Web Cybernetic Banking

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mail @babalakinandco.comwww.babalakin andco.com

2002

CYBERNETIC BANKING(CHANGING THE BANKING LANDSCAPE IN NIGERIA)

Introduction

Banking has indeed come of age. Competition, innovation and investment in high tech

communications and information technology equipment have almost rendered obsoletetraditional banking, as we know it. The technological revolution worldwide haspositively affected banking practices and customers are spoilt for choice between thedifferent electronic payment services now available. Banking has become highlyautomated resulting in greater efficiency and ultimate customer satisfaction.

Additionally, the advent of electronic commerce and marketing on the Internet WorldWide Web (WWW) has contributed to the technical transformation affecting the bankingindustry. Goods can now be purchased on the WWW using a credit card or electronicmoney (e-cash).1 From merely being a catch phrase, it appears that electronicbanking has come to stay.

On the global scene, electronic banking opens up a new world of finance whereopportunity and money know no bounds. With savers beings able to move funds aroundthe world at will, some economists even see Central Banks being forced to shift theirfocus from the domestic to the global money supply when considering policy moves. 2

Electronic banking is virtual banking. Instead of waiting in line at branches and officers,bank customers around the world are finding telephones with computer screens,automated teller machines where they can trade stocks, and even video conferencingkiosks staffed by experts on everything from mortgage loans to mutual funds.Corporations are getting pitches on new electronic techniques for international moneytransfer and transaction processing. The global banking system, founded on brick-and-

mortar branches and local franchises, is being transformed into a vast electronic webthat transcends national borders.3

Electronic Banking Products And Services

Simply put, electronic banking has been described as the use of magnetically encodedplastic cards at terminals outside a regular bank location for cheque cashing, depositsand other money transfer functions.4 Banking has gone digital and a cashless society isslowly being evolved. In the age of electronic banking, the use of money in tangibleform becomes over less important.5 Electronic banking embraces payment cards6(including credit cards, cheque cards, charge cards, debit cards, cash cards, chequeguarantee cards, gold cards, international cards and smartcards (electronic purses),

Electronic funds Transfer, Automated Teller Machines, Home Banking Services throughpersonal computer and telephone facilities and Internet banking.

Smartcards, also known as electronic purses, were recently introduced in Nigeria. Unlikethe traditional payment cards, these cards are embedded with a computer chip7 andoffer a variety of service depending on the requirements of the issuer. A Smartcardcould work as both a credit and debit card. When used as an electronic purse, a moneyvalue is transferred to the card, which diminishes as the card is used at designatedmerchant terminals.

Electronic Funds Transfer (EFT) systems are constantly being developed as advancementsare made in technology. New links are being formed8 and Nigerian banks are not being

1 T i m H e r r i n g t o n , M a r k e t i n g F u n d s o n t h e I n t e r n e t : T h e P o s i t i o n i n E u r o p e I n t e r n a t i o n a l B u s i n e s s L a w y e r S e p t e m b e r 1 9 9 7 .

2 B i l l J a v e t s k i a n d W i l l i a m G l a s g a l l , B o r d e r l e s s F i n a n c e : F u e l f o r G r o w t h , B u s i n e s s W e e k , D e c e m b e r 1 2 , 1 9 9 4

3 K e l l e y H o l l a n d , P a u l a D w y e r a n d Ga i l E d m o n d s o n , T e c h n o B a n k i n g t a k e s o f f , B u s i n e s s W e e k , D e c e m b e r 1 2 1 9 9 4 . T h e a u d i t o r s p o s i t t h a t E l e c t r o n i c b a n k i n g i s a d e f e n s i v e m o v e f o r m a n y b a n k s .4 T h e N e w W e b s t e r s D i c t i o n a r y o f t h e E n g l i s h L a n g u a g e , I n t e r n a t i o n a l e d i t i o n , L e x i co n P u b l i c a t i o n s I n c . 1 9 9 2 . W i t h t h e i n t r o d u c t i o n o f s m a r t c a r d s , t h i s d e f i n i t i o n w o u l d r e q u i r e s o m e m o d i f i c a t i o n s .

