Based on feedbacks from banks, how would you describe the level of compliance with the directive on BVN?
The feedback from the banks is very positive. I think we should start by understanding why we are embarking on the BVN project, you will see that there is no way the Banks would not be enthusiastic about it.
When the BVN project was initiated, there were three key areas of focus. First and most important of all is for us to identify our customers uniquely across Banks and across Accounts. So, once a customer enrolls and obtains a BVN, that same BVN is tied to all his Bank Accounts.
Now, relating to identifying is the possibility of Banks blacklisting people who have committed financial infractions. It could be fraudsters; it could be people who have forged documents; etc.
What happens today is that Mr. A goes to Bank E, commits fraud, then runs to Bank F and because there is no way of tying all these activities across, we found out that there are quite a lot of losses related to these individuals from one Bank to another.
BVN removes these losses. The beauty of it all is the unique identification in the financial space. Generally, people say every Nigerian is a crook but in actual sense, maybe only one per cent of Nigerians are crooks but the remaining 99 per cent are considered crooks because of that one per cent. So, BVN allows us, again, to find these individuals and to create that blacklists that other stakeholders in the financial space can have access to.
With this, even foreigners through their Banks, may be able to identify fraudsters that have been tracked in the Nigerian Financial space. Secondly, the BVN would allow us begin to build retail credit. Today, the Banks have concerns over identification in retail lending, that is why the entire retail consumer lending portfolio is targeted at people with formal employment whose employers can serve as a point of reference.
There are however a lot of self-employed people as well as others working in smaller organizations who require this, but do not have access due to the identification issue, as no bank will take the risk of lending to them – considering cases of resignation and eventual run off, how will the Banks get repayment? but with the availability of BVN, these set of individuals will also benefit from Retail Lending as identification and tracking issues will be mitigated.
The third, which I have already alluded to, is we want to be able to authorise financial transactions down the road, on an Automated Teller Machine (ATM) or a Point of Sales (PoS). You can use your biometric identifier to say ‘Yes, this is me and I am authorising the payment.’ So, those are the three key focus areas that led to the BVN project being conceived and implemented.
Everybody is expected to have been captured into the system by June 30; do you envisage any change in that date?
No. No. I think we are doing well. Just as most Projects, you start slow but as time goes on, it picks up. The number of enrollment doubles every week. So, given the number of BVNs generated so far, I think June 30 is achievable.
For those that have enrolled when are they likely to receive their BVN card?
I have gotten my BVN card. I would encourage Bank customers to talk to their Banks so that they can get theirs as well. The BVN cards are being printed and sent to the Banks to distribute to the branches where customers have enrolled. You will be sent a Small Messaging System (SMS) and for those that have their emails stipulated, they will be sent email.
What about the cost implications?
The Cards? It has no cost implications to the customers; we are giving them out to the Customers for free. The cost is borne by the Bankers’ Committee, which considers the BVN project very important and that is why they have been bearing the entire cost. The cost of the cards, the cost of integration with NIMC and almost everything else that has to do with the BVN is borne by the Bankers’ Committee.
Is NIBSS that provides the infrastructure for automated processing, settlement of payments and fund transfer instructions not concerned about the rising cases of fraud in the banking system?
We are very worried and what gets us even more concerned is that as one executes Electronic Transactions, a lot more people are participating in that space and cloud. So, it is easier for the Banks to invest in new technologies to protect themselves. But now, every business person wants to create a website to sell their products and wares and some of them may not have the capacity to invest in technologies to protect themselves.
Thus once one of them creates a point of leakage, it affects the whole chain. To curb this, one of the initiatives the Bankers’ Committee is putting in place is the Anti-fraud platform that payment transactions are connected to; such that if one has a transaction that is fraudulent, it flags it off immediately.
It allows us to identify cards that have been reported as fraudulent; it also allows us to do analysis of a particular location or website where fraud is frequently reported for proper monitoring and this initiative is not only for cards. What we are implementing, which is very unique in almost all areas is to centralise handling of cards, electronic payments and POS.
Most of the solutions available elsewhere are mainly for Cards but we have to modify it to allow transactions on other electronic payment platforms. It can create patterns and also highlight suspicious transfers and payments. This platform has gone live; it is currently being used and we are already seeing the benefits.
Most of these frauds are more or less insider-related and with click of the computer, the money is gone. Is there no way to set a limit or threshold on the value of transactions allowed at a particular time?
