be accepted by other infrastructure.
How acceptable are cards issued by Visa outside the country?
That depends on the bank; what we’ve got is a situation where because of currency control, you can’t take naira to the US and go into the bureau exchange in the US and change it. Sometimes some of the banks put restrictions on their cards, but some of them have managed to get permission from the Central Bank to manage their currency control and the restrictions.
The restriction is not from Visa card, but a restriction of the banks?
It is up to the banks, specifically it is for the banks to choose whether you can use your cards internationally, some other banks will say may be you can use your cards, may be they are putting limits, some banks have issued cards which are only for use in Nigeria. If your card is only for Nigeria, it will say so on the front of your card, for use only in Nigeria or only for use in Nigeria, but is actually up to the banks to decide.
Is it possible to have one Visa card you can use locally and outside Nigeria?
Absolutely, and even more interestingly, it is possible to have your card which is attached to your naira account which you can use anywhere in the world, so you don’t have to go and buy foreign exchange anywhere, you don’t have to fund your card in foreign currency, you can fund your card in your own local naira and you can use it at any of the 24 plus million places that you can use your Visa cards in the world.
Looking at Visa card, compared to Master card, most people prefer Master card, why?
(Cuts in again) Definitely not! I do not think I agree with that statement.
Because when you travel abroad, the cards most people are favourably disposed to is Master card..
If you look at the global statistics, Visa card, I believe is seen around about 60 per cent. So I do not think I necessarily agree with that stance. Typically, what you find is one of the banks which launched one of the cards to begin with, and is really who you bank with that will determine which card they will give you, so who you bank with, generally defines which card they will give you. As I mentioned, just about all Nigerian banks issue Visa cards.
Now, if you want to advise a client who wants to hold a Visa card, would you advise the restricted one or the one that can be used anywhere?
Imagine if you get a card that is restricted for use in Nigeria, it’s not only when you get on a plane or you travel across borders that you want to use that card internationally. Also if you want to use that card on an international website, for instance, if it is restricted for use in Nigeria only, that would work on an international website, so what I would say is when a card is going to work for you and places that you would want to spend and tell your bank if you are going to travel, because sometimes a bank will just limit the card, they know you are here in Nigeria and fixing your transaction in the US, they may decline it, but if you tell them ‘look I am traveling,’ then they will make sure your card works anywhere you went to.
There is usually a problem with these cards, problem of fraud, so many have been cloned and used to withdraw other people’s money. Why is it so?
Let me explain the way the card is structured; on the back of the card is what you call a magnetic strip, and on the front of the card is what you call a chip. Now, all Visa cards in Nigeria, for the last seven years, have a chip on them, not just a magnetic strip. So the challenges that you are seeing with fraud, cloned cards and other sorts of things, there were people who were able to copy the marked strip and did all sorts of fraudulent activities with them in the past. When we came to Nigeria, the chip technology was the current technology, so we implemented pure chip, chip technology, EMV. What you’ve seen in the last few years is that the Central Bank mandated that all other cards did the same thing, what we call chip-in-pin technology.
We have seen the issues that you’ve mentioned with cloned cards but they were not on Visa cards; they were cards which were not chip-in-pin cards. If you look at fraud perpetuated through cards in Nigeria, actually what you find is that Nigerian cards have a lower fraud rate when you compare it to the global average and that is primarily because all Nigerian Visa cards are chip-in-pin cards.
Imagine if you bought a telephone, like now, you buy a mobile phone, and may be fifteen years after, you found out that what was available for use was a fixed land line phone, so you come in with the latest technology, the latest technology is the mobile phone. In the card space, the latest chip technology is the EMV cards, chip-in-pin cards.
It’s almost impossible to clone a chip. These issues you were talking about were not on Visa card but were on cards which didn’t have chip but that has changed now because the whole market is chip-in-pin.
Looking at the card market, are you comfortable with the level Visa card is today in the Nigeria market particularly?
The Nigeria card market is a market which really started to take off about three or four years ago and in three or four years, you are not going to get where the market should be, so there is always room for growth, plenty of room for growth, absolutely on the side of the number of people who are carrying cards with them but also on the side of the number of places you can use your card. So there is always room for growth in both places, I think the Central Bank’s cashless Lagos plan which they are talking about implementing will grow the number of cards and a number of places that you can use your card.
