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 obsolete traditional banking, as we know it. The technological revolution worldwide has positively affected banking practices and customers are spoilt for choice between the different electronic payment services now available. Banking has become highly automated resulting in greater efficiency and ultimate customer satisfaction. Additionally, the advent of electronic commerce and marketing on the Internet World Wide Web (WWW) has contributed to the technical transformation affecting the banking industry. Goods can now be purchased on the WWW using a credit card or electronic money (e-cash).1 From merely being a catch phrase, it appears that electronic banking has come to stay. On the global scene, electronic banking opens up a new world of finance where opportunity and money know no bounds. With savers beings able to move funds around the world at will, some economists even see Central Banks being forced to shift their focus 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 conferencing kiosks staffed by experts on everything from mortgage loans to mutual funds. Corporations are getting pitches on new electronic techniques for international money transfer and transaction processing. The global banking system, founded on brick-andmortar branches and local franchises, is being transformed into a vast electronic web that transcends national borders. 3 Electronic Banking Products And Services Simply put, electronic banking has been described as the use of magnetically encoded plastic cards at terminals outside a regular bank location for cheque cashing, deposits and other money transfer functions. 4 Banking has gone digital and a cashless society is slowly being evolved. In the age of electronic banking, the use of money in tangible form becomes over less important.5 Electronic banking embraces payment cards6 (including credit cards, cheque cards, charge cards, debit cards, cash cards, cheque guarantee cards, gold cards, international cards and smartcards (electronic purses), Electronic funds Transfer, Automated Teller Machines, Home Banking Services through personal computer and telephone facilities and Internet banking. Smartcards, also known as electronic purses, were recently introduced in Nigeria. Unlike the traditional payment cards, these cards are embedded with a computer chip7 and offer a variety of service depending on the requirements of the issuer. A Smartcard could work as both a credit and debit card. When used as an electronic purse, a money value is transferred to the card, which diminishes as the card is used at designated merchant terminals. Electronic Funds Transfer (EFT) systems are constantly being developed as advancements are made in technology. New links are being formed8 and Nigerian banks are not being
1 2 3 4 T i m B i l l H e r r i n g t o n , J a v e t s k i a n d M a r k e t i n g W i l l i a m 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 F u e l i n E u r o p e G r o w t h , I n t e r n a t i o n a l B u s i n e s s B u s i n e s s L a w y e r 1 2 , S e p t e m b e r 1 9 9 4 1 9 9 4 . 1 9 9 2 . T h e a u d i t o r s p o s i t t h a t W i t h t h e i n t r o d u c t i o n o f 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 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 m a n y s o m e b a n k s . m o d i f i c a t i o n s . 1 9 9 7 . 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 o r W e e k , D e c e m b e r 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 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 d m o n d s o n , T e c h n o E n g l i s h L a n g u a g e , 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 I n t e r n a t i o n a l e d i t i o n , L e x i c o n P u b l i c a t i o n s I n c . 5 6 7 8 S t e p h e n T h e T h u s 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 , f u n d s L l o y d s o f L o n d o n ( E F T s ) , c a n P r e s s , 1 9 9 4 a n d a t p a g e 3 1 . 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 . d i f f e r e n t t h e c a r d s p a y m e n t h a v e c a r d s ( e x c l u d i n g t h a n B a n k s m a t c a r d s ) , t h e o f m a g n e t i c S c o t l a n d , e l e c t r o n i c s t r i p e s G o l d m a n t r a n s f e r s c a r d a n d E F T P O S m o r e h o m e b a n k i n g

m o r e

m e m o r y t h e R o y a l

p l a s t i c S a c h s

r e t a i n D a t a

i n f o r m a t i o n . 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 .

