A bitter squabble brewing between MasterCard worldwide and the Nigerian transaction switching company, InterSwitch, may put the fate of electronic business in Nigeria – valued at N500 billion by 2008 figures – in jeopardy, a NEXT investigation has revealed.
The two electronic transfer companies are on a collision course, according to claims made by MasterCard over the use of its proprietorial “M/chip 4” application, which InterSwitch issues on its branded card called Verve.
The controversy
In a statement sent to Nigerian banks mid-October, Jason Coetzee, MasterCard’s Vice President for Business Development in Africa said “it has come to our attention that there is currently unauthorised use of MasterCard’s M/Chip 4 card application in Nigeria by InterSwitch on some Verve branded cards.”
Industry insiders told NEXT in Lagos at the weekend that what started as a quiet protest has snowballed into a huge corporate face-off between MasterCard and InterSwitch, leading top officials of InterSwitch and the Central Bank of Nigeria to head off to Europe “to negotiate with MasterCard over the M/Chip 4 palaver.”
NEXT gathered that the CBN’s role in the issue is to “help mediate an out-of-court resolution of the disagreement”, especially as MasterCard has promised to “protect and defend its intellectual property rights stringently and vigorously.”
However, the Chief Marketing Officer of InterSwitch, Tito Adeniyi-Aderoju, dismissed this claim as laughable, adding that her boss, Mitchell Elegbe, the chief executive officer of InterSwitch, “is in France, where he is attending the Gartner Conference”, and that “he is not with any CBN official.”
Mrs. Adeniyi-Aderoju described Mastercard’s allegation as “not true”, a claim that is at variance with the views of Ingrid Sahu, MasterCard’s Vice President of Corporate Communications. Mr. Sahu said he would not comment on the matter beyond the fact that “MasterCard is in discussion with InterSwitch Nigeria on the use of the MasterCard M/Chip 4 application and we are not at liberty to comment on the details.”
However, Akeem Lawal, the Chief Technology and Operations Officer of InterSwitch, described MasterCard’s concerns as “begging the question”. He said, since InterSwitch already has an EMV (Europay, MasterCard and Visa) certification that guarantees its legal status for local and international transactions, it is inappropriate for it to be accused of intellectual property abuses. Mrs. Adeniyi-Aderoju added: “It’s an amazing time for us and we’ve gone through so many battles because of this brand. But we will see how the fittest survive.”
A ‘near monopoly’
Experts fear that this corporate disagreement has the potential of making a mess of the CBN’s directive that banks should migrate to the Chip and PIN (smart) card, and possibly undermine Nigeria’s teetering financial sector where Interswitch holds a near monopoly in the smart card segment.
According to claims on the InterSwitch website, there are over 7,300 Automated Teller Machines (ATM) on the company’s network and it controls more than 12,000 Points of Sale (PoS) with 24 banks connected to the switch and 19 state governments relying on the platform for the collection of internally generated revenue.
The company is the largest transaction switching company in the country and the Federal Government also directed all its ministries, departments and agencies to migrate their financial transactions to the electronic domain from January this year.
The switch to the chip and PIN cards
White-collar crime experts attribute the pervasive ATM fraud in the country to the inherent deficiencies of the magnetic stripe cards to copy information, as they are not very flexible for business development and are easy to clone.
Back in August 2003, the CBN issued a guideline on electronic banking in Nigeria, stipulating a five-year grace period for banks to migrate from the use of magnetic stripe cards to the chip and PIN technology (smart card).
Following the CBN directive, InterSwitch went ahead to design the Verve Card, which is an EMV-compatible card. Information available on the CBN website described the EMV as “the global standard that is helping ensure smart (Chip-and-PIN) cards, terminals and other systems can inter-operate”.
According to a statement announcing the introduction of the Verve card on the company’s website, the new product is “accepted and being used across all available payment channels in Nigeria”.
Nov92009