That brings us to the issue of cashless economy, what role do you envisage that cards will play in a cashless Nigeria?
There is no reason why you can’t have the technology in Nigeria that you have anywhere else in the world, anybody that tells you it wouldn’t work in Nigeria is fooling themselves because as human beings, we want the same thing, we want access to our funds, we want security, we want to know that our money is safe and we also want the convenience that says, today if I want to buy this with my card, I can just use it; I don’t have to worry whether it’s working or not working and those things can happen in Nigeria, absolutely.
The question of infrastructure is a big issue, that is one thing that people are worried about in the use of cards, I take my card to the village and I get to the ATM, slot the card in, no response, either because there is no power or the service cannot get there, then I’m cut off, how do I go about it?
Cashless Lagos is more than just trying to push cards. It is looking at electronics payment system. We’ve got challenges in Nigeria and many countries with infrastructure, which means that solutions have to be developed to tackle that. So one of the fantastic things you’ve seen growing in Lagos that is now being copied by other countries around the world, terminal, point of sale terminal (POS) which are battery powered and have mobile phone SIM cards in them and is not just that they have started in Nigeria, but grown rapidly in Nigeria to overcome the infrastructure challenges. The work that the whole institute is doing around the world mobile banking and bringing in cash in cash out vendors using their mobile phones for banking again that is driven by the infrastructure challenge we have in Nigeria.
So it is important that those things are fixed. I’ve seen in many markets mobile ATM. ATMs are actually built in vans powered by the battery of that van or solar-powered. All these things are out there, to overcome a particular challenge we have in each market, so mobile people have access to these tools, is just development will be in such a way that it helps to overcome the particular challenges of these markets.
Can you explain a bit more on these battery-powered points of sale with SIM cards, are they really in Lagos already? How functional are they?
They are very functional, if you go to a place where they can bring a post terminal to you, if they bring that post terminal to you and it is not plugged in, it is a battery-powered terminal, and a lot of restaurants today will have a mobile terminal, so if you finish having your lunch, the waiter will bring the terminal to your desk, so that is a battery- powered terminal. Now, what we call the dual SIM solution, you’ve got two mobile phone SIM cards to allow it to connect because you know that in some areas, may be one mobile network is not strong or is variable, whereas another mobile network is strong and these things have been there for a number of years.
What you have said now is very interesting, and is interesting as far as Lagos is concerned. Take a situation where you have to go to a remote village, some times in some of these places, you have to climb a hill top in order to have network access, such places with ATM cards, how functional will they be? And of course, you will find a situation where probably one bank is in a community of about 200,000 people and that bank has just may be one or two ATMs, how feasible is that?
You’ve got to develop solutions specific to the area you are in. I remember some work I did in central Europe, where we had particular villages, but because of the terrain, the phone signals were very poor but there were enough people there to justify bank branches and those bank branches needed to find other ways to connect, so they put in satellite connections. So long as people are there, and there are banks and merchants that want to satisfy them then there are solutions that they can used to meet those needs.
There is a peculiar thing in Nigeria, very peculiar! people carry dollar rather than naira, the well to do, if they want to spend money, all they do is go to bureau de change or the next Mallam available to exchange, don’t you see this as a problem in this cashless economy that we are talking about?
I think if you take a step back, the issue is or may be a lot of people are carrying a lot of cash, it almost does not mater in what currency the cash is in, but if people are holding a lot of cash outside of the banking system that is the problem, why? Because if your money is in your pocket or in your drawer, your bed or in your socks, and not in the banking system, it means it is not contributing to the economy, it is not out there funding business growth, it is not out there extending credit to businesses, the problem is not so much the currency. It is that large amount of cash that are out of the banking system and that I think is one of the things that cashless Lagos or cashless Nigeria when it comes in is designed to help and tackle.
Let’s go back to the cards what role will Visa play in this cashless Nigeria?