S p a i n s

B a n c o

S a n t a n d e r ,

a n d

E l e c t r o n i c

S y s t e m s

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Cybernetic Banking (Changing The Banking Landscape In Nigeria)

left out.9 The customers are the greatest beneficiaries in the banks jostle to attract new customers by reducing charges and offering other incentives. Automated Teller Machines ATMs)) have rapidly progressed from mere cash handling dispensers and some of them now have the capacity to handle more than 150 different types of transactions such as mutual fund investing and trade in stocks. 10 Home Banking Services are further developments, which enable bank customers to perform banking services through telephone lines, television and personal computers. Now consumers can conduct business from video-conferencing kiosks and in the pipeline is interactive video banking via cable or satellite. 11 Electronic networking of branches through the use of the Very Small Aperture Terminal (VSAT)12 inter alia has further enhanced efficiency of banks leading to greater customer satisfaction. Customers need not physically visit the branches where they maintain accounts and can obtain a myriad of services ranging from knowing their bank balances to cash withdrawals from other branches of their banks. Customers want to bank in more places and at any hour so banks are now offering electronic services that extend their reach far beyond their branches. 13 Internet banking is a new innovation with about 170 banks and 115 credit unions maintaining websites and the numbers are increasing weekly. 14 Although the sites are primarily used for marketing purposes, some banks offer on-line enquiries and bills payment services. Electronic payments with e-cash are further innovations in electronic banking. E-cash providers claim that they accommodate a range of convenient electronic payment mechanisms making it easy for all prospective buyers to purchase goods or services on the Internet.15 Electronic payments with e-cash are software based systems which allow users to send electronic payments from any personal computer (PC) to any other PC or workstation, 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 to focusing on the development of inter-exchange-ability of e-cash currencies along with working 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 the world of global electronic commerce offering a secure, low cost and private payment (privacy protecting) option to consumers for payments of any amount.17 Electronic cash is not just a step on the way to tomorrows payment system it is a technology, it is that technology 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 being bandied around and electronic banking may well be one of such. A compelling argument for this point of view is that previous attempts to introduce virtual banding by way of ATMs, credit cards and vouchers failed woefully. Furthermore, society is still heavily dependent on cash based commercial transactions so nothing has changed. Apart from illiteracy, the financial distress of several banks has in no small measure contributed to a cash dependent society. The Central Bank of Nigeria (CBN) is concerned by this cash dependency not only because of the risks of carrying cash around but also the cost implications for the currency issuing authority in terms of production, storage, processing, distribution, security and transportation. 19 The CBN thus advocated a reform of the payment system in Nigeria maintaining that the Nigerian banking system cannot be insulated from emerging global technological developments and imperatives in the quest
9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 T h e U B A M o n e y g r a m P a u l a P a u l a i s s a i d D w y e r D w y e r t o a n d a n d 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 . K e l l y K e l l y A H o l l a n d , H o l l a n d , G a i l G a i l E d m o n d s o n E d m o n d s o n s y s t e m s u p r a s u p r a . 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 . w i r e l e s s s a t e l l i t e P a u l a c o m m u n i c a t i o n s D w y e r a n d G a i l o f l i n k i n g K e l l e y L a r r y H o l l a n d , E d m o n d s o n I n t e r n e t I n t e r n e t . I n t e r n e t . N o v e m b e r a r e m o n e y , o f 4 1 9 9 8 , 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 1 2 c o m b i n e s M r . c o m p u t e r i z e d O g w u m a s t a t e d c o n v e n i e n c e f u r t h e r t h a t w i t h s e c u r i t y a n d p r i v a c y t h e t h a t i m p r o v e i s o n l e s s p a p e r c a s h t h e r e b y t o 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 o f p a y m e n t a n d a n d i t s v e r s a t i l i t y r a t i o o p e n s c r e a t e s u p a n e w h o s t f o r o f m a r k e t s a n d a p p l i c a t i o n s . 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 . s u p r a . 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 . C h i d i - M a h a , I n c , I n c , T h e B e n e f i t s I n c I n c t h e t h e t h e C y b e r C a s h C y b e r C a s h S c o t t D a v i d P a u l D i g i C a s h D i g i C a s h P a l o f r o m f r o m

L o f t e s n e s s , C h a u m , O g w u m a ,

A l t o o f

C a l i f o r n i a , t h a t

D i g i C a s h G o v e r n o r

N u m b e r s t h e

f r o m T h e

t h e C a s h

I n t e r n e t . P r o b l e m ,

C e n t r a l

B a n k

N i g e r i a .