This is part of the area the Anti-Fraud initiative caters for. We agree there must be a limit, either in frequency or value, all transactions going through the Anti-Fraud Systems are tracked such that if it exceeds that frequency or limit, it is flagged.
We are currently building rules now in collaboration with the Banks, such that when the system receives transactions that are outside the agreed parameters, this transactions are blocked or flagged and the Banks are advised immediately. It is very difficult to say you want to eliminate fraud, but with all these being implemented, it is our expectation that fraud will be highly mitigated.
What is the level of synergy between the BVN and the National Identity Management Commission to bring about a sustainable identity management system for Nigeria?
I think we need to understand the concept of identification. The National ID is supposed to be the root means of identifying an individual. That means it is general but you will always find specific ID databases that will be created. There is the National Driving licence that applies to people, who are of driving age and have decided they want to drive.
They are different from those that may be Banking customers that cannot drive. So, you will always have different databases. However, the idea is to have a common way of linking them. Somebody has a driving licence and at the same time has an ID for health, how do we ensure it is the same person? That is the idea behind the National ID.
With the BVN, we are creating something for Banking customers. The purpose is not just to identify but also ultimately to use it to authorise financial transactions. This cannot be done using the National ID which would identify but it is not meant for authorising Financial transactions. So, the question then is: how do they work together?
Today, we are already implementing the BVN financed by the Bankers’ Committee. It is a means of sharing data. When one enrolls for a BVN, we can make that information available. If you already have the National ID and you don’t have a Bank Account, once you use it, we pull the information from National ID and update it in creating your BVN identification.
This is with the intention of making it easy for people so that when you are enrolled for one, it is easier to enroll with the other and we have actually started that process of integration.
What have been your challenges?
Well, as a Banker coming into a processor environment, I think the biggest challenge so far is trying to get the industry to understand what we at NIBSS are trying to do. Unfortunately, those who do not understand our business strategy perceive us as being in competition and that the competition is disruptive because it affects the way they were doing businesses before.
Even for some Banks, we are seen as removing what they would have considered as propriety or niche because we try to create a uniform platform for the industry. We are however driven by the Bankers’ Committee. If they say roll out this service, our aim is to go-head with rollout as quickly and as efficiently possible.
For us, misunderstanding has been the biggest challenge by far in the industry. Some of my colleagues who are Bankers ask: ‘What exactly is NIBSS doing there?’ and for us, the answer is very simple. We are a shared service platform that is supposed to reduce the cost of providing financial services by Banks to the public. So, once we reduce that cost for the Banks, they are in a position to pass this, in either pricing or better quality service to their customers.
A lot of noise was made by the shared services with a view to reducing cost in the system but why is it that there is no longer emphasis on it?
This is actually ongoing. The Central Bank earlier reviewed Bank charges down and recently they have also reduced the Merchants Service Charge (MSC) on PoS transactions from 1.25 per cent (of transaction value, pegged at N2,000) to 0.75 per cent. Every year, there have been reductions in charges that are being implemented in various ways. As NIBSS, we are constantly reviewing our service charge.
Then, there is the other side of improved services. Unlike what obtained two years ago, if everybody wants to make a payment now, you either use NIBSS Instant Payments (NIP) or NIBSS Electronic Funds Transfer (NEFT). A lot of individuals are not aware that this is a significant benefit. There are very few countries that have similar platforms.
In the past, it would take you up to a week before the beneficiary receives value, but with these platforms, value is received in seconds or hours depending on which of the platforms used. So, this is efficiency and it is part of the things that we provide for the industry. But people don’t qualify it because they don’t see it exactly that way.
Why is it that merchants hide their PoS and they don’t ask you to use it until you demand for it for your transactions? Is it as a result of the charges?
There are cultural issues with anything you are trying to do nationwide, across boundaries, across regions and across communities. There are always cultural issues. When we started this journey with PoS three years ago, the major problem was network and a lot of efforts were made – working with the network operators to stabilise the network.
The essential problem we are contending with now is more of a cultural issue; Lets use the Petrol Stations for instance, a customer will not be offered a PoS terminal for payment unless you ask and insist on it; this is because when one buys fuel, first; they encourage you to fill up, and the total amount will always be rounded up; secondly, they never have balance to give you back if you need to collect balance from the amount you are required to pay after your tank has been filled.