Visa is affectedly a technology company we have the brand, we have the systems, we have the experience to be able to help facilitate the players, the stakeholders, the financial institutions to be able to roll out card payments. We also have the experience to be able help. I also want to say our consultancy have been able to help provide our global experience working with all of these stakeholders, to say ok, what are the global best practices, what have we learnt and done in other markets to achieve the same goal, what have we done and other people have done that we can learn from to really push forward the objectives, we stand in the middle, we connect merchant, financial institutions, government, consumers to make a whole ecosystem work.
I was reading the story of Kenya financial inclusion that has become a model in the eyes policy makers in Nigeria, it was not a formal thing, it was something that started by one of the service providers and became something that is catching up, but here, we are driving it by legislation or policy pronouncement, we are imposing a sanction, sanction of 10% for withdraws more than N150,000 that is the sanction but in other markets it was some sort of incentives, if you read the Malaysia story, of cause, how they provided incentives to merchants, instead of paying VAT they will reduce the VAT, it encouraged them to accept cards but here we are saying if you withdraw more than N150000 per day or a million for corporate institution, any thing above it you pay 10% or 20 % and people are saying no, you can’t do this. In your experience with other markets, is this how it all started in driving a cashless economy, is it by sanction or by incentive, which way is better for an economy like Nigeria.
If you break it down, it is the carrot or the stick, which approach is better. Can I say better or worse? No I can’t say either, can I say what have we seen in other markets? What we have seen in other markets, more often is the carrot approach, more often! Exactly, your example in Malaysia and a number of other markets where they have reduced the tax burden if you pay with electronic means. What you sometimes see is the stick is hidden, so, also in South-East Asia, yes they reduced the tax burden if you paid by electronic means but also if you are a merchant and you didn’t have more than a certain proportion of your income by electronic means, then all the burden was much heavier, that is the stick in another form, that was the only thing the merchant would have felt that wasn’t felt by the general public on the street. Really I can’t say which one is best, which one is worst, lots of different activities have been tried and we can certainly continue to share those best practices.
If you had an account in Nigeria and somebody tells you if you withdraw your money above N150,000 you will pay N100 per N1,000 in excess withdrawal, would you be happy?
If somebody tells me a whole lot of that and at the same time they gave me an alternative.
The challenge is the alternative, if you’ve got your card payment or your electronic bank transfer, if you’ve got the alternative. Let’s be clear, is not a case of just a stick the alternative, people are been given, their account have card attached to them, people can do inter-bank transfer, so really my question would be does the alternative currently meet my need? If I need to take more than N150,000 in a day to buy something, whatever that is going to be, it might be above N150,000 in a day, I might also use my card to pay for that one thing. So there is going to be a balance, absolutely, there is going to be a balance but so long as there is alternative, then the challenges are less.
Now, you have operated in the West African sub-region for a while, how would you compare Nigeria market with Ghana, South Africa, the cards market
Do you know what I would say? South Africa card market is thirty years old that of Nigeria may be we can say five years old. I don’t think it will take Nigeria another 25 years to get to where South Africa is today, and I say this because of the market and the people, if users are in quest to continue to better themselves. I don’t think we would need to seat for 25 years before we can compare our self with South Africa.
Absolutely, this market is strong, the growth you see is significant to the point that may be five or six years ago, if you are talking of the West African card business, you are talking about Ghana. But today when you say West Africa, first of all you are talking about Nigeria, and that is indicative of the market direction.
Banks are your customers. Nigeria banks focused more on corporate banking; there is little of retail/consumer banking. Cards are meant to drive retail banking and consumer banking, I don’t know, what is the relationship? How easy is it with the banks?
My experience with the Nigerian banks over the last three or four years is, there is a significant shift towards retail banking, what you are seeing is global experts, guys that have done it in a number of different markets, basing themselves in Nigeria, taking up appointments in Nigeria banks and growing retail banking in a way that they have already proven themselves, guys that have worked with known International banks are now here in Nigeria, working with the Nigeria banks as staff of those Nigeria banks and applying their knowledge in Nigeria, so absolutely, there has been a shift in the last few years to really focus on bridging that gap, filling that gap where retail banking was not a focused area. So I think that has changed significantly, and is going to continue to change.
What is Visa card’s relationship with other cards-issuing bodies in Nigeria, like Master card etc?
