Financial Technology (FinTech) describes software or mobile application, and hardware that helps to improve and automate traditional forms of finance for businesses.
FinTech is software that streamlines traditional financial transactions for organizations and consumers, and manages their business processes with latest technologies.
Fintech is making great impacts in financial services especially the banking sector. It helps in driving financial inclusion and cashless policy of the Central Bank of Nigeria.
With your phone you can make cash transfer, make online payment, and can withdraw money at the ATM point without walking into the banking halls.
In Nigeria, bank customers are grappling with bank transfer failures that have characterized Nigerian digital banking.
In this article, we intend to proffer solution on how Nigerian banks can fix most of the bank transfer failures and reversals which have become prevalent in the nation’s banking sector.
Causes of Bank Transfer Failures in Nigeria
The reason for transfer failure or error in dispensing cash at the automated teller machine (ATM) is transaction confirmation handshake failure. The confirmation handshake failure is as a result of issuing bank server failure, or receiving bank server failure, or the customer’s mobile network failure.
Another reason is that Nigerian banks adopt “Debit then Pay” system — they debit customer before the ATM dispenses cash. Because it’s debit then pay, if technical glitch occurs in seconds between debiting and depending, the ATM will not pay you despite that you have been “paid” according to the bank’s general ledger. The same thing happens when you make transfer with your mobile device or POS. If that happens at POS terminals where payment fails with the merchant only to notice later that you were actually debited, you u will need to go to the bank hall to request for transaction reversal.
Solutions to Bank Transfer Failures in Nigeria
The banks should deploy latest and strong software, and internet network. It’s despicable that some Nigerian banks’ still use 3G network in their internet banking services.
While internet failure bounds to happen, Nigerian banks should adopt “Pending, Pay then Debit” system, which is obtainable in most advanced economies.
How does this system work?
For instance, in the US, the banks “lock” your money, put a temporary pending status, then pay before debiting you, making sure you wouldn’t be debited without dispensing of cash or crediting the recipient’s account. For electronic fund transfer, there is a PENDING status (you see that in your online account) before any debit as the bank “warehouses” the fund, making sure the payer (account holder) cannot re-use it.
Notice that it has already sent value to the recipient. Once it establishes the recipient has the value, it moves from PENDING to DEBIT. Where it is unable to deliver value, it aborts the process and returns money to the payer. By doing this, it cannot debit you without serving your purpose; a great system design which works irrespective of network speed. This whole thing takes a short time. And because of it, there is no need for reversal as a confirmation handshake is established with the recipient before you are debited.
We can learn from this, upgrade our system design and get over the failures, irrespective of where the weak links are localized. This system design works for slow and fast networks because it is agnostic of speed, being fully structured to be state-based which means one state has to finish before the next begins, with all happening in seconds.
Yet, technically, there is no way they can pay you when you have no cash because the systems that check balances and release cash are entwined. And 99.99% of the time, the tech does not fail due to many layers of warehousing and redundancies built in. Everyone is happy and technical glitches do not cause bad customer experiences.