BusinessDay

Banks’ e-payment channels transaction to decline to N30.56trn

Value of transactions through Nigerian banks’ e-payment channel is expected to decline further to N30.56 trillion in August 2022 due to exchange rate swings.

Total value of transactions across the Nigerian banks’ e-payment channels declined by 7.62 percent to N31.63 trillion in July compared to N34.24 trillion recorded in June 2022, according to Bismarck Rewane, managing director of Financial Derivatives Company (FDC).

This was due partly due to the decline in consumer demand and spending as inflation bites hard. He said in his presentation during a breakfast session at Lagos Business School (LBS) recently that velocity of circulation declined to 0.35x in the first quarter (Q1) of 2022, compared to 0.44 in the Q1 2021, indicating the decline in the value of transactions.

“The market-reflective decline in the use of payment service banks, as interest rate hike squeeze liquidity from the system,” Rewane said.

He noted in his presentation that the value of transaction through Cheques dropped to N240.32 billion in July 2022 as against N274.01 billion, representing a 12.30 percent decline.

The value of e-payment transactions through Point of Sale (POS) channel increased by 8.76 percent to N724.73 billion in July 2022 from N666.36 billion in the previous month.

In terms of the value of transactions via NIBSS Instant Payment (NIP), it reduced by 7.72 percent from N31.74 trillion in June 2022 to N29.28 trillion in July 2022.

Also, the value of transaction through NIBSS Electronic Fund Transfer (NEFT) declined by 11.82 percent to N1.375 trillion in July 2022 compared to N1.56 trillion in June 2022.

“To ensure effectiveness of POS operations and a proper support/maintenance infrastructure, only CBN licensed Payments Terminal Service Providers shall deploy, maintain and provide support for POS terminals in Nigeria,” the Central Bank of Nigeria (CBN) said in the reviewed and approved guideline on operation of effective guidelines.

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In line with its commitment to promote an efficient and credible payments system, the CBN last year approved new licence categorisations for participants in the payments system.

The regulation requires companies desirous of operating more than one licence category, to set up a Payments Service Holding Company (PSHC) (hereinafter referred to as a Payments Service Holding Company (PSHC)), with activities of subsidiaries clearly delineated. The arrangement would prevent commingling of activities, facilitate management of risks and enable the Central Bank of Nigeria exercise adequate regulatory oversight on all the companies operating within the Group.

The affected regulated payment activities are: Mobile Money Operations (MMO), Switching and Processing, Payment Solution Services, and any other activity as may be approved by the CBN.

Under the arrangement, a Non-operating PSHC shall be formed to hold equity investment in the separate companies in a “parent-subsidiary” arrangement. In serving as a source of financial strength to its subsidiaries, a PSHC shall maintain financial flexibility and capital-raising capabilities to support its subsidiaries. It shall also be capable to provide and use available resources to augment the capital of its subsidiaries, in the event of financial stress or adverse conditions.

According to the World Bank, the development and implementation of safe, reliable and efficient national payments systems and Financial Market Infrastructures (FMIs) is a crucial component of the World Bank Group’s work to reduce poverty and boost shared prosperity. Secure, affordable, and accessible payment systems and services help expand financial inclusion, foster development and support financial stability.

Payment systems and FMIs are the mechanisms established to facilitate the clearing and settlement of monetary and other financial transactions.

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