N e w s w a t c h

M a g a z i n e ,

M a y

1 9 9 7 .

c u r r e n c y

o u t s i d e

b a n k i n g

s y s t e m

r e s p o n s i v e

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

l a r g e

r i s i n g

c u r r e n c y

p r o b l e m s

m o n e t a r y

m a n a g e m e n t

mails@babalakinandco.com www.babalakinandco.com 2002

Cybernetic Banking (Changing The Banking Landscape In Nigeria)

for improvement in customer service and delivery. 20 Another argument against electronic banking is that it is perceived to be elitist and geared towards serving the needs of high networth individuals and corporate customers. With our high level of total and semi-literacy, it is difficult to imagine how the ordinary Nigerian 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 a merchant. It is thus posited that it will take a long period of time before it becomes the order of the day and entrenched in our psyche. Massive enlightenment and awareness campaigns are thus required in this regard and society will have to be re-oriented to be less cash dependent. The banks offering EFT services have taken the forefront by using ordinary Nigerians in their adverts and some times employing the medium of Pidgin English. Another drawback is the evidential proof of electronic banking transactions. This drawback arises as a result of the nature of these transactions in relation to the rules of proof under the law of Evidence and the Evidence Act. The peculiarity of problems associated with proof of electronic transactions and electronically generated evidence stem from the fact that they are p aperless transactions. Such transactions by their nature restrict the use of rules of proving documentary evidence. Even where such transactions are paper-based, the modes of their generation considerably strain the traditional rules of proof of evidence. 21 Under the law of evidence, all facts except the contents of documents may be proved by oral 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 says he, saw, perceived or heard the fact. This forms the rationale for the rule against hearsay evidence as the court will not admit hearsay evidence but direct evidence from the 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, which is either by primary evidence or by secondary evidence. Primary evidence is the best means proving the contents of a document and simply means that the original document itself is brought before the court for the inspection of the court. As pointed out earlier, Electronic banking transactions are paperless transactions and they present a myriad of difficulties in their proof. These transactions utilize the computer, and computer network systems, the internet, automated teller machines, telephones, etc. The definition of a document under the Evidence Act is restrictive and does 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 described upon any substance by means of letters, figures or marks or by more than one of those means intended to be used or which may be used for the purpose of recording that matter. It is therefore not difficult to see the problem of admitting these devices in evidence as documents as whatever information contained in them remain unintelligible until it can be 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 and it is this absence of a written form, which makes the proof of electronic transactions
2 0 2 1 2 2 V . A . P r o f O d o z i , Y e m i 7 6 D e p u t y G o v e r n o r o f C e n t r a l o f p r o o f B a n k o f o f N i g e r i a I s s u e s o t h e r 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 i n a t t h e a n d 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 E x t e r n a l 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 1 9 9 0 ) N e w s P A G E M a g a z i n e , 3 2 0 . P r o f N o v e m b e r O s i n b a y o 2 3 i n 1 9 9 8 . 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 .

O s i n b a y o . o f t h e

P r o b l e m s A c t

c o m p u t e r

a n d

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

L o c a l

I n t e r n a t i o n a l

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T r a n s a c t i o n s ,

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D e b t

M a n a g e m e n t

( U N C T C , U N D P

S e c t i o n

E v i d e n c e

mails@babalakinandco.com www.babalakinandco.com 2002

Cybernetic Banking (Changing The Banking Landscape In Nigeria)

problematic. Most of the, provisions of the Evidence Act deal with documents, which are written, and this creates an obstacle to the proof of electronic transactions, which are largely unwritten. Now for example are withdrawals from an ATM cash machine to be proved 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 the transaction, would it be primary or secondary evidence and who would be called to tender such documents in order for it not to be hearsay in a situation where there have been various persons dealing with the various entries or information relating to the transaction. To establish the truth of facts contained in any document, the matter of the document has to be called unless the document falls within the categories of exceptions in Section (916) or the Evidence Act which provides that a statement in a document shall not be deemed to have 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 or otherwise recognized by him in writing as one for the accuracy of which he is responsible. In a situation where there has been an electronic funds transfer or other electronic transaction would be the method of verification of a signature. What is the legal effect of a PIN Code vis--vis the evidential requirement of a signature? Would a digital signature surface for the purpose of the Act, one would think not as the provisions of Section 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 be difficult to stick this to digital signatures. Such a document would not be admissible, as it would not have met the requirements of the said section. A PIN cannot also in view of the above provision be regarded as a signature or an initial. Whilst the rules of proof under the Evidence Act remain unchanged, the evidential problems presented by electronic 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 the United States in the 1980s but the advent of increasingly common two-career couples, business travels rising and workdays lengthening led consumers to place a growing premium 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 banking may succeed this time around. Additionally, New-age banking advocates argue that this seeming rush to digital money is democratizing banking by bringing the latest in electronic financial services to customers far beyond the ranks of the worlds largest companies and cities and millions of consumers will find it much easier to manage their finances through electronic banking.24 The risks inherent in carrying large sums of physical cash around (both for the customer and the merchant),25 convenience and flexibility are some of the advantages of electronic payment systems particularly Smartcards and EFTs. Increased sophistication of customers and aggressive marketing are factors electronic banking providers take full advantage of as they struggle to acquire a cutting edge in this field.
2 3 2 4 2 5 K e l l e y K e l l e y T h e H o l l a n d , H o l l a n d , P a u l a P a u l a t r e n d D w y e r D w y e r o f a n d a n d G a i l G a i l E d m o n d s o n E d m o n d s o n i n a s u p r a s u p r a 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 .

