How CBN Revolutionized Payment Systems in Nigeria

The Central Bank of Nigeria in collaboration with the Bankers Committee, Nigeria Inter-Bank Settlement System and other payment industry players have enhanced the payment systems by continuously providing solutions to increase the resilience of infrastructure to encourage the usage of electronic payment methods across the nation, writes Oluchi Chibuzor

With a population of over 200 million people and a large percentage with access to financial services, it has been said that Nigeria has the largest economy in Africa with significant opportunities for businesses willing to expand in the country. There is no doubt that over the years, with the provision of favorable regulatory policies by the Central Bank of Nigeria (CBN), Nigeria has made great progress in creating a robust payment system through several reforms targeted at growing the system. In providing a sound payment system infrastructure, where stakeholders and customers can consummate business transactions with confidence, trust and timeliness, the Central Bank of Nigeria in collaboration with the Bankers Committee, Nigeria Inter-Bank Settlement System (NIBSS) and other payment industry players have enhanced the Payment Systems by continuously providing solutions to increase the resilience of infrastructure to encourage the usage of electronic payment methods across the nation. These efforts have over the years added value to our economy as Nigeria leads in payment systems across the world. Indeed, Nigeria has leapfrogged ahead of a number of advanced economies in the area of payment innovation, especially Instant payment. In 2011, as at the time most small & medium enterprises and other service providers in the country desired a payment platform that delivers instant value; Nigeria demonstrated its quest as a forward-looking country with a vibrant financial & payment service industry. Through the mandate of the Central Bank of Nigeria to ensure the safety and stability of the Nigerian financial system, a faster, simpler and a more efficient means of payment was birthed. The introduction of the NIBSS Instant Payment (NIP) platform transformed the way Nigerians choose to pay for goods and services at all levels. Leveraging this, NIP has provided more opportunities for financial institutions and other players within the ecosystem to innovate and provide more options for payments.

Bank Verification Number

Then came another national initiative launched by the Central Bank of Nigeria, Bankers Committee and implemented by NIBSS in 2014; the Bank Verification Number (BVN) was developed to harmonize the financial sector and improve banking operations, enhance credit advancement to Bank customers and also encourage financial inclusion. With strong collaboration across the ecosystem, NIBSS facilitated the growth and proliferation of BVN with the management and issuance of unique identification number to Bank customers across the country. In 2015 and 2019 respectively, the Industry Fraud and Trapped Card portals were developed by NIBSS as portal services provided to the financial industry for stakeholders to monitor and report fraud; and for proper management of debit/credit cards trapped at various ATMs across stakeholders’ service point. Addressing the need for speed and transparency in platform integration & certification as well as industry efficiency for KYC, in 2020 and 2021 respectively, NIBSS created an Industry Sandbox and a centralized Address Verification service that gives access to all NIBSS services in a single suite and allows financial institutions proactively carry out KYC (Know Your Customer) to verify their customers respectively.

Payment experts have commended the introduction of these innovative solutions pointing out that the Nigerian payment system has evolved significantly over the years leveraging the wide spread technology advancement to simplify payments and deepen financial inclusion. Sequel to the COVID-19 Pandemic, globally, research had shown a major shift to contactless payment options with a number of countries like China, India, Thailand, Ghana, Singapore, Malaysia pioneering solutions with Quick Response Code. To bridge the gap within our fast-evolving payment landscape, Nigeria has not been left out as recently we saw the entrance of a National Quick Response Code (NQR); another initiative driven by the Central Bank of Nigeria (CBN) and implemented by Nigeria Interbank Settlement System Plc (NIBSS).

Integration process for financial institutions

With NIBSS providing efficient integration process for financial institutions to leverage APIs, NQR delivers instant value for P2B, P2P and B2B transactions with a more improved customer experience. This payment option has empowered Bank customers who own smartphones to easily access information provided by merchants for the purpose of making payments. It had long been recognized that the competition is indeed cash and we believe that cash is overripe for disruption, thus as a nation, we must embrace a cashless economy, encourage the provision of platforms to enable seamless transactions to boost business expansion where cash is efficiently disrupted. Consequently, the Nigeria payment industry has continued to introduce initiatives geared towards creating convenient ways of making payments and extending electronic payment benefits to Nigerians even at the bottom of the pyramid where usage of cash has been predominant.

Payment’s value chain

1. How many participants do we have in the payment’s value chain? There are multi-variant and inter-dependent participants in the payments value chain ranging from ➢ Deposit Money Banks (24); ➢ Merchant Banks (6); ➢ Non-Interest Banks (3); ➢ Mobile Money Operators (16); ➢ Switching & Processing Companies (13); ➢ Card Payment Schemes (7); ➢ Payment Solution Services (39); ➢ Payment Terminal Services Providers (19); ➢ Super agents (19); ➢ International Money Transfer Operators (47); ➢ Payment Service Banks (5); ➢ Micro Finance Banks (887); ➢ Finance Houses (106); ➢ Primary Mortgage Banks (34); ➢ Development Finance Institutions (6); ➢ Holding Companies (7

2. What is NIBSS’ role and every other participant’s role in the payment’s value chain?

• NIBSS is a critical shared service provider and National Central Payments Solution for Nigeria.

• NIBSS is the processor and manager of the Bank Verification Number which is the bedrock for customer identity, Know Your Customer (KYC) and due diligence in financial institutions.

• Within the Payment processing space, NIBSS is a routing agent for outward payment push from transaction originating institutions to beneficiaries receiving institutions and vice versa for collections.

• We facilitate the settlement of all payment schemes in conjunction with the CBN to avert industry exposures.

3. Under what circumstances can NIBSS or any of the participants be held responsible for delayed or failed transfers/transactions?

• Delays are relative, as it is the responsibility of every player in the financial system to ensure due diligence in mitigating risks.

• Transfers sometimes fail when the receiving institution is not available to apply funds

• Transaction failures not occasioned by system glitches are fool proof of the resilience and reliability of the payments processing system and it is positive to the industry.

• Also, there is an Industry process regulated by CBN for addressing delay or failed transactions.

Other reasons include: • Unfunded customer’s account • When a transfer limit is exceeded or an account is blocked from receiving inflows.

4. When there is transfer reversal failure, what are the possible causes? And which member of the value chain is responsible to activate reversal?

• Transfer reversal failure will occur when the owner of the account to be

debited fails to authorise debit into his/her account. Where this happens, the resolution of reversals goes into Dispute Resolution via the Industry Dispute Resolution System (IDRS) domiciled in NIBSS as an industry wide service

• The processing Bank is expected to reverse failed transactions instantly or within 24hours in line with Industry SLA (maximum period is 72hours in line with CBN regulations) .

• The person/customer that initiated the original transaction is responsible for activating reversal through his/her financial services providing institution.

• For electronic transactions the expectation is instant reversal or within 24 hours and if this didn’t happen the account holder should visit his/her bank to log it as a dispute, this should be treated within 72 hours.

5. We have noticed some stability within payment processing, in recent times, what has NIBSS and the Central Bank done to elevate the speed of transactions.

• Standards and operational procedures are set in collaboration with critical stakeholders who are constantly engaged through several stakeholders’ fora at which everyone gives their inputs.

• Infrastructure Capacity Enhancement: All players have also committed to improve on their network and infrastructural facilities.

 • Monitoring Tools: NIBSS has provided to stakeholders a real-time solution for proactive monitoring of transactions and uptime.

• Collaboration and partnership with banks and industry stakeholders.

 • Dedicated teams to resolve challenges proactively and as they occur.