Cost of managing cash in Nigeria too high – VoguePay boss

As a player in the e-payment market, what are your thoughts on the cashless policy introduced in 2012?

The cashless society is not only a policy but an enabler policy. I think it is brilliant. In my view, I think the CBN hasn’t gone further enough because if you look at the cost of managing cash in this country, it is quite high. Consider the percentage of business people who are still carrying cash. You just need to sit down at the petrol station and see a world of cash there. Everyone carries cash around and makes us a bit little backward.

I travel a lot and I go to many places both within and outside our own continent and I haven’t seen people carrying cash at the pump stations. Apart from the fact that it opens people to risk in terms of security, it spreads diseases. If you look at our money, these old monies are supposed to have been burnt.

Don’t you think that the cashless policy is moving as fast as expected?

One obvious reason is that the government, by nature, has the habit of only dealing or engaging with big companies. Big companies, whether big banks or others, are not in a hurry. They are very conservative. They are not agile and flexible because they are dependent on legacy systems. Some of our banks depend on programmers in India. Before they get authorisation and approval, it becomes proceedings. As a result, it is like you are trying to turn a massive trailer. That is not the best way to change things.

There are over one billion companies which only started about four years ago. Facebook was designed in 2005. Banks are not in the business of disrupting because whose market are they going to disrupt? Whereas our government is designed to speak with big banks rather than speaking to medium size energy-driven companies to get things done fast and efficiently. Those are the kinds of challenges we have. Moving forward, we will keep advising them as you need to speak with people underground and around.

How can financial theft be addressed in Nigeria?

We have experienced system attacks with very low success rate compared to industry figures. This is as a result of our investment in security and with our privilege in working with agencies like the FBI and the CIA. I think the challenge in Nigeria is that we compromise too often on standards. Even with all the frameworks we have put in place, we still back it up with insurance. But what tends to happen in most cases, in banks, is that someone in the bank has compromised and acts as insider.

We are also collaborating with other industry stakeholders via knowledge sharing. This includes taking steps towards working closely with them to have a reporting system among the processors, the security and the legal system.

What challenges have you noticed in the payment sector in Africa?

There is an obvious dearth of financial engagement within Africa, between Africans and the world at large. For example, most debit/credit cards issued in most African countries are not cross-continent and some are not even Internet-enabled; thereby limiting a large group of people, regardless of class from participating in cross-border fund transfers and transactions. Another major challenge we realised was that it is difficult to do business with the rest of the world. For example, it is easy to buy from overseas using PayPal, yet many Nigeria businesses that want to sell do not have a trusted financial platform to accept money from the international audience. That was one of the needs we built VoguePay to solve. To solve this market gap, VoguePay focuses on processing payments for business-to-business (B2B), business-to-consumer (B2C) and peer-to-peer (P2P) markets. This market audience cuts across religious institutions, schools, non-governmental organisations, brick and mortar businesses.

Another challenge is online fraud. We believe that international and local payment processors are not directly catering to people in Africa due to their lack of understanding of the diverse cultural elements of doing business in the continent, especially the high fraud rate. For example, most international payment gateways offer a single swap for transaction which makes it highly susceptible to fraud as there is no second-level authentication required for transactions to take place.

 When talking about e-transactions, what is peculiar about the SME market segment?

You will notice that the adoption of e-Commerce has accelerated online payment and many businesses are springing up to tap to this opportunity. While it is promising, small businesses cannot afford the integration cost of primary gateways, which is currently at $682 (N150, 000) per gateway. With the cost of development added, many SMEs will be set back by $1,500 before launching e-Payment on their websites. The impact of this imbalance is severe to small businesses in Nigeria and Africa in general.

That is why we are focusing on helping SMEs power their online payment infrastructures by offering free online payment integration; the estimated market audience is 20 million. We are enabling international companies to tap into Africa’s vast market by providing the capabilities to collect, convert and repatriate in one single sweep. We are at the frontiers of international trade and provide fund transfer services by collecting payments in local currency and paying out in major internal currencies

What is the place of collaboration in the fight against cyber frauds?

On security collaboration and advocacy, we are helping security agencies deal with online fraud at a global scale. For example, our fraud control team has identified a pattern of criminals bypassing the card issuer’s authentication system by spending multiple small value transactions across different geographical locations. These go without investigation by the cyber-security authorities due to the small transactional values involved. However, collectively this represents high value cyber-fraud, especially for small businesses.

Because of this, there is need for collaboration among payment processors, card issuers and security agencies in terms of reporting and investigating incidents and apprehending perpetrators. That is why we are championing stronger cross-continental collaboration between payment processors, card issuers and security agencies in reporting and investigating incidents and apprehending perpetrators. For example, a criminal gang wanted to exploit the lack of cross-country coordination when it comes to fighting cyber-crime by using a card issued in the United States to perform transactions on a website that is powered by VoguePay in the UK via a merchant in China. The majority of victims are the owners of small businesses that don’t have the resources or capabilities of larger companies to absorb such losses. This is where we play a crucial role to Voguepay’s users, helping to prevent and deter transactions that could prove to be fraudulent.