i n f l a t i o n a r y

t h e

e c o n o m y

c a s h - d r i v e n

mails@babalakinandco.com www.babalakinandco.com 2002

Cybernetic Banking (Changing The Banking Landscape In Nigeria)

Presently, a consortium of banks has established a company to pool resources towards promoting an electronic purse. A card issued by any member of the consortium can be used at any vendors location whether or not the card issuer supplied his terminal. The banks are trying to take advantage of the economies of scale and avoid the reasons why some past experiments in electronic banking were not as successful as anticipated. 26 Social Costs As technology and communications improve, Cybernetic banking may result in massive layoffs in the banks. Europe alone might have seen some 500,000 banks employees laid off between 1994 and 1999.27 With the increased use of ATMs, the demand for over the counter-cash is expected to reduce substantially leading to a reduction in the administrative cost of human resources28 as fewer cashiers and signature verification officers would be required. In a related vein, usage of ATMs particularly those which charged their customers a foreign usage fee (if they use another banks TM) and/or convenience 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 at the customers expense. 29 Fraud and counterfeiting are other problems associated with some aspects of New-age banking. Credit card fraud is a major problem particularly in developed economies although proponents of Smartcards boast of their virtually fraud-free qualities particularly its PIN protection, Chip and access security and the fact that the chip is tamperproof amongst its other security features. 30 It however appears that there are emerging attacks on Smartcard systems31 despite their reputed invincibility. Additionally, the more consumers and companies transfer money electronically, the greater will be the potential for thieves to intercept or tap into these flows. 32 The technology that makes our personal and business lives easier and more convenient in terms 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 these marvelous creative technologies lag far behind and the gap is ruthlessly exploited by the fraudster.33 Now more than ever, more computerized information is being held about individuals which is relatively easy to access and the usage of plastic cards on the Internet has further assisted fraudster and computer hackers in stealing identities and using them to perpetrate fraud. 34 With the increasing mobility of funds globally, the emergent wide-open global money market will grapple with a dark side of finance where financial volatility will become a fact of life as traders pump up their super-computers and merge physics, maths and money to create ever more complex instruments and techniques. 35 Another down side of New-age banking is the somewhat intractable problem of money laundering. The basic difference between money movement facilities and money laundering is a fine one especially viewed from the p erspective of the banker who wants to do the deal because ultimately, performing services for paying customers in the source of banking profitability and moral entrepreneuralism on behalf of crime prevention has never been seen as a prerequisite for success in major public or private international banking.36 Some Nigerian Banks have sought to place limits on funds that can be transferred under their EFT schemes having implicitly recognized that EFT could be used by money launderers. 37 In a similar vein, e-cash is said to be conditionally untraceable unlike even paper cash as the binding carried out by the users own device makes it impossible for anyone to link payment to payer.38
2 6 2 7 2 8 2 9 3 0 3 1 3 2 3 3 3 4 3 5 3 6 3 7 3 8 C o s t s K e l l e y B . O . I l e n e 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 a n d G a i l F i r s t b a n k s t h a n s u p r a p r e s e n t e d 1 9 9 8 . 1 9 9 7 . 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 . 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 . 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 w e r e o f t e n t i m e s s u b j e c t H o l l a n d , C a r d P a u l a b a s e d H i g h D w y e r E d m o n d s o n B a n k s C a s h , T h e L o n g e s y s t e m s : C o s t i n t o a o f e x p e r i e n c e / e x p e c t a t i o n s G o o d H o u s e k e e p i n g 1 6 t h A p r i l A p r i l R a y m o n d , S m T h e G e t t i n g

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1 9 9 7 s u p r a . s u p r a T h e a t a u t h o r s p a g e i s 3 1 . $ 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 ) . 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 .

