By COLLINS NWEZE
As the power house of the fledgling cash-less banking, the Nigeria Inter-bank Settlement System (NIBSS) is defining what electronic banking should be. Its Acting Managing Director/CEO, Niyi Ajao, in this interview with COLLINS NWEZE, speaks on the Cash-less Lagos pilot project and related issues.
CBN has introduced Cash-less banking to reduce the cost of banking operations and create efficiency in the system. How prepared are you for this?
NIBSS is well prepared. If you look at it critically, it was like a revolution that started about five years ago. There have been a lot of initiatives in the market by NIBSS and other service providers to broker payments and make payments more efficient. This comes through internet payments and all that. It has been going on for a long time. If you talk about our preparedness, I will say over the years, we have been growing capacity. So, we have the drive from the Central Bank and the banks to go Cash-less. We also have a financial adviser. Already, we have NIBSS Electronic Funds Transfer (NEFT), introduced since 2004. Today, it’s being used by all the banks to make inter-bank payments.
From our findings, cost is crucial in cash-less banking. Merchants are saying they cannot pay the 1.25 per cent transaction fee for the Point of Sale (PoS) terminals. How will you address this?
The guidelines on PoS came out on August 12, last year. In the guidelines, what the Central Bank was saying is that a merchant should not be asked to pay more than 1.25 per cent as transaction fee or a maximum of N2,000 per transaction. The rule is not saying, that is what merchants must pay. So, at the end of the day, it is bank-customer relationship. The merchants have bankers behind them. They have banks that bought the terminals. Going by that guideline, there is supposed to be an agreement between that merchant and the bank customer. By that agreement, the bank will play the role of banking. It will look at the peculiarities of the merchants, and where they see he cannot afford 1.25 per cent, they can go for a negotiation. The merchant can ask for only one per cent, and the bank can review the request based on the volume of transactions involved. Don’t forget that it is not only the PoS transactions that brought the merchants and banks together, they have other banking transactions too. They can look at the total package and say, for PoS, you can be paying 0.8 per cent. So, when merchants complain, what we should be telling them is to get closer to their banks. The banks are meant to be their financial advisers. The banks know the peculiarities of their businesses, and banks are very willing when it comes to that. So, the banks can always work it out with the merchants and agree on mutually beneficial prices. So, the 1.25 per cent is not mandatory, it is just a bar. What the CBN is saying is that banks must not charge more than that. It is negotiable.
There have been some complaints about bringing in the PoS through the ports. Thus, we don’t have the PoS as much as we ought to, to drive this process. How do you think the problem can be solved?
Yes, there was a problem in bringing in the PoS last year. I am aware that the CBN has stepped in and the problem is being resolved right now. So, a lot of terminals are coming to the market and are being installed by the banks. With the momentum going on now, by March ending, we will begin to have much more terminals in place. And don’t forget that Cash-less Lagos is not all about PoS terminals.
We are part of the e-salary payment structure apart from the fact that we are the clearing house for all the banks. Those payments are still being processed through the banks. They are being processed through our system at NEFT. Don’t forget that we are like a gateway for all the banks.
In this Cash-less Lagos, what is on ground in terms of capacity to ensure that you do not fall below expectations?
Like I told you earlier, over the years, we have created a lot of capacity. We knew all along that it is a matter of time, the e-payment system in the country will grow. And we are growing. So, what we have been doing is for volume to grow. Already, we have a lot of capacity on ground. Having said that, volume is growing. We are working on capacity to extend it further. We are recruiting more staff, we are looking at our technology and expanding areas that need to be expanded so that we can cope with the volume that is coming.
What are the positions of MasterCard and Visa in the e-payment system?
MasterCard and Visa are just card schemes. They own the MasterCard and Visa brands. They authorise other players to use that brand and facilitate payments. They can authorise banks to deploy devices that will accept cards that will be issued by these banks. Visa/MasterCard along with other members will now authorise other members that are called switches, who will process transactions from those devices, accept cards from those devices, debit customers’ accounts with that and then facilitate payments through companies such as NIBSS.