We are all in the same industry, we are all stakeholders. Large elements of that industry are absolutely non-competitive areas. For instance, fraud, that is not a competitive issue, we all have to sit down and work together to tackle these fraudsters, these criminals trying to attack our industry and we did so, things like standards, EMV, the chip on the card, the actual standards around those developed by an organisation and it’s called EMV which is Euro-based master cards and Visa. So together we’ve all worked to develop those standards. The areas where we are competitive is around issuing cards and pushing our card products to the market. These are areas where just like in banking, you work together; you have to work together for the good of the entire industry. In other areas,
you are competing, but that is good for the market.
Do you ever meet together to discuss these challenges?
We just had a fraud forum, and in that forum, we didn’t have the card schemes but we had all of the banks sitting together, including the Central Bank and the objective of the forum was to put together other key stakeholders and those challenges they face overtime and identify and tackle the problems. For instance, the fraud issues that we are seeing or expect to see in the future; remember fraud travels, so when you have an international organisation involved in a fraud forum, we can see what is happening in other countries and most likely to happen in Nigeria. That is for the entire industry to work together and not compete at all. So in those situations, we do work together
In reality, has fraud issues ever bothered Visa?
We’ve got significant investment in combating fraud globally. We have neural network, we have systems whereby for every single transaction that goes to the system, we rate that transaction and its likelihood of being fraudulent and globally, we have a system we call Visa advanced fraudulisation. Globally, in a year, it correctly identifies $1.5 billion worth of fraud; you don’t make that level of investment unless it is key to your operations.
One thing that Nigeria expects from companies like yours is technology transfer. How have you done this, in terms of training and manpower development in the industry?
We spend a lot of time on training processes, we bring people and it is not only on technology, it’s also on all aspects. At the first forum, we brought in guys from South Africa and Kenya to exchange knowledge and to grow knowledge. If you look at Visa activities in Nigeria in the last six or seven years, a large part of that was setting up the organisation to apparently manage terminals in Nigeria and providing information and knowledge, transferring skills to make sure that these guys are in place where they are technically capable to run a very successful card-acquiring business. That is our work, it’s not as if I can come here and do this myself or bring people here to it, there are thousands of people involved and you have to invest in some of these people to make sure this is successful.
Carrying your cards has some risk, if I carry this card and load it with a lot of money, if the card is missing or something happens to it and I can’t get the card back or someone uses the card, what risk will you bear or is there some form of insurance that covers or protects the users?
Absolutely, what you do is, if you lose your card, you can’t find your card, you think somebody else has seen your pin, or an ATM has held on to your card, you straight away phone your bank and say please block my card. It’s not that the funds are loading in your card, the funds are in your account and your card is an access device to your account. So your bank is able to block that card. If you don’t know where your card is, you need to make sure your bank is blocking your card.
You have prepaid and postpaid, is there any form of insurance or is your company thinking of developing a kind of insurance coverage for people who hold your card as protection?
I can’t talk on other schemes, but let me talk about Visa, you have Visa prepaid cards, it effectively says, you’ve given the bank the money, say here is my money, give me your card, that money is still held in an account somewhere. So if your card is lost, stolen, broken, you are not sure, if you phone your bank, there is always a contact list on the back of the bank details. If you get in contact with your bank, they will be able to block your card even if it is a prepaid card, it doesn’t matter whether it is a prepaid card, a debit card or a credit card, they will be able to block it. Each bank offers different terms, some banks will offer zero liability, what matters is you’ve done everything correctly, and you’ve got zero liability. Some banks will say you are liable for yourself in this matter, but it really depends on individual banks.
There is one thing that is not clear to many card users, for the purpose of the Nigerian reading public, credit and debit cards, what is a credit card, what is a debit?
That is a fantastic question, part of the reason why it is not clear is because, historically, the terms have been used loosely and not always appropriately. Historically, if you said credit card, you are just talking about a card that was attached to an account which was funded in foreign currency, you can use it abroad, but that is not what a credit card is, so the three main types of cards are prepaid, debit and credit. With your prepaid card, you’ve already paid the bank for that card, so you have access straightaway to the fund. The debit card will only allow you to spend what you have access to in your card, so if your account goes up or comes down, that is what the card will be able to spend. For the credit card, it’s like the bank has extended to you a loan, and you are only accessing that loan when you spend on your credit card. So your prepaid is you paid before, your debit is you pay now and your credit card is you pay later.