5 S t e p h e n K . H u b e r , B a n k s : F r a u d a n d C r i m e e d i t e d b y J o s e p h J . N o r t o n , L l o y d s o f L o n d o n P r e s s , 1 9 9 4 a t p a g e 3 1 .

6 T h e d i f f e r e n t p a y m e n t c a r d s ( e x c l u d i n g s m a t c a r d s ) , e l e c t r o n i c f u n d s t r a n s f e r s ( E F T s ) , E F T P O S a n d h o m e b a n k i n g s e r v i c e s w e r e w e l l d e f i n e d i n L e g a l A s p e c t s o f E l e c t r o n i c B a n k i n g , a p a p e r p r e s e n t e d b y M r . G e o r g e E t o m i a t T h e S e m i n a r o n E l e c t r o n i c B a n k i n g a n d t h e I n f o r m a t i o n S u p e r H i g h w a y i n N i g e r i a : T h e C h a l l e n g e s o f t h e 2 1 s t C e n t u r y , o n 1 6 t h A p r i l 1 9 9 7 .

7 T h u s t h e c a r d s h a v e m o r e m e m o r y t h a n t h e m a g n e t i c s t r i p e s p l a s t i c c a r d a n d c a n r e t a i n m o r e i n f o r m a t i o n .

8 S p a i n s B a n c o S a n t a n d e r , t h e R o y a l B a n k o f S c o t l a n d , G o l d m a n S a c h s a n d E l e c t r o n i c D a t a S y s t e m s 3 7 h a v e f o r m e d t h e I n t e r - B a n k O n - L i n e S y s t e m ( I B O S ) a n e l e c t r o n i c b a n k i n g s y s t e m t h a t c a n d i g i t a l l y z a p f u n d s a m o n g b a n k s a r o u n d t h e g l o b e i n o n l y s e v e n s e c o n d s . K e l l e y H o l l a n d , P a u l a D w y e r a n d G a i l E d m o n d s o n s u p r a .


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Cybernetic Banking (Changing The Banking Landscape In Nigeria) 2

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2002

left out.9 The customers are the greatest beneficiaries in the banks jostle to attractnew customers by reducing charges and offering other incentives. Automated TellerMachines ATMs)) have rapidly progressed from mere cash handling dispensers and someof them now have the capacity to handle more than 150 different types of transactionssuch as mutual fund investing and trade in stocks. 10 Home Banking Services are furtherdevelopments, which enable bank customers to perform banking services through

telephone lines, television and personal computers. Now consumers can conductbusiness from video-conferencing kiosks and in the pipeline is interactive video bankingvia cable or satellite.11

Electronic networking of branches through the use of the Very Small Aperture Terminal(VSAT)12inter alia has further enhanced efficiency of banks leading to greater customersatisfaction. Customers need not physically visit the branches where they maintainaccounts and can obtain a myriad of services ranging from knowing their bank balancesto cash withdrawals from other branches of their banks. Customers want to bank inmore places and at any hour so banks are now offering electronic services that extendtheir reach far beyond their branches.13

Internet banking is a new innovation with about 170 banks and 115 credit unionsmaintaining websites and the numbers are increasing weekly. 14 Although the sites areprimarily used for marketing purposes, some banks offer on-line enquiries and billspayment services.

Electronic payments with e-cash are further innovations in electronic banking. E-cashproviders claim that they accommodate a range of convenient electronic paymentmechanisms making it easy for all prospective buyers to purchase goods or services onthe Internet.15 Electronic payments with e-cash are software based systems which allowusers to send electronic payments from any personal computer (PC) to any other PC orworkstation, using many computer network including the Internet.16 DigiCash Inc is

currently working with major banks in issuing and developing e-cash with a view tofocusing on the development of inter-exchange-ability of e-cash currencies along withworking to add new platforms and facilitating offline verification of electronic currency,DigiCash claims that its e-cash is an important and inevitable payment solution in theworld of global electronic commerce offering a secure, low cost and private payment(privacy protecting) option to consumers for payments of any amount.17 Electronic cashis not just a step on the way to tomorrows payment system it is a technology, it is thattechnology that is here now.18

We Have Been Down This Road Before (Dj Vu)?