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Cybernetic Banking (Changing The Banking Landscape In Nigeria)

These problems notwithstanding, the benefits would appear to outweigh perceived disadvantages. Fraud and theft are not peculiar to electronic banking and great amount of money are being expended to set up protective checks and controls. It is said that a potential fraudster requires equipment worth at least $50 million and a period of at least 6 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 payments and it will encourage economic activity by providing opportunities for customers to transact business and vendors to stay open longer without fears of armed robbery attacks. Furthermore, cash handling costs and risks are reduced for all the parties involved. It is even foreseeable that with cash playing a smaller role in business transactions, kickbacks and bribes will reduce accordingly. Card based schemes open up new vistas of economic co-operation with the formation of local and international affiliations and alliances between issuers, merchants and customers by way of discounts from participating merchant, loyalty schemes and other incentives such as free or subsidized car rentals, reduced rates on international telephone calls, bonus air travel tickets, complimentary limousines etc. Conclusion There is a need for the reform of the Evidence Act to embrace technological advancements, the law of evidence and our rules of proof must not continue to lag behind as they would only stultify technological and economic advances in electronic banking. The act must be amended to respect these technological advances; documents generated 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 its validity 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 (with its subsequent amendments) which is the primary statute regulating banks and other financial institutions in Nigeria does not have any provisions relating to electronic banking. This statute could be a vehicle for the reform of the necessary banking laws an impetus for technological advancement of the banking sector and the platform for the wholehearted adoption of electronic banking in Nigeria. The world is rapidly becoming a global village and Nigeria cannot afford to be left behind in the technological development modifying the financial services available worldwide. We still rank far behind the developed economies in this regard. Electronic banking is being institutionalized although much is still required to make it the norm and reduce our cash dependency. In forming a consortium to promote the Smartcard projects our banks have taken a giant first step and the critical success factor is for them to put aside competition and self interest to promote this and indeed other aspects of electronic banking for the greater good of society. References
1. 2. 3. Tim Herrington, Marketing Funds on the Internet: The Position in Europe International Business Lawyer September 1997. Bill Javetski and William Glasgall, Borderless Finance: Fuel for Growth, Business Week, December 12, 1994 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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Cybernetic Banking (Changing The Banking Landscape In Nigeria)

7
With the

4.

The New Websters Dictionary of the English Language, International edition, Lexicon Publications Inc. 1992. introduction of smartcards, this definition would require some modifications.

5. 6.

Stephen K. Huber, Banks: Fraud and Crime edited by Joseph J. Norton, Lloyds of London Press, 1994 at page 31. The different payment cards (excluding smatcards), electronic funds transfers (EFTs), EFTPOS and home banking services were well defined in Legal Aspects of Electronic Banking, a paper presented by Mr. George Etomi at The Seminar on Electronic Banking and the Information Super Highway in Nigeria: The Challenges of the 21st Century, on 16th April 1997.

7. 8.

Thus the cards have more memory than the magnetic stripes plastic card and can retain more information. Spains Banco S antander, the Royal Bank of Scotland, Goldman Sachs and Electronic Data Systems 37 have formed the Inter -Bank On-Line System (IBOS) an electronic banking system that can digitally zap funds among banks around the globe in only seven seconds. Kelley Holland, Paula Dwyer and Gail Edmondson supra.

9.

The UBA Moneygram is said to be made possible by a global computer network based in Denver, Colorado. First Bank of Nigeria PLCs Western Union Money Transfer and Allstates Vigo Fund Express are other EFT products. Ecobank Grup has also introduced Rapidtransfer, which provides same day transfer of funds across the West-African sub-region.

10. 11. 12. 13. 14.

Kelly Holland, Paula Dwyer and Gail Edmondson supra Kelly Holland, Paula Dwyer and Gail Edmondson supra. A wireless satellite co mmunications system linking geographically dispersed locations. Kelley Holland, Paula Dwyer and Gail Edmondson supra. Larry Chidi-Maha, The Benefits of the Internet to Banking a paper presented at The Seminar on Electronic Banking and the Information Super Highway in Nigeria: The Challenges of the 21st Century, on 15th April 1997. He added that according to recent surveys, 2000 or more banks would be online before 2000AD.