So, who gets the balance? It is the attendant? But with electronic payment, you will be paying the exact amount utilized. It is very interesting to then note that when you sum up all these balances in the range of N5 or N10, it becomes significant daily for the attendant. As such naturally, it is normal for the attendant to be reluctant about offering a PoS for payment.
As part of the activities to enhance this culture change and increase adoption, we are currently working with the CBN and the Commercial Banks to provide the Electronic Payment Incentive Scheme (EPIS) for Sales Personnel, Merchants and Cardholders. The Component of the scheme targeted at the Sales personnel/attendant is called the ‘Tipping Point’.
This component is such that whenever payments are made on PoS, the sales personnel/attendant collect points which they can redeem for a certain reward. It makes them understand that even though they do not collect the little balance ‘change’ from their customers, if they encourage Electronic transactions, they would still be able to get some reward.
Part of the loyalty scheme is also targeted at encouraging all cardholders that use their cards to make payments so that by insisting on using your card for payments, you get some of your cashback and you can also collect points that you can redeem for a reward. In addition to this benefit, for every electronic based transaction paid for from your account, it is COT free. So, these are some of the initiatives that are going on quietly behind the scene, which we would unveil very shortly.
Can you give us rough ideas on the total volume of transactions that pass through your platforms?
Transaction volumes are growing consistently month-on-month; this shows that adoption and confidence level are on the rise. We have actually commenced publishing transaction values and volumes on our website (www.nibss-plc.com.ng) and we would be publishing more for the public to see.
The only platform that has not seen significant growth is ‘cheque’ and that is not strange as more people are rapidly migrating to the Electronic Funds Transfer platforms as well as other e-channels due to the convenience and speed experienced. So I can tell you we have seen tremendous growth in the past years.
What other innovations are we expecting from NIBSS regarding electronic payments system in Nigeria?
The answer is whatever Innovation the Banks wants us to implement, we would definitely put in place. Our intention is to make the Mobile Money Platform a lot more efficient and seamless in Nigeria. In view of this, we are currently working closely with the Mobile Money Operators to make it possible and easier for customers to make payments with their phones when purchases are made just the way you use your cards.
That will encourage the usage of your phones to do transactions because we believe that mobile is key, especially for financial inclusion.
In addition, we have commenced regular sessions with software developers, encouraging indigenous innovative ideas and application development that can run on these platforms, thereby encouraging them to increase their scope and do more in terms of employment as we firmly believe that technology is one of the new frontiers for economic growth.As a purely Nigerian company for Local markets, we encourage the local companies to be partakers and be involved in the payment industry.
Don’t you think there seems to be some kind of rivalry between the Banks and Mobile Money Operators in terms of who should really drive Financial Inclusion?
I don’t agree with you. I don’t think there is rivalry. Some Mobile Money Operators have some misconceptions about their licences. We have situations where some of them believe they got a Banking Licence. Yes, it is possible to get a Financial Services Licence but Mobile Money Licence is not a Banking Licence. In essence, they are a transaction company.
Customers have the balance with the Bank but we are creating a platform for Mobile phone users to transact on it through Mobile Money. Due to the initial low cost of securing the licence, some people rushed into it without understanding that it is a retail business and retail businesses have longer gestational period.
We have situations where many of them were not adequately capitalized; for that reason, you find entities searching for quick wins – rather than go to the rural areas where this was intended for they commenced doing business in the cities, where they believe there are millions of people, half of who already have basic understanding of the technology and most of who already have smart phones which will translate into quick business for them.
Unfortunately for them, these people already have relationships with Banks. The objective was to encourage the unbanked to come into the financial space, and enjoy the benefits of financial services (such as micro credit, micro loans, online selling and buying/payments, etc) using wallets; not the same customers that the Banks are targeting who already have Bank accounts and who are using their phones and applications already provided by the Banks.
That is why it appears there is rivalry between Banks and Mobile Operators.
So, we sincerely hope that with the collaboration in creating Shared Agency Network, it would be easier for instance for me to go to the rural areas, create one Agent Network then all other Mobile Money Operators can connect to that Agent and I would get paid because if other Mobile Money Operators are not allowed to connect to that Agent platform, there will never be enough business for the Agent to begin to see the profit.
Some of these new initiatives are being built to improve the industry; we all basically encourage the Mobile Money Operators to create a niche for themselves, otherwise it most likely will remain a big issue in the industry.