The skeptic may well say that electronic banking is much ado about nothing resulting

from the frenzy accompanying the approaching millennium. New buzz-phrases are beingbandied around and electronic banking may well be one of such. A compelling argumentfor this point of view is that previous attempts to introduce virtual banding by way ofATMs, credit cards and vouchers failed woefully. Furthermore, society is still heavilydependent on cash based commercial transactions so nothing has changed. Apart fromilliteracy, the financial distress of several banks has in no small measure contributed to acash dependent society. The Central Bank of Nigeria (CBN) is concerned by this cashdependency not only because of the risks of carrying cash around but also the costimplications for the currency issuing authority in terms of production, storage,processing, distribution, security and transportation.19 The CBN thus advocated a reformof the payment system in Nigeria maintaining that the Nigerian banking system cannot beinsulated from emerging global technological developments and imperatives in the quest

9 T h e U B A M o n e y g r a m i s s a i d t o b e m a d e p o s s i b l e b y a g l o b a l c o m p u t e r n e t w o r k b a s e d i n D e n v e r , C o l o r a d o . F i r s t B a n k o f N i g e r i a P L C s W e s t e r n U n i o n M o n e y T r a n s f e r a n d A l l s t a t e s V i g o F u n d E x p r e s s a r e o t h e r E F T p r o d u c t s . E c o b a n k G r u p h a s a l s o i n t r o d u c e d R a p i d t r a n s f e r , w h i c h p r o v i d e s s a m e d a y t r a n s f e r o f f u n d s a c r o s s t h e W e s t - A f r i c a n s u b - r e g i o n .

1 0 K e l l y H o l l a n d , P a u l a D w y e r a n d G a i l E d m o n d s o n s u p r a

1 1 K e l l y H o l l a n d , P a u l a D w y e r a n d G a i l E d m o n d s o n s u p r a .

1 2 A w i r e l e s s s a t e l l i t e c o m m u n i c a t i o n s s y s t e m l i n k i n g g e o g r a p h i c a l l y d i s p e r s e d l o c a t i o n s .

1 3 K e l l e y H o l l a n d , P a u l a D w y e r a n d G a i l E d m o n d s o n s u p r a .

1 4 L a r r y C h i d i - M a h a , T h e B e n e f i t s o f t h e I n t e r n e t t o B a n k i n g a p a p e r p r e s e n t e d a t T h e S e m i n a r o n E l e c t r o n i c B a n k i n g a n d t h e I n f o r m a t i o n S u p e r H i g h w a y i n N i g e r i a : T h e C h a l l e n g e s o f t h e 2 1 s t C e n t u r y , o n 1 5 t h A p r i l 1 9 9 7 . H e a d d e d t h a t a c c o r d i n g t o r e c e n t s u r v e y s , 2 0 0 0 o r m o r e b a n k s w o u l d b e o n l i n e b e f o r e 2 0 0 0 A D .

1 5 C y b e r C a s h I n c , D i g i C a s h I n c f r o m t h e I n t e r n e t .

1 6 C y b e r C a s h I n c , D i g i C a s h I n c f r o m t h e I n t e r n e t .

1 7 S c o t t L o f t e s n e s s , P a l o A l t o C a l i f o r n i a , N o v e m b e r 4 1 9 9 8 , f r o m t h e i n t e r n e t .

1 8 D a v i d C h a u m , D i g i C a s h N u m b e r s t h a t a r e m o n e y , 1 9 9 4 f r o m t h e I n t e r n e t . T h e a u t h o r a d d s t h a t e - c a s h c o m b i n e s c o m p u t e r i z e d c o n v e n i e n c e w i t h s e c u r i t y a n d p r i v a c y t h a t i m p r o v e o n p a p e r c a s h t h e r e b y a d d i n g v a l u e t o a n y s e r v i c e i n v o l v i n g p a y m e n t a n d i t s v e r s a t i l i t y o p e n s u p a n e w h o s t o f m a r k e t s a n d a p p l i c a t i o n s .

