Nigeria’s instant payment (NIP) built by the Nigeria Inter-Bank Settlement System Plc (NIBSS is twelve years (12) ahead of the FedNow instant payment service built by the Federal Reserve aimed to provide real-time payment capabilities to banks and financial institutions across the United States.
The Federal Reserve on July 20, 2023, announced that its new system for instant payments, the FedNow® Service, is now live. Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers.
“The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” said Jerome H. Powell, Federal Reserve Chair.
“Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid,” he said in a statement.
NIBSS instant payment is the largest instant payment service in Africa, and the top 6 largest in the world, processing more transactions yearly than the payment system in the US.
However, bank transfers in Nigeria were not always as easy or instantaneous as they are today. Before NIP, customers often queued in banking halls, filled out lengthy forms, or presented cheques to send and receive money.
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In 1993, the Nigerian Bankers Committee incorporated NIBSS, and amongst other things, the agency was tasked with centralising payment and settlement activities among banks and other financial institutions.
NIBSS Instant Payments (NIP) was launched in 2011 by NIBSS to electronically facilitate real-time bank transfers. In that same year, the apex bank directed all banks to adopt a standardised 10-digit account number format known as Nigeria Uniform Bank Account Number (NUBAN). Up until then, account numbers had varying lengths and formats. This introduction of a standard NUBAN format made it easier to validate electronic payments and routing.
The Central Bank of Nigeria (CBN) also made it necessary for future categories of financial institutions such as mobile money operators and payment service banks to connect directly to NIP and were interoperable with the rest of the Nigerian financial system.
With NIP, customers had access to an electronic transfer service that could reliably and cheaply perform bank transfers without having to queue in banks.
According to the NIBSS data, electronic payment transactions in Nigeria rose to N387 trillion in 2022, hitting an all-time high as more Nigerians embrace cashless payments.
The value recorded on the NIBSS instant payment represents a 42 percent increase over the N272 trillion recorded in 2021 and a 72 percent increase from 2020.
This is more than the total amount processed from 2017 to 2019 combined (₦224 trillion).
These numbers do not include intra-bank transfers (transfers within the same bank) or transfers through other payment platforms like NIBSS Electronic Fund Transfer (NEFT) or other payment channels like Central pay, cheques, and point of sale.
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