Most of the cards issued in Nigeria are prepaid, and of course, the one you pay now, we’ve not graduated to the level of credit card, how soon do you think we will get to the level of credit card?
Very good question, and it is important because it is the kind of activity that actually drives growth in the economy, so what we are saying is that right now, the majority of cards are debit cards and majority of the banks are tying your card to your current or savings account. The issue with credit card is understanding it, understanding the skills and knowledge around it, understanding how you can manage this as a bank. I am going to give credit and not lose my money and your question is all about skill and knowledge transfer, that is exactly the point. We’ve got to spend time and effort bringing people in to help educate banks on how to appropriately manage a credit card programme.
So you can give a guy credit if he wants or needs credit. You can get credit cards now, but the guys in Nigeria who generally get credit cards are those who don’t need the credit. If I have got millions of naira in my account, why give me a credit card? You give me a credit, thank you, that is very nice, but the guys who need and want credit are not getting access to credit card, what you’ve seen is that a few banks have started, the bank sort of brought these skills in early, some other banks are yet to do so, a lot of Nigeria banks had actually applied for credit card, individual average Nigerians, not the millionaires, but as an average Nigerian, you can actually get a credit card. But we’ve spent some time in the last few months helping banks. I know there are a number of banks that are working through the process to be able to issue the man or the woman on the street a credit card. Some banks have already got them, it’s not just for multimillionaires, a number of banks are working to put these things up and is critical.
Does it require a government policy to start a credit card programme in any economy?
One thing that is missing at the moment in Nigeria is credit bureau, although it is being developed here and was introduced last year. For a bank to lend you money, it needs to know who you are, not just because you told me your name is Fred. I can’t just say this is Fred, so I trust him. I need to know who you are; I need to know what your exposure is elsewhere for me to be able to make a credit lending decision as to what is the risk of lending you this money. So development of credit bureaus has already started, the banks are working with the credit bureaus to be able to put the information to the credit bureaus so that they can become useful and these are all the fundamental bases on which you now start extending credits. It is not just about credit cards, it’s about the vehicle of finance, to be able to access funds; it’s about mortgages. All of those things require you as a bank to be able to make an informed credit decision. We are getting there. And I think the policy has been around developing foundations to be able to build on, rather than mandating a bank to issue credit cards. Let’s make sure that these bureaus are in place, let’s make sure that most of the information are in these bureaus, then the banks are able to utilise them to start extending credits.
The problem we have as a country is the reliability of data, how reliable and how credible are the credit bureau being set up now, how credible are the data?
The question is: Will the information with the credit bureau be reliable? Everybody is working very hard to make them reliable. The other thing being focused on is the national ID system, so if you say you are John today, tomorrow you will not then say you are someone else because you’ve got the national ID system that is reliable. So then, all your information is connected to you, to your national ID in the system.
So if the National ID card scheme and the credit bureau are not in place, the credit system will not work?
What I would say is, the earlier you have them in place the better and the easier it is for banks to make informed decisions. You already have banks that without significant information from the credit bureau, without a fully reliable national ID system, are able to do the calculations to lend or give credit. If you get to your village, look at the microfinance banks, the guys would lend you credit without first of all talking to a credit bureau or focusing on National ID; they will find other ways to verify and make decisions, so it is not only what happens, it is just that it is easier on a mass scale if you’ve got reliable data on which to base your lending decision.
Is there any special message or particular message you want to send out to Nigerians on Visa cards?
Really what I would say is, the cards are there, speak to your bank, always make sure you sign the back of your cards, because in Nigeria, you use a pin, but if you travel, in a lot of markets, you use signature to verify your transaction. Make sure you cover the post terminal when you are entering your pin, so that you don’t share your pin with anybody. Also cover your ATM. When you are entering your ATM pin, don’t let anybody else see your ATM pin and if your card disappears, held by an ATM, stolen or lost, contact your bank as soon as possible to get them to block it. These cards are safe so long as you use them properly.