1 9 P a u l O g w u m a , G o v e r n o r o f t h e C e n tr a l B a n k o f N i g e r i a . T h e C a s h P r o b l e m , N e w s w a t c h M a g a z in e , M a y 1 2 1 9 9 7 . M r . O g w u m a s t a t e d f u r t h e r t h a t c u r r e n c y o u t s i d e t h e b a n k i n g s y s t e m i s l e s s r e s p o n s i v e t o m o n e t a r y p o l i c y . T h u s t h e e x i s t e n c e o f l a r g e a n d r i s i n g c u r r e n c y r a t i o c r e a t e s p r o b l e m s f o r m o n e t a r y m a n a g e m e n t a n d i n f l a t i o n c o n t r o l . H e a d d e d t h a t o n e o f t h e s a l i e n t f e a t u r e s o f a v i a b l e f i n a n c i a l a n d m o n e t a r y s y s t e m s i s t h e e v o l u t i o n o f a n e f f i c i e n t p a y m e n t s s y s t e m t o f a c i l i t a t e f i n a n c i a l a n d o t h e r c o m m e r c i a l t r a n s a c t i o n s , w h i c h i n h i s v i e w w o u l d b e c r u c i a l t o t h e o v e r a l l v i a b i l i t y a n d s t a b i l i t y o f t h e b a n k i n g i n d u s t r y .


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for improvement in customer service and delivery.20 Another argument againstelectronic banking is that it is perceived to be elitist and geared towards serving theneeds of high networth individuals and corporate customers.

With our high level of total and semi-literacy, it is difficult to imagine how the ordinaryNigerian citizen on the molue omnibus will be able to follow the instructions required

for using an ATM, Credit Card or indeed the Smartcard either as a customer or amerchant. It is thus posited that it will take a long period of time before it becomes theorder of the day and entrenched in our psyche. Massive enlightenment and awarenesscampaigns are thus required in this regard and society will have to be re-oriented to beless cash dependent. The banks offering EFT services have taken the forefront by usingordinary Nigerians in their adverts and some times employing the medium of PidginEnglish.

Another drawback is the evidential proof of electronic banking transactions. Thisdrawback arises as a result of the nature of these transactions in relation to the rules ofproof under the law of Evidence and the Evidence Act. The peculiarity of problemsassociated with proof of electronic transactions and electronically generated evidencestem from the fact that they are paperless transactions. Such transactions by theirnature restrict the use of rules of proving documentary evidence. Even where suchtransactions are paper-based, the modes of their generation considerably strain thetraditional rules of proof of evidence.21

Under the law of evidence, all facts except the contents of documents may be proved byoral evidence and oral evidence must in all cases whatsoever be direct.22 If it is a fact,which can be seen, heard or perceived, it must be the evidence of a witness who sayshe, saw, perceived or heard the fact. This forms the rationale for the rule againsthearsay evidence as the court will not admit hearsay evidence but direct evidence fromthe actual person who saw, heard or perceived a particular fact and not from any other

person.

The Evidence Act provides for two methods of proving the contents of a document, whichis either by primary evidence or by secondary evidence. Primary evidence is the bestmeans proving the contents of a document and simply means that the original documentitself is brought before the court for the inspection of the court.

As pointed out earlier, Electronic banking transactions are paperless transactions andthey present a myriad of difficulties in their proof. These transactions utilize thecomputer, and computer network systems, the internet, automated teller machines,telephones, etc. The definition of a document under the Evidence Act is restrictive anddoes not contemplate the central processing unit of a computer, or other storage devices

like diskettes and compact disks. The Evidence Act defines documents to include books,maps, plans, drawings, photographs and also includes any matter expressed or describedupon any substance by means of letters, figures or marks or by more than one of thosemeans intended to be used or which may be used for the purpose of recording thatmatter.

It is therefore not difficult to see the problem of admitting these devices in evidence asdocuments as whatever information contained in them remain unintelligible until it canbe translated into an intelligible form, which is legible and visible to the human eye.

The Evidence Act essentially presupposes that documents should be in a written form andit is this absence of a written form, which makes the proof of electronic transactions

2 0 V . A . O d o z i , D e p u t y G o v e r n o r o f C e n t r a l B a n k o f N i g e r i a I s s u e s i n M o n e y a n d B a n k i n g a p a p e r p r e s e n t e d a t t h e a n n u a l G e n e r a l M e e t i n g o f t h e A s s o c i a t i o n o f C o r p o r a t e A f f a i r s M a n a g e r s o f B a n k s ( A C A M B ) P U B L I S H E D I N T h e N e w s M a g a z i n e , N o v e m b e r 2 3 1 9 9 8 .

