Nigerian South African Chamber of Commerce

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THE FUTURE FINANCIAL SERVICES IN NIGERIA

Posted on: 11 Apr 2017

The Nigeria Inter-Bank Settlement System Plc (NIBSS) was set up by the decision of the Bankers Committee in 1992, as a Shared-Service infrastructure for facilitating payments finalities, streamlining Inter-bank payments and settlement mechanisms, to drive and promote Electronic Payments across the Nigerian Financial Industry.

Incorporated in April 1993 it commenced operations in June 1994 by deploying state of the art technologies to complement the Central Bank of Nigeria (CBN) payment activities and has since driven and contributed immensely to the growth of the Nigerian Payments System. NIBSS continues to drive collaboration with all Nigerian Banks, Card schemes, Processors, Payment Terminal Service Providers (PTSPs), Mobile Money Operators (MMO), Telecommunication providers and other Payment Service providers to improve adoption of Electronic Payment in Nigeria.

NIBSS operation is supported with the best Information, Communication and Technology infrastructure for Automated On-line operations as well as effective information and data transmission security practices to deliver world-class payment/settlement services. Operational and Credit Risks in funds transfer across financial institutions are adequately mitigated by NIBSS operations.

In view of the specialized nature of their services, they have set up a well equipped and appropriately manned, modern training infrastructure to provide e-payment training/research services for the financial system.

NIBSS is positioned to be a World-class payments and Settlement Institution which fundamental objectives are:

  • To carry on business as a service-oriented institution that provides a mechanism for same day clearing and settlement of inter-bank transfers and payments.
  • To provide the infrastructure for the automated processing and settlement of transactions between banks.
  • To provide the framework for elevating the level of efficiency in funds transfer generally whilst at the same time reducing the risks associated with uncertainties in receiving value for payment and difficulties in maintaining efficient treasury. operations and effecting timely reconciliation.
  • To initiate and develop an integrated nationwide network for the electronic or paperless funds transfer and settlement of transactions, among others.

Nigeria recorded 82 percent increase in fraud cases in 2016 compared to 2015 and this came with an estimated loss of N2.2 billion out of N4.4 billion attempted fraud cases according to Nigeria Inter-Bank Settlement System Plc. (NIBSS)

Ezekiel Niyi Ajao,Executive Director, Nigeria Inter-Bank Settlement System Plc (NIBSS)  while making presentation  on behalf of the CEO of NIBSS Adebisi  Shonubi at the March 2017 Nigeria-South Africa Chamber of Commerce (NSACC) Breakfast Meeting in Lagos,  said  49.7 per cent  of the amount lost was recovered  “but actual loss was reduced by 2.7 per cent  compared to 2015.

According to him, total fraud  volume in 2015 was 10, 743 whilst the figure for 2016 was 19,532 showing an increase of 81.80 per cent, whilst attempted fraud value are N4.37 billion  and N4.36 billion  for 2015 and 2016 respectively – a drop of -0.4 per cent.

He added that actual loss value were N2.2 billion and N2.1 billion for 2015 and 2016 respectively showing a drop of 2.65 per cent. The percentages of actual loss were 52 per cent and 50 per cent respectively for 2015 and 2016 respectively, he said.

NIBSS provides a shared service infrastructure for the Nigerian financial sector. It is a payments processing company for payments schemes (local and international) in Nigeria, and acts as a settlement company for both interbank and inter-schemes payments. NIBSS initiates and develops an integrated nationwide network of the electronic or paperless funds transfer and settlement of transactions. It provides a framework for elevating the level of efficiency in funds transfer services generally.

With the increasing incidents of compromise on conventional security systems (password and PIN), there is a high demand for greater security for access to sensitive or personal information in the Banking System. In recent times, biometric technologies have been used to analyze human characteristics as an enhanced form of authentication for real-time security processes.

Biometrics refers to identifying an individual based on physiological or behavioral attributes – fingerprint, signature etc.
The Central Bank of Nigeria through the Banker’ Committee and in collaboration with all banks in Nigeria on February 14, 2014 launched a centralized biometric identification system for the banking industry tagged Bank Verification Number (BVN).

  • BVN gives a unique identity that can be verified across the Nigerian Banking Industry (not peculiar to one Bank).
  • Customers Bank Accounts are protected from unauthorized access.
  • It will address issues of identity theft, thus reduce exposure to fraud.
  • The BVN will enhance the Banking Industry chances of being able to fish out blacklisted customers.

  • Standardized efficiency of Banking operations
  • The Customers unique BVN is accepted as a means of identification across ALL Nigerian Banks.

According to him, NIBSS can boast of over 18 innovative products and services that support the operations of the Financial Services Industry such as Cheques Clearing & Settlement, National Central Switch, Industry Portals, and Research & Development.

NIBSS provides a shared infrastructure platform for e-payments that supports the Nigerian Financial Industry. He listed the journey of NIBSS so far:

Incorporation of NIBSS, Automation of Cheque, Clearing through MICR Settlement Processing

  • Launch of NACS  for electronic  clearing of  Cheques,  Reduction in  clearing cycle to
  • T+3 local &  T+5 upcountry cheques.
  • Guideline on e- banking introduced to provide catalyst & regulatory framework for automation in banking.
  • Establishment of switching company for interoperability of shared ATM/POS banking
  • Implementation of RTGS System, T24 eFass & ERP Establishment of National Central Switch.
  • Payment System Vision 2020 introduced, CBN Act amended giving CBN regulatory  authority over payment system, Reduction in clearing cycle to T+2 local & T+3 upcountry .
  • Mobile Payment Regulatory Framework, Guideline on Transaction Switching & Prepaid cards introduced.
  • Guidelines on ATM Operations released, NUBAN introduced to reduce delays & clearing errors related to wrong account numbers.
  • NIBSS transformation project launched, Cash-Less policy introduced, NIP Launched
  • CBN began Cash-less roll out in Lagos, Cheque Truncation launched, Agency banking & Tiered KYC guidelines 2013.
  • NeFF established Industry anti-fraud Circular released.
  • BVN launched Guideline for card issuance and Usage.
  • 2FA mandatory for CNP transactions and for banks’ internal processes.
  • SIM swap fraud tacked headlong and BVN  watchlist launched.

