Addressing Failed Transactions in Nigeria’s Cashless Drive

One of the biggest hurdles in Nigeria's push toward a cashless economy is the recurring issue of transaction failures, particularly where customers are debited in ATMs without receiving cash or declined transactions in PoS after being debited. Also, there have been cases of making bank transfers, the money leaves the sender's account without getting to the receiver's account. This challenge undermines public trust in digital payment systems and discourages further adoption. Resolving this issue requires collaborative efforts from banks, fintech companies, and the Central Bank of Nigeria (CBN).

Challenges with Failed/Declined Transactions

1. Poor Network Infrastructure: Unreliable network connectivity causes many failed transactions.
2. Overloaded Systems: With increased digital transactions, many banking systems struggle to handle the volume efficiently.
3. Delayed Refunds: Customers often wait days or weeks for failed transaction reversals, causing frustration and empathy on the use of digital platforms.
4. Inconsistent Standards: Variations in technology adoption among financial institutions result in incompatibility and inefficiencies.

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Strategies for Addressing Failed or Declined Transactions

The decline transactions, where customers' accounts are debited without cash being dispensed, can be frustrating and undermine system trust. Here are some steps that banks, fintech companies, and the Central Bank of Nigeria (CBN) can take to mitigate this problem:

 CBN’s Role in Addressing Faild/Declined Transactions

1. Regulations and Guidelines: Issue clear regulations and guidelines for handling declined transactions, including mandatory refunds within a specified timeframe (e.g., 24 hours) for banks and fintechs to reverse debited funds from failed transactions. Penalise institutions that fail to comply with these timelines.

2. Monitoring and Enforcement: Regularly monitor financial institutions and fintech companies to ensure compliance with regulations and take action against non-compliance.  

3. Public Awareness: Collaborate with stakeholders to educate citizens about digital payment systems, their benefits over cash, and how to handle issues efficiently. Conduct public awareness campaigns to educate customers about their rights and the steps to take when they encounter decline transactions.

4. Scalability Issues: Facilitate partnerships between banks, fintech companies, and telecom operators to improve connectivity. Encourage investments in robust payment processing infrastructure to handle higher transaction volumes.

5. Incentivise Digital Payments: Reward customers with points and charge reductions for using digital payment methods regularly. Offer discounts or reduced charges for digital transactions to encourage adoption despite initial challenges.

6. Establish a Unified Payment Platform: Develop a central payment gateway or clearing house to streamline digital transactions across banks and fintechs. Ensure interoperability among financial institutions to minimise failures caused by system incompatibilities.

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Banks and Fintech's Role in Addressing Failed/Declined Transactions:

1. Enhance Infrastructure: Banks and fintechs should invest in upgrading their ATM and Point-of-Sale (PoS) systems to ensure they are reliable and can handle high transaction volumes.

2. Customer Support: Establish dedicated customer support teams to address issues promptly and provide refunds or credits for failed transactions.

3. Transparency: Ensure clear communication with customers about transaction statuses and any issues that may arise.

4. Innovative Solutions: Develop and implement advanced algorithms and technologies to detect and prevent decline transactions.

5. User-Friendly Apps: Create intuitive and user-friendly mobile apps that provide real-time transaction updates and alerts, allow customers to track pending transactions, and initiate transactions directly.

6. Partnerships: banks and other financial institutions should collaborate more instead of competing in order to improve the overall payment ecosystem.

7. Strengthen Network Infrastructure: Deploy redundant systems to ensure seamless operations during network downtime. Use cloud computing and scalable technologies to accommodate peak transaction periods.

8. Implement Real-Time Transaction Monitoring: Set up real-time transaction monitoring systems to identify and address transaction failures immediately. Provide instant notifications to customers on the status of their transactions. Offer proactive customer support, such as live chats or helplines, to resolve issues faster.

9. Automate Refund From Failed Transaction: Automate the refund process using artificial intelligence and machine learning to identify failed transactions and initiate refunds without manual intervention.

10. Educate Customers: Conduct public awareness campaigns on how to report failed transactions and track refunds. Provide clear, simple instructions on using digital channels effectively.

11. Adopt Data Sharing: Adopt open banking APIs to facilitate seamless integration and data sharing.

Benefits of Resolving Transaction Challenges

Increased Public Trust: Customers will embrace digital payments more readily when their experiences are seamless and reliable.

• Economic Growth: Efficient cashless systems attract investment and drive innovation in fintech.
• Reduced Operational Costs: Banks and fintechs save costs on manual transaction reversals and customer complaints.

Conclusion

To achieve the vision of a cashless Nigeria, addressing the infrastructure challenges and transaction issues is critical. Collaborative efforts between the CBN, banks, fintech companies, and telecom operators can ensure a reliable and efficient payment ecosystem. By investing in robust infrastructure, adopting advanced technology, and prioritising customer satisfaction, Nigeria can build a cashless system that meets global standards and benefits all citizens.

What is your experience with failed financial transactions in Nigeria? Share in the comment below 👇