2 1 P r o f Y e m i O s i n b a y o . P r o b l e m s o f p r o o f o f c o m p u t e r a n d o t h e r E l e c t r o n i c a l l y G e n e r a t e d E v i d e n c e i n L o c a l a n d I n t e r n a t i o n a l F i n a n c i a l T r a n s a c t i o n s , I n t e r n a t i o n a l F i n a n c e a n d E x t e r n a l D e b t M a n a g e m e n t ( U N C T C , U N DP 1 9 9 0 ) P A G E 3 2 0 . P r o f O s i n b a y o i n t h i s p a p e r a n a l y s e d t h e p r o b l e m s a s s o c i a t e d w i t h p r o o f o f o m p u t e r a n d o t h e r e l e c t r o n i c a l l y g e n e r a t e d e v i d e n c e i n N i g e r i a C o u r t s .

2 2 S e c t i o n 7 6 o f t h e E v i d e n c e A c t


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problematic. Most of the, provisions of the Evidence Act deal with documents, which arewritten, and this creates an obstacle to the proof of electronic transactions, which arelargely unwritten. Now for example are withdrawals from an ATM cash machine to beproved or magnetically encoded plastic cards used at a terminal outside a regular bank.Who is to be called as a witness (in the event friend or a dispute) as to the information,which was entered in to the computer at one point by the customer or data entry clerk

and processed by the computer to produce an output at the other end.

The status of the output from a computer in an electronic transaction is also not clear.What would be the status of information printed from a computer in respect of thetransaction, would it be primary or secondary evidence and who would be called totender such documents in order for it not to be hearsay in a situation where there havebeen various persons dealing with the various entries or information relating to thetransaction.

To establish the truth of facts contained in any document, the matter of the documenthas to be called unless the document falls within the categories of exceptions in Section(916) or theEvidence Act which provides that a statement in a document shall not be deemed tohave been made by a person unless the document or the material part was written,made or produced by him with his own hand or was signed or initialed by him orotherwise recognized by him in writing as one for the accuracy of which he isresponsible.

In a situation where there has been an electronic funds transfer or other electronictransaction would be the method of verification of a signature. What is the legal effectof a PIN Code vis--vis the evidential requirement of a signature? Would a digitalsignature surface for the purpose of the Act, one would think not as the provisions ofSection 91 limits documents admissible thereunder to document which has been made or

produced by a person with his own hand or was signed or initialed by him. It would bedifficult to stick this to digital signatures. Such a document would not be admissible, asit would not have met the requirements of the said section. A PIN cannot also in view ofthe above provision be regarded as a signature or an initial. Whilst the rules of proofunder the Evidence Act remain unchanged, the evidential problems presented byelectronic banking transactions would continue to persist.

Consumer apathy to electronic banking was however not a problem limited to Nigeria.Consumers did not readily embrace Techno banking when it was first offered in theUnited States in the 1980s but the advent of increasingly common two-career couples,business travels rising and workdays lengthening led consumers to place a growingpremium on convenience and flexibility in handling their finances.23 This appears to be

the situation in urban Nigeria today and may thus be a reason why electronic bankingmay succeed this time around.

Additionally, New-age banking advocates argue that this seeming rush to digital money isdemocratizing banking by bringing the latest in electronic financial services to customersfar beyond the ranks of the worlds largest companies and cities and millions ofconsumers will find it much easier to manage their finances through electronic banking.24The risks inherent in carrying large sums of physical cash around (both for the customerand the merchant),25 convenience and flexibility are some of the advantages ofelectronic payment systems particularly Smartcards and EFTs. Increased sophisticationof customers and aggressive marketing are factors electronic banking providers take fulladvantage of as they struggle to acquire a cutting edge in this field.

