System upgrades leave bank customers frustrated

For some weeks, bank customers have been struggling to access their funds due to the network disruptions that accompanied the ongoing core banking applications. Many transactions were botched and investment firms saw their operations stalled, JUSTICE OKAMGBA writes

In an email, Optimus by Afrinvest warned customers that they might experience temporary transaction delays due to Nigeria Inter-Bank Settlement System and some banks’ downtime.

The mail partly read, “We would like to inform you about some temporary delays in processing withdrawals. This is due to an issue with NIBSS (Nigeria Inter-Bank Settlement System), as well as downtimes from certain banks, including GTCO, Zenith, Sterling, Stanbic, and Standard Chartered. If your Optimus by Afrinvest account is linked to any of these banks, you might experience delays in receiving funds in your bank account or depositing funds in your wallet.

“We sincerely apologise for any inconvenience this may cause. Rest assured, we are actively monitoring the situation and will update you as soon as everything is back on track.”

Investment firm, i-invest, which is into treasury bills, stocks and other investment services,  also informed customers that a planned upgrade by its partner bank would affect its operations.

The firm said, “This is to inform you about a planned upgrade that may temporarily affect your transactions. To improve your experience, our partner bank will undergo maintenance, which may cause delays or disruptions in funding and withdrawals.

“The upgrade is scheduled from 12:00 am on Sunday, October 13, to 9:00 am on Monday, October 14, 2024. We apologise for any inconvenience this may cause and appreciate your patience.”

In recent weeks, some banks have announced the completion of their technology upgrades, while others are still navigating the ongoing migration. The disruptions caused by the system upgrades have left many customers unable to access essential banking services, raising concerns about the banks’ overall preparedness.

Before the widespread system upgrade, which primarily seeks to improve customer experience, banks had over the years relied on foreign companies to manage their IT infrastructure, spending significant amounts on maintenance in foreign currencies.

However, some financial institutions, like Sterling Bank, have started shifting toward locally developed solutions.

The tier-2 lender with a market capitalisation of N115.16bn, according to the latest industry data, switched from the Switzerland-based Temenos T24 system to SeaBaaS, an indigenous solution developed by Peerless.

It began its system upgrade to the new SeaBaaS in August, completing it in September. The upgrade left more than 3 million of its customers unable to access any of Sterling’s banking channels during the transition.

“The migration process is inherently complex and daunting,” IT expert and Head of Marketing at MIM Finance, Bobola Ojo-Ami, told The PUNCH.

“Banks can never be 100 per cent prepared; the initial planning only equips them for what lies ahead. It is during the actual migration that they face the real challenges.”

GTBank, a tier-1 bank, transitioned from ICS Financial Services to India’s Finacle system by EdgeVerve Systems.

The bank warned its customers of potential service disruptions on October 13. Meanwhile, Access Bank postponed its system upgrade, initially scheduled for October 12, to avoid further inconveniences.

Zenith Bank also faced similar challenges, with customers experiencing login issues for three days following an October 1 system update.

FirstBank customers encountered even longer delays, unable to access digital services for six days due to their upgrade.

IT expert Ojo-Ami argued that a vital component of the migration process for large banks was a robust business continuity plan, which included the capability to roll back to the previous system if the new one presents significant challenges or hampers service delivery.

While having a rollback option was essential, he cautioned that it was not always straightforward.

According to Ojo-Ami, in some cases, it may be more effective for banks to persist with the new system rather than revert to the old one.

Another crucial aspect of the system upgrade involves post-migration testing and staff training, which could take an additional one to two months.

As the new system goes live, ongoing monitoring continues to ensure operational efficiency and data integrity.

He explained that banks were transferring the data of millions of customers across various platforms and hundreds or thousands of branches.

He stated that the bank also needed to train thousands of staff members on the new systems, and there may be hardware infrastructure changes required to accommodate the new technology based on specific requirements.

Communication gaps

Customers have reported on different channels, including social media, that some banks failed to provide prior notice before embarking on the upgrade process.

Frustrated customers lament that those outages not only hinder access to banking services but also significantly impact their trust in the institutions, which was considered the most valuable currency in banking.

Ojo-Ami stressed the need to inform customers about any temporary solutions or alternative routes for assistance during the migration.

He advised that banks must also communicate any periods when they would be unavailable due to prioritising migration tasks, ensuring customers were aware of what they could do during those times.

“This level of transparency reassures customers that they are valued and that the bank is committed to serving their needs throughout the migration process. “Without this clarity, customers may feel disenchanted and consider switching to another bank, as trust is the most critical currency in banking,” Ojo-Ami added.

Artificial Intelligence Researcher at RealSearch and Partners Inc., Enakirrerhi Truthful, told The PUNCH that banks failed to prepare for worst-case scenarios during the upgrades.

Truthful stated that the disruptions affected businesses and delayed personal transactions, underscoring the need for more robust scenario planning.

“This outage also revealed a lack of contingency planning. What happens if things go south during an upgrade? Do we have a backup plan? For many of the banks, the answer appears to be no.

“We saw firsthand how much we depend on our banking system for our daily lives. People couldn’t pay for groceries, businesses couldn’t settle payments, and even international transactions were affected. This wasn’t just about technical glitch; it impacted commerce, security, and even our confidence in the financial system,” he lamented.

