Nigeria has a booming economy driven by a robust banking sector. However, the country’s financial system is not without its challenges, and one of the most significant issues that financial institutions and their customers face is failed transactions. Whether due to technical glitches, network downtime, or inadequate infrastructure, failed transactions can cause immense frustration and financial losses for individuals and businesses.
A Guardian Nigeria report quoted industry sources mentioning that resolutions of failed transactions got up to 60%, leaving 40% unresolved failed transactions.
The CBN naira redesign policy bulldozed digital transactions to record highs, but the resolutions of failed transactions have continued to fall, compared with the volume of transactions in Q1 2023.
The antecedent of failed transactions
The CBN’s push to redesign high-denomination currency removed ₦2.3 trillion from circulation between October 2022 and February 2023, according to figures from the Central Bank of Nigeria (CBN).
That scarcity of cash drove Nigerians to sign up for digital and electronic banking services, causing a gradual shift from a cash-driven economy.
For instance, mobile banking transactions more than doubled between October 2022, the month the CBN first announced its currency redesign plan, and the end of February 2023.
In value terms, mobile banking transactions expanded from ₦1.1 trillion to ₦2.6 trillion in one year. Both the volume and value of transactions conducted via point of sale (POS) terminals went over the roof, just as the number of POS terminals deployed across the country was at its record high.
In a report by Premium Times, Babatunde Obrimah, the Chief Operating Officer of the FinTech Association of Nigeria, said, “The cash crisis would definitely reaffirm the need for everyone to register on a digital platform and increase financial inclusion in the rural areas.”
Nigerians are, however, divided on choices between cash or online as evident in this video:
Yet, the volume of mobile inter-scheme transactions rose to 380,110.94 in March, from 183,687.09 in February 2023, despite the fade of the cash crunch. In value terms, that is ₦4.1 trillion in March, compared to ₦2.6 trillion in February.
Meanwhile, the value of NIBSS Instant Payment (NIP) transactions, which receded in February to approximately ₦36.8 trillion, climbed to ₦48.3 trillion by March – it was ₦39 billion in January.
Data from NIBSS showed that PoS transactions volume rose from 113.53 million in February to 177.93 million in March, with the value also rising from ₦883.4 billion to ₦1.152 trillion, representing a surge of about 30.41%.
With this tsunami comes the rise in unresolved failed e-payment transactions that characterised the first quarter. This is why social media is awash with curses and complaints of a relatively unready Nigeria for a cashless economy. Failed transactions have become a daily conversation in Nigeria.
Elvis Christopher, a Product Partnerships Executive, says, “This is perhaps the biggest headache since the inception of this naira redesign policy and the switch to digital/alternate channels. Most banks have instituted a feature called auto-reversal that has significantly reduced this issue but a lot more can still be done, to make sure there is the stability of the platforms.
“Customer care representatives at various institutions have complained bitterly over the rise in the number of complaints coming from failed transactions. A Tier1 bank even had to lodge some of their staff to work overnight and extra time just to reduce the backlog of failed transactions in their system. Good efforts but still far from the outcome. The 2-5 days period to resolving failed transactions is still not being met and creating distrust with customers.”
But, what are the common causes of failed transactions?
- Insufficient funds
- Network issues
- Incorrect or incomplete information
- Transaction limits
- Technical glitches
Insufficient funds occur when an individual attempts to make a transaction, but their account does not have enough funds to cover the cost. In such a case, the transaction will fail, possibly because they were expecting funds and did not wait to confirm.
Network issues are particularly common with electronic transactions, such as ATM or mobile banking transactions, requiring a reliable network connection. Poor network connectivity, downtime or system maintenance can cause a transaction to fail.
Another common cause of failed transactions in Nigeria is when an individual provides incorrect or incomplete information during a transaction. This can be due to a mistake or oversight and can result in the transaction being declined by the financial institution or service provider.
Transaction limits can also cause transactions to fail in Nigeria. Financial institutions or service providers may have certain limits in place for transactions, such as daily withdrawal limits or transaction limits. If an individual attempts to exceed these limits, the transaction may fail.
Technical glitches occur due to a malfunction in the system or technical issues with the service provider’s software or hardware. Technical glitches can also be caused by the use of incompatible or outdated devices, software, or browsers.
The CBN’s body language
On June 1, 2020, in a circular, CBN Revises Timelines for Dispense Errors, Refund Complaints, which took effect June 8, 2020, signed by former CBN Director, Corporate Communications, Isaac Okorafor noted that “in its determination to further enhance service quality, particularly quick refunds when customers experience failed transactions, dispense errors or disputes, has revised timelines for reversals and/or resolution of refund complaints on electronic channels, with effect from June 8, 2020, as follows:
“Failed “On-Us” ATM transactions (when customers use their cards on their bank’s ATMs) shall be instantly reversed from the current timeline of three (3) days. Where instant reversal fails due to any technical issue or system glitch, the timeline for manual reversal shall not exceed 24 hours.
“Refunds for failed “Not-on-Us” ATM transactions (where customers use their cards on other banks’ ATMs) shall not exceed 48 hours from the current 3-5 days. Disputed/failed PoS or Web transactions shall be resolved within 72 hours from the current five (5) days.
“All banks are directed to resolve the backlog of all ATM, POS and Web customer refunds within two weeks starting June 8, 2020.”
Anyhowness (you can’t make this up), however, is a motto in Nigeria, so that circular was just the move of one finger. It is 2023 and failed transactions still take weeks to be resolved.
And in our article on Wallets Africa, it was observed that failed transactions could take months – some of them remain unresolved.
Talking failed transactions
Discussing failed transactions is now important for several reasons. First, failed transactions can significantly impact the financial well-being of Nigerians. When a transaction fails, especially if it is large or important, it can result in financial losses, inconvenience, frustration, and the potential risk of identity theft and fraud.
By laying out the common causes of failed transactions and providing advice on avoiding them, individuals can take steps to protect themselves and their finances. This can help to promote financial stability and security in Nigeria.
Moreover, discussing failed transactions can also help to hold financial institutions and service providers accountable.
When individuals experience repeated failed transactions, it may indicate underlying issues with the systems or processes of the institution or provider. By bringing attention to these issues, consumers can push for improvements in Nigeria’s financial services’ quality and reliability. This can help promote greater trust and confidence in the financial system, ultimately benefiting all Nigerians.
Ultimately, talking more about failed transactions is an important step towards promoting financial literacy, consumer protection, and overall economic development in Nigeria.
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