2 3 K e l l e y H o l l a n d , P a u l a D w y e r a n d G a i l E d m o n d s o n s u p r a


2 5 T h e i n f l a t i o n a r y t r e n d o f t h e e c o n o m y i n a c a s h - d r i v e n s o c i e t y s t e m m i n g f r o m d i s t r u s t o f c e r t a i n f i n a n c i a l i n s t r u m e n t s ( e . g . c h e q u e s a n d b a n k d r a f t s ) c o u p l e d w i t h t h e d e v a l u a t i o n o f t h e N a i r a h a s r e s u l t e d i n r e q u i r i n g l a r g e v o l u m e s o f m o n e y f o r o f t e n t i m e s r o u t i n e c o m m e r c i a l t r a n s a c t i o n s .


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Presently, a consortium of banks has established a company to pool resources towardspromoting an electronic purse. A card issued by any member of the consortium can beused at any vendors location whether or not the card issuer supplied his terminal. Thebanks are trying to take advantage of the economies of scale and avoid the reasons whysome past experiments in electronic banking were not as successful as anticipated. 26

Social Costs

As technology and communications improve, Cybernetic banking may result in massivelayoffs in the banks. Europe alone might have seen some 500,000 banks employees laidoff between 1994 and 1999.27 With the increased use of ATMs, the demand for over thecounter-cash is expected to reduce substantially leading to a reduction in theadministrative cost of human resources28 as fewer cashiers and signature verificationofficers would be required. In a related vein, usage of ATMs particularly those whichcharged their customers a foreign usage fee (if they use another banks TM) and/orconvenience surcharge, add to the high cost of obtaining cash allegedly resulting in over$2.2 billion in profits to the banks in the United States of America over the past year atthe customers expense.29

Fraud and counterfeiting are other problems associated with some aspects of New-agebanking. Credit card fraud is a major problem particularly in developed economiesalthough proponents of Smartcards boast of their virtually fraud-free qualitiesparticularly its PIN protection, Chip and access security and the fact that the chip istamperproof amongst its other security features.30 It however appears that there areemerging attacks on Smartcard systems31 despite their reputed invincibility.Additionally, the more consumers and companies transfer money electronically, thegreater will be the potential for thieves to intercept or tap into these flows. 32 Thetechnology that makes our personal and business lives easier and more convenient interms of EFT, obtaining credit and making payments anywhere in the world, performs

the same service for the fraudster but the systems to protect the integrity of thesemarvelous creative technologies lag far behind and the gap is ruthlessly exploited by thefraudster.33 Now more than ever, more computerized information is being held aboutindividuals which is relatively easy to access and the usage of plastic cards on theInternet has further assisted fraudster and computer hackers in stealing identities andusing them to perpetrate fraud.34

With the increasing mobility of funds globally, the emergent wide-open global moneymarket will grapple with a dark side of finance where financial volatility will become afact of life as traders pump up their super-computers and merge physics, maths andmoney to create ever more complex instruments and techniques. 35

Another down side of New-age banking is the somewhat intractable problem of moneylaundering. The basic difference between money movement facilities and moneylaundering is a fine one especially viewed from the perspective of the banker whowants to do the deal because ultimately, performing services for paying customers inthe source of banking profitability and moral entrepreneuralism on behalf of crimeprevention has never been seen as a prerequisite for success in major public or privateinternational banking.36 Some Nigerian Banks have sought to place limits on funds thatcan be transferred under their EFT schemes having implicitly recognized that EFT couldbe used by money launderers.37 In a similar vein, e-cash is said to be conditionallyuntraceable unlike even paper cash as the binding carried out by the users own devicemakes it impossible for anyone to link payment to payer.38

2 6 C o s t s w i l l b e l o w e r f o r t h e p a r t i c i p a t i n g b a n k s t h a n i f t h e y s e t u p s t a n d - a l o n e m o d e l s . S y n e r g y a m o n g s t p a r t i c i p a t i n g b a n k s w i l l a v o i d t h e p a s t s i t u a t i o n w e r e A T M s a n d c r e d i t c a r d s w e r e i n d i v i d u a l i z e d t h u s c a s h o r c r e d i t c o u l d n o t b e o b t a i n e d b y a b a n k o t h e r t h a n t h e p r o v i d e r . A T M s w e r e u s u a l l y l o c a t e d o n o r a r o u n d t h e b a n k s p r e m i s e s t h u s y o u r e q u i r e d a v i s i t t o t h e b a n k i n t h e f i r s t p l a c e a n d t h e o n l y t h i n g y o u s a v e d o n w a s t h e t i m e s p e n t q u e u i n g i n f r o n t o f t h e c a s h i e r o r f i n d i n g o u t t h a t t h e b a n k h a d c l o s e d f o r b u s i n e s s . A d d i t i o n a l l y , t h e l i m i t s w e r e r a t h e r l o w f o r a n i n f l a t i o n a r y s o c i e t y s u c h a s o u r s . C r e d i t c a r d s w e r e n o t r e a d i l y a c c e p t a b l e a n d e r e o f t e n t i m e s s


