The Central Bank of Nigeria, CBN, has asked the public to get ready to key into full digital transactions that will soon influence activities in the financial sector.
Governor of the Bank, Godwin Emefiele, said already the global financial system is fast evolving, with different economic blocs and financial institutions introducing innovative solutions to make the global payment system more efficient, faster, transparent and safer for transactions settlement.
Speaking at the 34TH seminar for Finance Correspondents and Business editors, themed, “Implementing a Robust Payment Architecture: Prospects, Opportunities and Challenges” on Tuesday in Calabar, Cross River State, Emefiele, said that in many climes, the acceleration of digital payment options has caused brick-and-mortar offices to give way to electronic channels.
The Governor listed some of these channels include the automated teller machines (ATM), point of sales (PoS) terminals, internet banking, mobile banking, unstructured supplementary service data (USSD), and contactless payments. These products are designed to meet customers’ expectations of ease and speed, coupled with consideration for safety.
He said, already the Nigeria payment system landscape has particularly continued to record significant changes and development, adding, “We are all witnesses to the transformation that has taken place in the Nigeria payment system in the last decade. From heavy reliance on cash and daily visits to brick-and-mortar banks, we are now in a largely cash-less era, a project that commenced since 2012.”
As a deliberate policy towards ensuring easier, cheaper and faster means of payments, Emefiele, said the CBN has continued to collaborate with relevant stakeholders in the adoption of payment system instruments and channels, such as, the Bank Verification Number (BVN), the Real Time Gross Settlement System (RTGS), Regulatory Sandbox, Open Banking and the CBN Digital Currency (CBDC), the eNaira. Nigeria is currently the first country in the Continent and second in the world to have fully launched a live CBDC.
According to him. The payment system regulation and management role of the CBN is very critical in the achievement of its primary mandate of price and monetary stability conducive for inclusive and sustainable economic growth. It is also important for ensuring a stable, safe and efficient financial system in Nigeria.
“Cognisance of the implications of the risks that accompany digital innovations and technological advancement globally, the Central Bank of Nigeria, has continued to ensure a healthy balance between the adoption of latest innovations and development of reliable mitigants to the associated inherent and operational risks to both the payments system and the rest of the economic sectors in Nigeria.”
Dwelling on the role of the Central Bank of Nigeria in shaping the payment ecosystem in Nigeria, which is ranked among the top ten in the world in terms of its sophistication and robustness, he said in the Bank’s efforts to design a robust payments system in Nigeria, the CBN plays three critical roles.
As a Regulator, he said Banks and Other Financial Institutions’ Act (BOFIA) 2020 and other enabling laws empower the CBN to regulate the banking and payments system towards ensuring a safe, stable and resilient systems.
In this regard, the Bank licenses key operators in the payments system, maintains oversight on the participants and issues policies and regulations to support extant laws in enhancing payments system resilience. In performing this role, the Bank adopts a collaborative approach with other stakeholders.
Also, as an Operator, he said the CBN operates the wholesale payments infrastructure, the Real Time Gross Settlement (RTGS) System. The system, being a key financial market infrastructure, operates in line with the Principles for Financial Market Infrastructure and local laws and regulations. This platform is key to ensuring an efficient and liquid settlement system.
In addition as a Catalyst the CBN, through the Payments System Vision (PSV) statements, helps in engendering innovation and wider adoption of electronic payments in different sectors of the economy. PSV 2020 was first issued in 2006 with the goal of driving the adoption of electronic payments across sectors and geographies in Nigeria.
The PSV 2025 was recently issued as a guidepost for the payments system until 2025. Its main goal is to expand payment options available to customers and strengthen regulation of the payments system.
The CBN has continued to initiate and implement several programmes to drive innovation and meet emerging market needs in the payment system landscape. A key objective is the use of the payments system as a tool to achieve the financial inclusion goals of the country.
Through these programmes, the CBN has successfully repositioned the Nigerian payments system to be highly competitive and acclaimed as one of the most innovative globally. Thus, many payment products that abound in the country are not readily available in some other countries. These include instant payments, QR codes and Central Bank Digital Currency, i.e. the eNaira.
These efforts have culminated into a significant increase in the total volume of transactions on Electronic Payment Channels. While the use of cash and cheques continued to diminish, web-based transactions such as POS, NIP, ATM and MMO have increased substantially. For instance, between 2021 and 2017, the volume of transactions via electronic channels such as ATM, POS, WEB, MMO and NIP increased by 99.76, 1,775.72, 35,502.58, 2,413.44 and 836.50 percent, respectively.
He listed some of the key CBN initiatives that accounted for the significant achievements in the payment system architecture to include the eNaira.
The advent of the Corona Virus pandemic (COVID-19) no doubt triggered rapid advancements in financial technology leading to speedy digitisation of money and finance. The CBN took advantage of the opportunity by launching the eNaira in October 2021. The eNaira was developed to broaden the payment possibilities of Nigerians, foster digital financial inclusion, with potential for fast-tracking intergovernmental and social transfers.
Since its launch, the CBN has continued to modify its features to make it more accessible to a wide range of users. Today, one does not need a smartphone to use the eNaira as it has become compatible with all generations of mobile devices (old and new). Till date, over 1.4m transactions have passed through the eNaira platform.
Another initiative of the Bank he mentioned is open banking which aims at expanding the cache of customer data warehoused in the financial sector for use in developing innovative products to service the needs of the public.
He said the CBN will ensure that the data exchange will be done in a way to safeguard the privacy and concerns of the customers who own the data in the first place.
The opportunities presented by open banking are diverse and it serves to enhance financial inclusion and encourage healthy competition in the financial services space as well as promote efficiency.
The Bank also initiated the Regulatory Sandbox to provide the opportunity for innovators to test their ideas and products to regulators in a controlled environment where the risks and potential of the products could be assessed. The Bank recently opened the first cohort of the sandbox. Startups with innovative ideas are invited to apply to the sandbox.
The industry is quickly evolving towards cardless and other contactless payment options, including QR Codes, NFC etc. In this regard, the Bank has issued robust regulations to standardise operations of contactless payments in Nigeria. Through contactless payments, financial transactions can be consummated without physical contact between the payer and acquiring devices. It is an innovative payment option for safe and efficient conduct of low-value, large-volume payments.
Bank Verification Number (BVN) has continued to feature in the Bank’s KYC requirements as part of plans to ease the constraint associated with poor identification of banking customers. We have continued to support the aggressive enrollment of prospective banking customers in the informal sector onto the BVN system.
With a total enrollment of 57,431,355 as at 31st March 2023, the BVN is supporting the development of credit profiles for banking customers, which will assist in improving access to credit for credit-worthy borrowers by banks.
The BVN has also helped the industry in investigating fraud and other related crimes.
He however listed some of the extant challenges faced by the Bank in implementing these initiatives.
One of them he said is Weak social infrastructure.
He explained that effective operation of payment platforms is highly reliant on stable telecommunication networks and power infrastructure. These are currently not optimal in Nigeria, thus, impacting the stability and resilience of the payments system, he noted.
“We remain proud that the Nigerian payments and financial services sector is ranked among the best in terms of innovation, regulation and resilience. To sustain the successes achieved, the support of all financial institutions and stakeholders is imperative. In this regard, the CBN stand ready to continue to strengthen the institutional and regulatory frameworks that would encourage further development of the payments system and promote the usage of secure and credible electronic products as stipulated in the PSV 2025 strategic plan.”