Electronic Payment Cards : Making Sense Out of the Cards Now in the Nigerian Financial Market

Cards seem to be all over the place now, and that is good for the economy. Getting rid of much of the cash that we burn enormous resources in handling, storing, transporting and securing will do everybody a lot of good. The benefit in reducing the level of insecurity is also something to be expectant about. Just think of how attractive it would be to go for robbery where you expect to find only plastic cards that you can't even chew. Even the roads will definitely be more convenient to ply, without hordes of bank bullion-vans chasing you off the way and giving a close shave in the process. So, let the cards reign!

Well, it's has only just begun, so this is in no way to suggest that we have come a long way. Certainly not, since market penetration is yet to attain critical mass. A positive trend all the same, and one that must be supported and nurtured by every concerned stakeholder. And that's the spirit of this write-up. Before it gets confusing because of the increasing variety you find all around, we have gone out to find what differences there are, if any, and what they can do for you. Believing that cards and electronic payment are the way of the future, we hope you get on board and begin to adjust to life without tonnes of cash. This is a guide to help you make sense of what's out there now. Okay, not necessarily an expert view; just our summation of the facts we have gathered.

Classification Parameter
Of course the right way to sort the varieties and make sense out of the lot is by effecting some classification. Broadly, we can classify existing cards in terms of funding status, currency application, loading source and, perhaps, a few other factors:

Funding Status
Here we identify two options - the debit and credit cards. Debit cards are pre-funded cards, which can only dispense money that currently exists in your bank account. If your account is not funded, you have no value to utilise. Credit cards on the other hand allow you utilise credit, granted by the card issuer, up the limits attached to your card. In effect, your ability to utilise value from the card does not depend on balance in your account. It is like leaving a stand-by overdraft in your pocket: you draw down when you need to use your card. A credit card issuance is consequently a credit management process, requiring more scrutiny and control. The user gets to pay interest on the utilised credit for the period it has not been funded by him. The credit dimension is obviously why such cards are slow in coming into our system, as debit cards currently dominate the market. Most of the ATM and other cards carried today are strictly debit cards: if your account is not funded, your card is out of payment function. A few organisations are, however, known to be offering credit cards now.

Currency Value
As to currency, you will find strictly Naira-based cards and foreign currency cards. The Naira cards can only be applied to Naira transactions and will not be valuable if you wish to make a foreign currency payment, say online. Again, most of our ATM cards today are Naira cards, only valid for Naira payments and so, usable only in Nigeria. What if you have to travel abroad and are now used to money on cards? Right, you're still in business because there are foreign currency cards now in the market. Fortunately, two of the most prominent international companies engaged in electronic cards payment systems are the ones now operating here in collaboration with Nigerian partners. Mastercard and Visa International are now issuing cards through Nigerian agents - banks mainly - meaning that you can have a foreign currency card that allows you pay online in foreign currency or take your card when you travel. Some can also be set by the issuer to be used to draw from the Naira ATMs.

Loading Source
Better put, this is about loading and non-loading. How is the money you utilise on the card held? Two options, currently. It could be right in your bank account, with the card serving as a mere conduit for utilising it. Here, the card is only providing access to your fund - its more like a pass to your account, allowing you to slot in at a payment point - ATM or merchant POS terminal - to access the fund sitting in your account. Except for the limit on single or daily drawings that individual banks place on the ATM cards they issue, technically, all the money in your account is available to you on the card. But it also means that it is the money in the account that the card relates to that it can avail you. In effect, those cards are tied, not just to a specific bank (the issuing bank), but also to a specific account(s). It cannot access money in an account that is not attached to it, much less a different bank. Consequently, if you use that kind of card, you need to have one for each bank you want to access your balance in through the card. Multiplicity of cards. Maybe, though that gives flexibility when a particular bank is down. However, there is also the 'universal' approach: a card you can load money into and carry with you. That's the typical electronic purse. An example will be the Interswitch cash card. Money can be pre-loaded from any account and used when you need to. In this case, a misplaced card only exposes the loaded amount, not your entire balance, to risk.

Multiplicity or Consolidation
So, what is better for you - a cache of cards or a one-stop solution option? Currently, a combo solution doesn't seem to be there, strictly. The is no super-issuer card that allows access to all your accounts, irrespective of banks. If you have multiple accounts, you may need multiple cards, unless you don't want to access some with a card. The good thing is that you can utilise an ATM at any bank or location to draw from a particular bank. The only snag is if the terminal is Interswitch and you have a QuickCash card or vice versa. Given that Interswitch would seem to dominate the market (possibly up to 90% of machine presence), you probably know what should work better for you in terms of card brand.

All said, the good thing is that the card culture has set in and is really growing well. Cheques haven't done well in our economy, but cards look good at the moment. As a person involved in financial transactions, are you learning to operate the new way (the card style) - either as a payee or payer? Go get yourself a card or merchant POS terminal: it's in everybody's interest!

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