2 8 B . O . L o n g e C a r d b a s e d s y s t e m s : F i r s t B a n k s e x p e r i e n c e / e x p e c t a t i o n s p r e s e n t e d a t T h e S e m i n a r o n E l e c t r o n i c B a n k i n g a n d t h e I n f o r m a t i o n S u p e r Hi g h w a y i n N i g e r i a : T h e C h a l l e n g e s o f t h e 2 1 s t C e n t u r y , o n 1 6 t h A p r i l 1 9 9 7 . A s t h e y r e - e n g i n e e r a n d r e - p o s i t i o n t h e m s e l v e s f o r t h e c h a l l e n g e s o f t h e o n c o m i n g m i l l e n n i u m p a r t i c u l a r l y t h r o u g h i n v e s t m e n t s i n I n f o r m a t i o n T e c h n o l o g y , s o m e b a n k s h a v e a l r e a d y c o m m e n c e d r e t r e n c h m e n t e x e r c i s e s .

2 9 I l e n e R a y m o n d , T h e H i g h C o s t o f G e t t i n g C a s h , G o o d H o u s e k e e p i n g A p r i l 1 9 9 8 .

3 0 I n t r o d u c i n g S m a r t c a r d s i n t o N i g e r i a T h e B u l l e x p e r i e n c e , 1 6 t h A p r i l 1 9 9 7 .

3 1 P l a s t i c c a r d c r o o k s a r e a d y i n g b r e e d C I B N e w s , J u n e 1 9 9 8

3 2 K e l l e y H o l l a n d , P a u l a D w y e r a n d G a i l E d m o n d s o n s u p r a .

3 3 L . H . L e i g h , B a n k s ; F r a u d a n d C r i m e s u p r a a t P a g e 3 1 .

3 4 S t o l e n L i v e s . E s s e n t i a l s O c t o b e r 1 9 9 7

3 5 B i l l J a v e t s k i a n d W i l l i a m G l a s g a l l s u p r a . T h e a u t h o r s p o s i t t h a t t h e p r o l i f e r a t i o n o f h i g h - t e c h i n s t r u m e n t s c o u l d o v e r t i m e b l u r t h e d e f i n i t i o n o f w h a t c o n s t i t u t e s m o n e y .

3 6 M i c h a e l L e v i , B a n k s : F r a u d a n d C r i m e s u p r a a t p a g e 3 1 .

3 7 T h e m a x i m u m l i m i t i n t h e c a s e o f U B A M o n e y g r a m i s $ 2 0 , 0 0 0 . V a n g u a r d N e w s p a p e r , N o v e m b e r 1 9 1 9 9 7 q u o t i n g M r . B e n A k a b u e z e o f t h e C o m m e r c i a l B a n k i n g d e p a r t m e n t o f U B A . W h a t i s n o t c l e a r i s w h e t h e r t h i s l i m i t i s p e r t r a n s a c t i o n o r w h e t h e r t h e r e i s a n a d d i t i o n a l t i m e l i m i t . H e h o w e v e r s t a t e d t h a t t h e s c h e m e i s r u n i n a c c o r d a n c e w i t h t h e v a r i o u s l a w s s t i p u l a t e d b y t h e N a t i o n a l D r u g L a w E n f o r c e m e n t A g e n c y ( N D L E A ) .

3 8 D a v i d C h a u m , D i g i C a s h N u m b e r s t h a t a r e m o n e y s u p r a .