How can we use technology to reduce fraud? What is your advice to Nigerians so that they don’t fall victim of e-fraud?

We need to put things into professionalism. If you carry out a research and see how many people are getting robbed while carrying cash in this country, you will come to the conclusion that people are losing more money through cash carrying than what they lose online. If you compare the two, there is no doubt that the online fraud issue is a challenge to everyone. It is not only unique to our country or our continent, it is worldwide.

Users should take personal responsibility not to disclose their card details to avert frauds exploiting this confidential information. We have noticed cases of unauthorised usage of cards within families and co-workers. Also, when you are creating pins, always try to include a symbol so that it is not just words or mere numbers and include a symbol in your password. You have to be very careful where you use your card online; a major culprit is public café. Finally, when you get those fishy emails, be extremely careful. Don’t click on any link if in doubt.

 Security is the key concern in online payment. How does your payment gateway check against online frauds?

VoguePay deployed four pillars of security framework that include anti-money laundering, buyer and seller protection programme, security of our platform and collaboration with other industry stakeholders.

tax and our economy.........taxation

Tax Laws and Economic Development
Musa (2009) opined that economic and social development laws and policies provide the basis
for effective state action that lifts society from underdevelopment, improves the standard of
living and facilities for the realization of the millennium development goals. Nigeria is in dire
need of solution to its development challenges. Good laws that are well implemented would
contribute to the resolution of these challenges. The first thing to do in this scenario is an attempt
to review the implementation of the identified laws like the company income tax, petroleum
income Act and tax reform Act. The second thing is to get the relevant legislative committees
and ministers, departments and agencies involved give account of their respective
stewardship/roles in implementation of the law. Ariyo (1997) in his study on productivity of the
Nigerian tax system and reports a satisfactory level of productivity of the tax system before the
oil boom. The advent of the oil boom encouraged some laxity in the management of non-oil
revenue sources like the company income tax, which was rectified to a reasonable extent with the
commencement of the structural adjustment programme. The report underscores the urgent need
for the improvement of the tax information system to enhance the evaluation of the performance
of the Nigerian tax system and facilitate adequate macroeconomic planning and implementation.
Sani (2005), the Executive Governor of Zamfara State stated that tax system as a whole is an
embodiment of contention and controversy whether in its policy and formulation, legislation or
administration. Similarly,the objectives of the tax system are multi-dimension in nature which
include revenue generation, resources allocation, fiscal tool for stimulating economic growth and
development, social function, like redressing the rural-urban population drift as well as making
everybody to be a responsible citizen in the society.

The Joint Tax Board was created in the tax law by section 27 of Income Tax Management Act
of 1961 to harmonize the tax administration of the country. It needs to be appreciated that the
tax system offers itself as one of the most effective source of revenue and that it tends to create
an environment conducive to the promotion of economic growth. However, the potency of the
tax system will depend greatly on the tax measures and policies adopted. Sani(2005) opined at
prompting ambition, rewarding success, encouraging private savings and investments needed to
create new jobs and kindling in the people that spirit of enterprise. The regulation of Nigerian
economy should also be the basic function of the tax system. Taxes should in the main be aimed
at creating the proper atmosphere for economic growth. According to the traditional Keynesian
philosophy, one of the most effective ways of doing this is to adopt taxes that affect consumption
and demand. The idea is to use taxes as a deflationary device. As a developing economy with
small and insufficient internal productive capacity, we are likely to import the greater percentage
of prevailing inflation from abroad; we will also need to restrain imports with the use of taxes
where circumstances demand. Taxes should further be used selectively to induce and encourage
nationally desirable economic activities, and may be offered to promote the development of
backward areas of Nigeria. Sani concluded that tax concessions must be given and framed so as
to ensure the companies actually carry out the underlying intention of increased economic
development if the tax authority is to avoid the criticism that tax concessions only offer tax
loopholes through which the agile tax prayer can maneuver.
United Nations (2000), expert group stated that tax revenue contributes substantially to
development and therefore, there is the need to streamline a nation tax system so as to ensure the
realization of optimal tax revenue through equitable and fair distribution of the tax burden. The
stark reality in most developing countries is that whilst there is severe budgetary pressure as a
result of ever increasing demand for government expenditure, there is a limited scope for raising
extra tax revenues. Non-compliance problems with corporate persons result from technicalities
and tax avoidance, poor record keeping and cash transactions.
Desai, Foley and Hines (2004) stated that governments have at their disposal many tax
instruments that can be used singly or in concert to finance their activities. These tax alternatives
include personal and corporate income taxes, sales taxes, value added taxes, capital gain taxes
and numerous others. It is not uncommon for a country to impose all of these taxes
simultaneously. In choosing what tax instruments to use and what rates to impose, governments
are typically influenced by their expectations of the effects of taxation on investment and
economic activity, including Foreign Direct Investment (FDI) they stated that there is extensive
empirical study that high corporate income tax rates are associated with low levels of FDI. The
empirical results indicate that high tax rates on company income tax are associated with reduced
foreign direct investment by multinational organizations.

