CBN boosts cashless policy  with card payment scheme

BY EMEKA EJERE

The Central Bank of Nigeria (CBN) in line with its mandate to promote and consolidate the cashless and financial inclusion policy, and growth in the  payment system, last week introduced a national domestic card scheme that became effective on January 16, 2023.

Although the bank is yet to disclose the procurement cost and operational charges, the scheme, which processes payments using debit and credit cards, is expected to compete with other debit cards, including Mastercard, Visa, and Verve cards operating in Nigeria.

The apex bank in collaboration with the Bankers Committee, Nigeria Inter-Bank Settlement System (NIBSS) and other payment industry players have overtime 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.
Over the years, with the provision of favorable regulatory policies by the CBN), Nigeria has made great progress in creating a robust payment system through several reforms targeted at growing the system.

These efforts have over the years added value to the Nigeria’s economy, placing the country ahead of a number of advanced economies in the area of payment innovation, especially Instant payment.

Recognizing that the competition is indeed cash, experts believe that cash is overripe for disruption, thus as a nation, Nigeria 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.

In 2011 when most small and medium enterprises and other service providers in the country desired a payment platform that delivers instant value, the introduction of the NIBSS Instant Payment (NIP) platform transformed the way Nigerians chose 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.

A statement by the CBN spokesperson, Osita Nwanisobi, said the domestic card scheme would accelerate financial inclusion and deliver lower cost payments services that are more accessible and affordable for Nigerians.

“Nigeria is Africa’s largest and most vibrant economy and the pace of digitisation and innovation, alongside the expansion of mobile penetration and the proactive policy initiatives of the CBN have driven the accelerated adoption of digital financial services,” he said.

“Considering the strength and breadth of its banking sector and the rapid growth and transformation of its payments system over the last decade, Nigeria is ideally positioned to successfully launch a national card scheme,” he said.

The bank said apart from fostering innovation within the Nigerian domestic market, the scheme would allow banks to offer a variety of solutions including debit, credit, virtual, loyalty and tokenized cards amongst others.

By launching the scheme, the CBN said Nigeria would join countries like India, Turkey, China, and Brazil who have used this means to service the underbanked areas in their jurisdiction.

“The CBN recognizes the significant benefits from delivering Africa’s first central bank-driven, domestic card scheme, which when delivered at scale has the potential to become the largest in Africa, and one of the largest in the world”

At a press conference in Lagos, the Managing Director of NIBSS, Premier Oiwoh, explained that the domestic card scheme would reduce the operating costs of cards in the country for both the issuers and users.

“The card would be optimised for local content solely for the Nigerian market and support micro-payment and credit, e-government, identity management, transportation, health and agriculture regarding payment,” Owoh added.

Bank Verification Number

Another national initiative launched by the CBN, 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.

In 2020 and 2021 respectively, NIBSS created an Industry Sandbox and a centralized Address Verification service that gave 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.

Research has shown the COVID-19 pandemic has prompted 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 the Nigerian fast-evolving payment landscape, the country saw the entrance of a National Quick Response Code (NQR); another initiative driven by the CBN and implemented NIBSS.

Integration process

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.

The Managing Director, Interswitch Purepay, Akeem Lawal, said players in the payment industry must collaborate to provide opportunities to co-create solutions that make digital payment safer and further drive profitability.

He said “Interswitch is committed to partnering with stakeholders to continuously drive financial inclusion through its innovative products and solutions. These products reaffirm the company’s continued drive to improving Nigeria’s digital payments landscape through innovation and the development of first-rate solutions and infrastructure that address pressing needs in the payments ecosystem.”