15. 16. 17. 18.

CyberCash Inc, DigiCash Inc from the Internet. CyberCash Inc, DigiCash Inc from the Internet. Scott Loftesness, Palo Alto California, November 4 1998, from the internet. David Chaum, DigiCash Numbers that are money, 1994 from the Internet. The author adds that e-cash combines computerized convenience with security and privacy that improve on paper cash thereby adding value to any service involving payment and its versatility opens up a new host of markets and applications.

19.

Paul Ogwuma, Governor of the Central Bank of Nigeria. The Cash Problem, Newswatch Magazine, May 12 1997. Mr. Ogwuma stated further that currency outside the banking system is less responsive to monetary policy. Thus the existence of large and rising currency ratio creates problems for monetary management and inflation control. He added that one of the salient features of a viable financial and monetary systems is the evolution of an efficient payments system to facilitate financial and other commercial transactions, which in his view would be crucial to the overall viability and stability of the banking industry.

20.

V.A. Odozi, Deputy Governor of Central Bank of Nigeria Issues in Money and Banking a paper presented at the annual General Meeting of the Association of Corporate Affairs Managers of Banks (ACAMB) PUBLISHED IN The News Magazine, November 23 1998.

21.

Prof Yemi Osinbayo. Problems of proof of computer and other Electronically Generated Evidence in Local and International Financial Transactions, International Finance and External Debt Management (UNCTC,UNDP 1990) PAGE 320. Prof Osinbayo in

this paper analysed the problems associated with proof of computer and other electronically generated evidence in Nigeria Courts. 22. 23. 24. 25. Section 76 of the Evidence Act Kelley Holland, Paula Dwyer and Gail Edmondson supra Kelley Holland, Paula Dwyer and Gail Edmondson supra The inflationary trend of the economy in a cash-driven society stemming from distrust of certain financial instruments (e.g. cheques and bank drafts) coupled with the devaluation of the Naira has resulted in requiring large volumes of money for oftentimes routine commercial transactions. 26. Costs will be lower for the participating banks than if they set up stand-alone models. Synergy amongst participating banks will avoid the past situation were ATMs and credit cards were individualized thus cash or credit could not be obtained by a bank other than the provider. ATMs were usually located on or around the banks premises thus you required a visit to the bank in the first place and the only thing you saved on was the time spent queuing in front of the cashier or finding out that the bank had closed for business. Additionally, the limits were rather low for an inflationary society such as ours. Credit cards were not readily acceptable and were oftentimes subject to abuse and fraud. 27. 28. Kelley Holland, Paula Dwyer and Gail Edmondson supra B.O. Longe Card based systems: First Banks experience/expectations presented at The Seminar on Electronic Banking and the Information Super Highway in Nigeria: The Challenges of the 21st Century, on 16th April 1997. As they re-engineer and reposition themselves for the challenges of the oncoming millennium particularly through investments in Information Technology, some banks have already commenced retrenchment exercises.

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Cybernetic Banking (Changing The Banking Landscape In Nigeria)

29. 30. 31. 32. 33. 34. 35.

Ilene Raymond, The High Cost of Getting Cash, Good Housekeeping April 1998. Introducing Smartcards into Nigeria The Bull experience, 16th April 1997. Plastic card crooks are a dying breed CIB News, June 1998 Kelley Holland, Paula Dwyer and Gail Edmondson supra. L.H. Leigh, Banks; Fraud and Crime supra at Page 31. Stolen Lives. Essentials October 1997 Bill Javetski and William Glasgall supra. The authors posit that the proliferation of high-tech instruments could over time blur the definition of what constitutes money.

36. 37.

Michael Levi, Banks: Fraud and Crime supra at page 31. 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 subject concerned and should not be treated as a substitute for specific advice concerning specific situations. If you need further information about any issue discussed above, please contact Bayo Adaralegbe at agadaralegbe@babalakinandco.com BABALAKIN & CO. 8 th -10 th Floors, 24A Campbell Street, Lagos Phone: +234-1-2632185 Fax: - +234-1-26237136 http: www.babalakinandco.com E-mail: mails@ babalakinandco.com

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