This is a whole lot of process?
Sure, but this is a process that has been on for years. Since 2003, we have been on with this type of transaction process. All the switches and all other players have been running in the country since then. The players are already familiar with the market; the awareness creation is there and so on and so forth.
These are foreign firms. Do we have local schemes too?
Yes, there is a number of local schemes coming up too. There is Freedom Card, Verve, Genesis from E-Transact. There is a lot of awareness coming up. Companies such as ValuCard for instance are playing a major role. The CBN has licensed those we call merchant acquirers. They are authorised to sign agreement with merchants to put PoS terminals in the merchants’ offices. Any of the 24 banks can approach a merchant and put PoS there, and ValuCard can do the same. Apart from that, ValuCard is a processor for Visa. So, many Visa transactions that banks process normally go through ValuCard as a processor.
What value do all these add to the economy and the employment sector?
I have always told people, what we have seen in telecom will be small compared to what we will see in cash-less banking. Under the Cash-Less Lagos project, the Central Bank has licensed six companies called the Payment Terminal Service Providers (PTSP). Their job is to install and maintain PoS terminals. The idea is that a merchant acquirer will locate a merchant, which will then call a PTSP to maintain that terminal. Now, this PTSP are new companies and will employ people that will go at short notices to rectify faults on PoS terminals. So, they need to employ a lot of people to do that. And we are talking of six companies for Cash-less Lagos. This cash-less project will go outside of Lagos State to other states, the company will need to employ more people. They need to train merchants and staff of the merchants. You are going to see a lot of activities in that area. And along the line, the CBN is going to be licensing more PTSP. Banks themselves will need to have more staff to market merchants. The processors such as ValuCard, InterSwitch and others, as the services grow, will need to improve capacity. NIBSS will need to get more staff. No matter how you look at it, the economy will be the best for it. E-payment has a lot of convenience.
How do you see this project as it moves to other parts of the country where there is no electricity?
We are so resilient in Nigeria. In those villages where there is no electricity, people are running their own businesses using small generators. And if you look at the PoS terminals we are talking about, how much power do you think we need to run them? What a Lagosian can use and appreciate, every Nigerian can also use and appreciate once they have confidence on the product. Look at GSM, initially there were scepticisms. But today, almost everyone is carrying a phone. You do your bank transfer in any part of the country. For me, extending it to other parts of the country will not be an issue at all. Where the phones can work, the PoS terminals will also work.
What services does the Nigeria Interbank Settle-ment System (NIBSS) offer?
NIBSS Plc is a company jointly set up by banks and the Central Bank of Nigeria (CBN) in 1993, to facilitate interbank payment and grow the payment system. Basically, it is to set up a national payment network so that the benefits of an efficient payment system can become a reality. The company started operation in 1994. It operates the Nigeria Automated Clearing System (NACS), which facilitates the electronic clearing of cheques and other paper-based instruments, electronic funds transfer, Automated Direct Credits and Automated Direct Debits. NIBSS, at the instance of the Bankers’ Committee, has acquired cutting-edge technologies for the operation of the Nigeria Central Switch (NCS).
Before NIBSS, what was e-payment system like?
Before NIBSS, the CBN used to handle interbank payments directly. In those days, way back in 1994, if a bank customer wants to move money from his account to an account in another bank, it must pass through the CBN. That’s what used to happen. So, along the line, the volume of transactions grew, and it became obvious that a structure had to be put in place to ensure that payments go very well. This was because payments were not moving as fast as they should, thereby stifling the economy. People can’t buy things faster and they were not able to buy as much as they wanted. The economy was affected. So, it is all about this idea of letting the private sector handle some things. That was what made us to establish NIBSS so that it can operate as a full-time company with the efficiency to deliver the needed payments to the economy. That has been our mandate since we started in 1994.
No comments:
Post a Comment