System upgrade necessary

The Executive Director at Financial Services Innovators, a non-profit organisation of over 3,500 innovators, Aituaz Kola-Oladejo, told The PUNCH that upgrades were imperative for optimising resources, enhancing efficiency, and reducing vulnerability to attacks and fraud.

“I believe the upgrade is essential as digital technologies evolve and the volume of digital financial transactions grows exponentially.

“Financial institutions must conduct stress and capacity tests on the resilience of their systems,” Kola-Oladejo stated.

She added that the upgrades were crucial for addressing vulnerabilities that fraudsters exploit and improving the overall customer experience.

The National Bureau of Statistics revealed that the banking sector contributed 16.36 per cent to Nigeria’s real GDP, which grew from 2.98 per cent in Q1 to 3.19 per cent in Q2 2024.

Speaking with The PUNCH, the co-CEO of XChangeBOX, Abiola Jimoh, pinpointed the need for timelier infrastructure improvements.

He noted that while the upgrades were necessary to enhance banking services, the delays in updating key systems are hurting customer confidence.

“Banks are working to improve their systems, but these upgrades should happen more regularly. Unfortunately, what we are seeing is that while we have made progress in banking services, we are still struggling significantly with infrastructure,” he asserted.

Fintechs to the rescue 

In the peak of the downtime, many customers sought alternatives by turning to fintech platforms, such as OPay, PalmPay, and Monie Point for their financial transactions.

This trend mirrors the situation experienced during the naira redesign by the Central Bank of Nigeria and the subsequent cash crunch two years ago.

Jimoh praised the role of fintech in alleviating some of the pressure, noting that newer, tech-driven banks helped during the system disruption.

“If not for the new banks and fintech players stepping in just like they did during the cashless policy period, the situation would have been much worse,” he said. “These delays affect trust in the entire banking ecosystem.”

Jimoh saw fintech as a critical partner in driving sustainable growth in Nigeria’s banking sector.

“Fintechs are helping to complement the efforts of traditional banks. We need to continue supporting them to ensure better user experiences and greater stability in the system,” he added.

The Nigeria Inter-Bank Settlement Systems reported that licensed mobile money operators, such as OPay, PalmPay, and 15 others, processed a staggering N46.91tn in transactions in 2023.

With Nigeria’s population estimated at over 200 million; Jimoh believed there was still room for growth in the fintech space to meet the country’s banking needs.

“Compared to other nations, we don’t have enough fintech or banking institutions to fully serve our people. The sector is still evolving, and it needs continuous support for sustainable growth,” he stated.

He noted that while major brick-and-mortar banks faced significant downtime, fintech firms continued to operate seamlessly.

At the end of 2023, Nigeria saw a remarkable increase in cashless transactions, which surpassed N600tn up from N395.38tn the previous year.

The shift towards digital payment methods continued into 2024, with the first quarter witnessing an 88.09 per cent growth, bringing total transactions to N237tn.

Corroborating the thoughts of Jimoh, AI researcher Truthful said largely digital fintech companies remained functional while the big, largely brick-and-mortar banks were down.

“I remember using Opay’s app and noticing their notification about GTBank’s upgrade; ironically, it wasn’t even GTBank that informed me. In fact, I know a couple of guys who have switched their banking service providers due to this issue. This is a wake-up call for the traditional banks—if they don’t adapt and improve,” he stated.

Truthful emphasised that the operational efficiency of fintech companies highlighted a pressing need for traditional banks to enhance their infrastructure and service delivery.

IT upgrade spending

In the first half of 2024, five major Nigerian banks collectively invested N178.77bn in enhancing their information technology infrastructure, according to the analysis of their financial statements.

Zenith Bank, Access Bank, Guaranty Trust Holding Company, Wema Bank, and United Bank for Africa demonstrated a strong commitment to upgrading their digital capabilities, with IT investments increasing by an impressive 203 per cent from N58.8bn during the same period last year.

A closer look at the IT spending reveals that Zenith Bank allocated N23.10bn for technology improvements in H1 2024, marking an increase of 166.54 per cent compared to N8.67bn in the first half of 2023.

Wema Bank’s investment in technology and alternative channels reached N1.13bn, a 59.03 per cent rise from N708m in the corresponding period last year.

UBA’s IT expenses surged by 248.20 per cent, climbing to N6.70bn in H1 2024 from N1.93bn in H1 2023.

Access Bank emerged as the highest spender on IT, investing N111.24bn—an increase of 264.55 per cent from N30.47bn the previous year.

GTB reported a 115.12 per cent rise in IT-related expenses, amounting to N36.60bn in the first half of 2024, up from N17.02bn during the same period in 2023.

In August, many financial institutions announced their plans to raise capital, with intentions to allocate $1.20bn of those funds toward technological investments and bolstering their cybersecurity measures.

Conclusion

The digital transformation currently taking place in Nigeria’s banking sector underscores the industry’s ability to adapt and prioritise technological advancements.

Although there have been some short-term challenges; Nigerian banks are strategically positioning themselves for future growth by aligning with global trends while fostering local innovation.

These technological upgrades may create initial obstacles, but they reflect a strong commitment to enhancing innovation and improving cost efficiency within the sector.