Sunday October 17, 2021 / 8:37 PM / By Adaeze Nwachukwu & Abdulqudus Isiaka, Proshare Research / Header image credit: Access / Ecography
Cross-border payments and settlements becoming increasingly important taking into account the Agreement on the African Continental Free Trade Area (AfCFTA) starting in January 2021, Access bankrecently introduced a travel debit card that its customers could use to access foreign currency outside of Nigeria.
In addition to the AfCFTA, the card was created in response to the Central Bank of Nigeria (CBN) instruction that all depository banks (DMBs) respond to legitimate personal travel allowance (PTA) exchange requests. and business travel allowance (BTA). According to the bank officials, all legitimate and approved PTAs or BTAs would be credited to the travel debit card for use outside of Nigeria as of October 18, 2021.
Retail banking in a recent press release stated the following benefits of the new debit card:
- Instant issuance for PTA / BTA requests
- Easy access to international transactions via POS, ATM and WEB
- The card is valid for 3 years and can be used for ongoing and subsequent PTA / BTA requests during its validity
- All unused funds remain in the card and can be used for international transactions or onward travel
According to the bank, it has always demonstrated preperation to compete for first place in the Nigerian banking sector. Following of them successful Eurobond issues and the completion of a major continental acquisition (the acquisition of BancABC in Mozambique), and the recent launch of its latest product- the Access Travel Debit Card, the bank may have grabbed the thunder of their local Tier 1 rivals.
A travel card and its difference
Access Bank executives observed that the travel debit card is slightly different from the bank’s credit card which has different classes and different daily limits. The main difference is that, unlike credit cards that can be used at point of sale and web-excluded ATMs, which are not eligible for international transactions, the travel debit card, however, could be used. on all three platforms (POS, Web and AU M).
Although the introduction of a travel debit card seems new to the banking public, its features are not far behind international debit cards issued by other commercial banks.
The tastes of FCMB, Zenith Bank, GTCO, and First Bank of Nigeria (FBN) have both virtual and physical cards that are used for international transactions outside of conventional home account transactions
(see illustration 1 below).
Illustration 1: Nigerian Bank Tier 1 International Debit Cards
Understand the benefits of international debit cards
Stop Round trip
Before the CBN decides to Stop sales of change (FX) To exchange office (BDC), the was a turning point a door between commercial banks and BDCs, Marlet analysts speculated that banks preferred to sell FX through affiliated BDCs to increase global company margins. Business observers, therefore expressed his skepticism about the effectiveness of new CBN directive, nevertheless, banks have since stepped up to the plate and established various FX counters in their branches.
In a letter sent to customers, Bank access said he had “…created a simpler process to access FX through the Access Travel Debit Card“.
On its face value, the new travel card does not speed up the process, as it does not exactly introduce the automation of the submission of Form A and other documents. However, allowing customers to keep FX in their accounts, the newly introduced card could potentially reduce the number of applications. A widely held belief is that the FX application process is cumbersome and time-consuming for which customers party with more Naira for less dollars for the immediacy offered to BDCs. The convenience factor explains the large number of FX buyers who flock to BDC and therefore The travel debit card offers a convenience bonus.
With the trip debit card, travelers do not have to carry physical dollars. Travel cards are designed to allow the holder to access the assigned PTA from ATMs outside of the country, ensuring the security of funds. Yes the map is stolen card holder could contact the bank to ask them to block the card.
Cashless Policy and COVID- 19
The CBN’s cashless policy had always aimed to minimize the amount of physical money flowing through the economy and as an alternative encouraging electronic payment. Analysts argue that the new travel card supported the digital initiative of CBN. In addition, with the reducein circulation of cash dollar invoices on potential transmission rate of communicable diseases such as COVID-19 would be reduced.
Easy access to international transactions via POS, ATM and WEB
Similar toexisting cards linked to a domiciliary account, Access bank The travel card allows cardholders to access their funds through ATMs as well as ATMs and on the web.
Who benefits from the new Access travel debit card?
Nigerians have moan in pain of the naira in rapid decline. A the angry governor of the CBN threatened to take legal action against some BDC information platform the owners to quote FX platform for what Governor Emefiele called mmarket manipulation. Since then, the Naira has continued to slide in the parallel market. For example, since the 15the In October, it is said on the street that BDC sold the Naira at N570 for US $, making the parallel premium around N160.
Vice President Yemi Osibanjo’s statement recently sparked further depreciation of the domestic currency at the Importers and Exporters Exchange Counter (I&E FX). According to Professor Yemi Osibanjo, the current CBN demand management strategy has encouraged profit from arbitration and deterred business activities and discouraged foreign investment. (see table 1 below).
Graph 1: Week-to-week movement of the Naira / US $ at the I&E FX window rate
Source: FMDQ, Proshare Research
Analysts welcomed the introduction of Travel debit menu; business observers believe that if the CBN adopted the travel card as the sole medium for the allocation of PTA / BTA life would be stifled rent seekers.
Travelers expressed optimism In regards to Access Banks Debit Card. The new travel card would have allow eligible customers to get dollars in a FX account from which withdrawals could be done only outside the country.
Currency observers believe that the Ddebit vsard would have encourage travelers and importers who deplore the delay and the relative difficulty of obtaining FX by banks.
The important questions to which Access bank and its stakeholders must answer are strategic. For example, is Access bank considering a larger share of the PTA / BTA FX transactions? Would owning the new debit card be a strong enough proposition to influence customers? If cardholders only need to renew their card after three years, will it be a free card or will there be a foreign transaction fee?
The adoption by the CBN of a card transactions policy only for PTA / BTA, tuition and medical fees accessible only outside the country would have a beneficial impact on the country’s foreign exchange position.
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