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These problems notwithstanding, the benefits would appear to outweigh perceiveddisadvantages. Fraud and theft are not peculiar to electronic banking and great amountof money are being expended to set up protective checks and controls. It is said that apotential fraudster requires equipment worth at least $50 million and a period of at least6 months to change the numeric codes on a Smartcard which holds a maximum value of

N16 million. A most unprofitable exercise indeed.

Electronic banking will further demystify our cash dependency by facilitating paymentsand it will encourage economic activity by providing opportunities for customers totransact business and vendors to stay open longer without fears of armed robberyattacks. Furthermore, cash handling costs and risks are reduced for all the partiesinvolved. It is even foreseeable that with cash playing a smaller role in businesstransactions, kickbacks and bribes will reduce accordingly.

Card based schemes open up new vistas of economic co-operation with the formation oflocal and international affiliations and alliances between issuers, merchants andcustomers by way of discounts from participating merchant, loyalty schemes and otherincentives such as free or subsidized car rentals, reduced rates on internationaltelephone calls, bonus air travel tickets, complimentary limousines etc.

Conclusion

There is a need for the reform of the Evidence Act to embrace technologicaladvancements, the law of evidence and our rules of proof must not continue to lagbehind as they would only stultify technological and economic advances in electronicbanking. The act must be amended to respect these technological advances; documentsgenerated from electronic transactions must be capable of being admitted in evidence.In Electronic transactions, which utilize the PIN, the PIN must be recognized by the Court

as being key and crucial to such transaction and there must be a method of upholding itsvalidity in a transaction. The issue of digital signatures must also be addressed.

It is interesting to note that the Banks and other financial institutions Decree 1991 (withits subsequent amendments) which is the primary statute regulating banks and otherfinancial institutions in Nigeria does not have any provisions relating to electronicbanking. This statute could be a vehicle for the reform of the necessary banking laws animpetus for technological advancement of the banking sector and the platform for thewholehearted adoption of electronic banking in Nigeria.

The world is rapidly becoming a global village and Nigeria cannot afford to be left behindin the technological development modifying the financial services available worldwide.

We still rank far behind the developed economies in this regard. Electronic banking isbeing institutionalized although much is still required to make it the norm and reduceour cash dependency. In forming a consortium to promote the Smartcard projects ourbanks have taken a giant first step and the critical success factor is for them to put asidecompetition and self interest to promote this and indeed other aspects of electronicbanking for the greater good of society.

References

1. Tim Herrington, Marketing Funds on the Internet: The Position in Europe International Business Lawyer September 1997.2. Bill Javetski and William Glasgall, Borderless Finance: Fuel for Growth, Business Week, December 12, 19943. Kelley Holland, Paula Dwyer and Gail Edmondson, Techno Banking takes off, Business Week, December 12 1994. The auditors

posit that Electronic banking is a defensive move for many banks.


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29. Ilene Raymond, The High Cost of Getting Cash, Good Housekeeping April 1998.30. Introducing Smartcards into Nigeria The Bull experience, 16th April 1997.31. Plastic card crooks are a dying breed CIB News, June 199832. Kelley Holland, Paula Dwyer and Gail Edmondson supra.33. L.H. Leigh, Banks; Fraud and Crime supra at Page 31.34. Stolen Lives. Essentials October 1997

35. Bill Javetski and William Glasgall supra. The authors posit that the proliferation of high-tech instruments could over time blurthe definition of what constitutes money.36. Michael Levi, Banks: Fraud and Crime supra at page 31.37. The maximum limit in the case of UBA Moneygram is $20,000. Vanguard Newspaper, November 19 1997 quoting Mr. Ben

Akabueze of the Commercial Banking department of UBA. What is not clear is whether this limit is per transaction or whether

there is an additional time limit. He however stated that the scheme is run in accordance with the various laws stipulated by

the National Drug Law Enforcement Agency (NDLEA).

38. David Chaum, DigiCash Numbers that are money supra.

The information contained in this publication is only intended as a

general review of the sub ject concerned and should not be treatedas a substitute for specific advice concerning specific situations.If you need further information about any i ssue discussed above,

please contact Bayo Adaralegbe [email protected]

BABALAKIN & CO.

8 th -10 th Floors, 24A Campbell Street, LagosPhone: +234-1-2632185Fax: - +234-1-26237136

http: www.babalakinandco.com

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