{WIZTOL}: PUBLIC FINANCE: SOLUTION TO ECONOMY DEVELOPMENT

{WIZTOL}: PUBLIC FINANCE: SOLUTION TO ECONOMY DEVELOPMENT: SCOPE OF PUBLIC FINANCE The scope of public finance may be summarized as under:         I.             Public Revenue       II.     ...

FRAUD AND BANKS DEVELOPMENT IN NIGERIA

Fraud has been the precipitant factor in the distress of banks, and as much as various measures have been taken to minimize the occurrence of fraud, it still rises by the day because fraudsters always device strategic ways of committing fraud. This has become a point of great attention in the banking world. The high occurrence of fraud within the banking industry has become a problem to which solution must be provided in view of the large sums of money involved and its adverse implications on the economy (Fadipe-Joseph and Titiloye, 2012). However, Ojo (2008) say that bank frauds is a serious impediment in the organizational growth of a bank as it leads to bank distress because fraud reduces the deposits of depositors and ultimately lead to the erosion of the capital base of banks. An author Ogubunka (2003) opines that bank fraud as lead to bank distress which has become a common glossary in Nigeria leading many banks to fail in the period of 1994 through 2003. Bank distress is the forerunner of bank failure, whereas a bank in distress could have chances of regaining health, a failed bank loses every chance of life.

There is a common agreement amongst criminologists that fraud is caused by three elements called “woe” (Idolor, 2010) for any fraud to take place there must be a will, an opportunity and exit, he further went ahead to say that a fraud will only come about if the perpetrators have the will to commit the fraud, if there is a way out or escape means from appropriate sanctions or institutions that are against fraud or related abnormal behavior (Akinyomi, 2012)
Recent literature categories fraud by the person conducting it and differentiates between first party and third party fraud. In first party fraud, a legitimate customer betrays the bank, whereas in the third party fraud, the customer becomes a victim of criminals who steal identities use lost
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or stolen cards, counterfeit cards or gain unauthorized access to customer account by other means (Gates and Jacob, 2009, Greene, 2009). However (Orad, 2010) even claims that the internet allows criminals to organize as a network, supporting each other in their attacks. Fraudsters are particularly interested in accessing customer‟s online bank accounts. A common practice to steal access data is “phishing”, where an email from an allegedly credible source is sent to bank customers requesting sensitive information such as their username or password. During recent years, phishing has become a significant threat to online security (Bergholz, 2010). Since credit cards have become a major payment instrument for web based transactions, they have attracted great attention of fraudsters (malphrus, 2009).
Akinyomi (2010) view fraud as the act of depriving a person underhandedly of something, which such a person would or might be entitled to but for the perpetration of fraud in its lexical meaning, fraud is an act of trickery which is intentionally practiced in order to gain illegitimate advantage. Therefore, for any action to constitute a fraud there must be deceitful objective to benefit (on the part of the perpetrator) at the disadvantage of another person or group. Fraud typically requires stealing and manipulation of accounts, frequently accompanied by cover up of the theft. It also involves the translation of the stolen resources or property into own resources or property.
In view of the gravity of fraud in banks, the management of various banks had employed different measures, such as establishment of internal control unit, fraud alerts, security measures etc.., yet fraud has continued in an upward trend, and this has called the effectiveness of these measures into question (Okubena, 1998). Young (2002) says that, ample evidence exists that individual integrity of those running the banks today has never been at a higher level. Never before have we seen attention to the actual steps; procedures and control of monetary
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transactions. Employees‟ as well as firms in all industries and banking activities engage in fraudulent practices all over the world. Furthermore, Adeoti (2011) said that fraud is a global occurrence; it is not peculiar to the banking industry or for that matter, peculiar to only Nigeria.
Ogidefa (2008) reported that the problem of fraud in our banking system may have some attachments which are:
a. Bank malpractices
b. Failure to appoint trusted and honest official as the representative in the clearing house
c. Failure to change representative on regular basis
d. Failure to provide locked boxes or bags for carrying cheques to and from the central banks
e. Inadequate training facilities for clearing staff both in the offices and central bank
f. Negligence in checking clearing cheques from the banks to avoid a case of possible short change of cheque
According to Eseoghene (2010) there are various types of frauds perpetrated in banks which embezzlement is a form of fraud which involves the unlawful collection of monetary items such as cash traveler‟s cheque and foreign currencies. It could also involve the deceitful collection of banks assets such as motor vehicles, computers, stationary, equipment and different types of electronics owned by the bank. While defalcation, involves the embezzlement of money held in trust by bankers on behalf of their customers. Defalcation of customers deposits either by conversion or fraudulent alteration of deposit vouchers by either the bank teller or customer is the common form of bank fraud. Where the bank teller and customer collude to defalcate, such fraud is usually neatly perpetrated and takes longer time to discover. They can only, easily be discovered during reconciliation of customers bank account.
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2.2 THEORETICAL FRAMEWORK
2.2.1 CAUSES OF BANK FRAUD
Causes of bank fraud can be classified into institutional and environmental factors
Institutional factors