These giant strides have been made possible by cooperation among the banks under CBN’s strong leadership and oversight.

According to him, Agency Banking will grow – Agents represents the frontline of any branchless banking service. From whenever they operate, they enable customers to transact-often by turning cash into e-money and back again. Agents play critical role not only in handling transactions but in identifying, acquiring and educating new customers as well as delivering g a customer experience that keeps customers coming back.

As part of the renewed efforts to further drive the financial inclusion mandates of the Central Bank of Nigeria (CBN), NIBSS in collaboration with Banks and the leading Telecommunications companies have launched mCASH. This is an innovative solution designed to facilitate low-value retail payments, grow e-payments by providing accessible electronic channels to a wider range of users and to further enhance financial inclusion in Nigeria by extending e-payment benefits to Payers and Merchants at the bottom of the pyramid where usage of cash has been predominant. The solution aids payments to Merchants (Sellers) for commodities and services. It leverages the NIBSS Instant Payments Infrastructure (NIP) for immediate fund delivery to Merchants accounts and the mobile telephone USSD technology.

In addition, the financial inclusion trends in Nigeria have increased tremendously, the proportion of adults that are formally included increase from 23.6% to 48.6% which is an increase of 25.0 million. The proportion of adults that are formally served increase from 47.5 to 60.5% which is an increase of 15.5 million. The numbers of adults that are financially excluded is 8.5 million.

Financial service providers around the world-from Brazil and Mali to India and the Philippines are using agents more and more to distribute financial services. Nearly all of the 215 –plus branchless banking operations worldwide rely on agents as the main way to sign up and service customers. At least six countries have more 100,000 agents and Brazil tops the list with its central Bank reporting 377,000 agents as of January 2015.

Over one year period, Mobile transaction continues to trend upwards as the preferred channel for instant transfers from 24% in Oct 2015 to 41% in Sept 2016.  USSD is witnessing a high growth rate from approx. 0% in Oct 2015, to 6% in March 2016 to 13% in Sept 2016.

The transaction summary for 2015 was about 868.9 Million,   a 54.5% spike in the volume of electronic transactions. The volume included transactions processed through the Nigeria Central Switch (NCS) clearing and Automated Teller Machine (ATM) in 2016, 69.1Trillion, was recorded there was an increase of 31.5% in the value of NCS and ATM transactions compared to 2015.

According to him, new technologies are changing the way banking services are being delivered. New non-bank entrants and technological advances will challenge banks’ business models and fundamental change is inevitable. The only question is how much of banks’ traditional territory the new entrants will occupy.

He added that to use biometric information as a means of first identifying and verifying all individuals that have account(s) in any Nigerian bank and consequently, as a means of authenticating customer’s identity at the point of transactions.

The Benefits are: Credit Check; Know Your Customer (KYC), Fraud Management Transaction Authentication; Employees check and Tenants Check.

Payment by Bank account will become pervasive- Online shopping require authentication by customer bank that transaction is actually originating from the right person; Card payment has been the only option over the years using its two factor authentication; Central pay is designed for two factor authentication whether using cards, account option or mobile wallet.

Treasury Management

A typical bank client today has multiple accounts across different banks; To manage these accounts, they receive multiple statements and multiple internet banking access. Corporate lounge provides a single interface for clients to view their various accounts across various banks in one click!!!

Multiple Bank Corporate payment platform

Our Multiple Bank Corporate payment platform is one of our newest platforms to provide payment comfort to bank customers.

It can be deployed as a solution that interfaces with ERP of companies or with any solution provided by the bank to their Corporate.

It has our Corporate Lounge solution built in which allows Corporate check on their bank balances prior to making or authorizing payments.

It also has a corporate bill payment module which will allow corporate make their statutory payments like Taxes, pension and utility.

The platform allows the corporate set up all their bank accounts on the platform and they can authorize payment from any of the account or bank.

Direct Debits now working:

An Insurance company desires effective and timely premium collection with:

  • Automated mandate set up and validation.
  • Error free collection schedule preparation, authorization and payments.
  • Seamless schedule transmission.
  • Failure and successful transaction notification.
  • Remittance of all proceeds.
  • Ease of reconciliation
  • Many insurance companies seek end to end premium processing from their Banks.

Furthermore, NIBSS warehouses POS merchant database. Effort is underway to create a similar database of micro-merchants with geo-location data.

Micropayments leverages instants debit to account with USSD. This has immense opportunities e.g. proximity advertisement over mobile apps, economic activities measures. The cab man only remembers his phone number……wonders why he can’t be paid with it while his cash hits his bank account or mobile money account.

As payment system continue to evolve, we have created a platform that will enable people exchange payments with people using a registered ID e.g. email or phone number.

As the central utility infrastructure for e-payments in Nigeria, NIBSS is  focused on providing shared services for Nigeria Financial Sector as well as be in the forefront of e-payments innovation and an advocate for industry collaboration that would improve the efficiency and reduce the cost of operations for all financial institutions. It is expected that e-payments would become a significant contributor to Nigeria’s GDP by year 2020.