CBN and implementation of e-payment usage in non-banking sectors

The banking and financial services industry has played an integral role in promoting the Central Bank of Nigeria’s (CBN) cashless policy. But to further increase the level of adoption of electronic payments, the apex bank is looking at developing end-to-end value chain systems that can be implemented in various industry verticals. The CBN is therefore keen on extending the usage of electronic channels in the non-banking sectors of the economy – agriculture, hotels and entertainment, transport, education, and health.

“We are focused on creating a future with pervasive electronic payments usage through the implementation of additional initiatives in certain sectors such as agriculture, hotels and entertainment, transport, education and health. We hope to develop a cashless model for smart cities.

“We will target existing as well as greenfield cities such as Eko Atlantic in Lagos and the Centenary City in Abuja to ensure that less cash is used for payments at retail outlets, for transportation and other services,” according to Dipo Fatokun, director, banking and payment department, CBN, saying the future outlook for electronic payments in Nigeria is positive.

The payments and settlement system, according to the CBN, refers to the entirety of instruments, technology and processes, laws, rules and regulations based on which value is exchanged by economic agents within an economy and across borders for the facilitation of trade and other economic activities.

Efforts at entrenching robust payments system commenced with the establishment of the Lagos Clearing House in 1961, by the CBN, which itself started operations in 1959. Over the years, the bank created clearing houses in all the states of the federation including the FCT.

Consequently, banks introduced cards and ATMs in the 90s while the Magnetic Ink Character Recognition (MICR) Technology was adopted in 1991, for enhanced processing of cheques. Sequel to the establishment of the Nigeria Inter-Bank Settlement System (NIBSS) plc in 1994, and a number of private switches 10 years later, cards, ATMs and PoS transactions started gaining traction while cheque clearing cycle improved to T+2 and T+5 for local and upcountry cheques, respectively, in 2002. The CBN issued the first guidelines on electronic banking in 2003, which covers a whole spectrum of electronic payments.

Electronic payments channels, according to the CBN, have been broadened with several options as online web payments, electronic funds transfer, various forms of cards, PoS, ATM non-cash transactions, etc. As an instance, the Nigerian inter-Bank Settlement System (NIBSS) Instant Payments (NIP) used for online transfers has grown at an annual growth rate of 199 percent and 190 percent in volume and value, respectively, with total transfers on the platform in 2013, grossing N10.85 trillion.

The development goes beyond electronic payments growth; even jobs have been created with over 21 MMOs licensed with each employing not less than 20 staff along with about 66,930 agents. Electronic payments companies, both indigenous and foreign, have come into the market with positive impact on investment and employment.

Fatokun, who delivered a key note address on ‘Electronic Payments in Nigeria: Past, Present and the Future,’ mandated all banks to comply with requirements for highly secured online payments platform by implementing cutting-edge electronic banking security solutions, including but not limited to the implementation of hardware tokens, behavioural monitoring, SMS/email transaction alert, and anti-phishing solutions.

HOPE MOSES-ASHIKE