With just about three years to go, Nigeria is moving closer to achieving fully the objectives of the Payment System Vision 2020, which is aimed at revolutionalising the payment system the country thorough advancement in payment infrastructure and methods. Recent figures show a rising trend in the use of electronic channels for payment.
The increased adoption of electronic channels as against the brick and mortar banking model is in line with the PSV 2020 which was launched in 2007 with an objective of establishing an electronic payment system within the country that is internationally recognized and nationally utilized and would make the Nigeria one of the top economies by the year 2020.
Last year, over N56 trillion moved through the electronic channels in the Nigerian financial system. Total transactions through electronic payment platforms such as Automated Teller Machines, Point of Sale terminals, web payments, online transfers and mobile money from January to December last year hit N56.886 trillion. This shows that the country is moving towards achieving the PSV 2020 goal.
Between 2007 when it was launched and now, the country has grown from being one of the backward nations in payment systems to being counted amongst the top 17 countries with the fastest payment systems, ahead of countries like the United States of America.
Compared to what was obtainable in the past, Nigeria has advanced from the use of passbook and tally numbers in the banking halls, a period when consummating a banking transaction could be a whole day affair and could only be done in the banking hall. Today, customers can execute transactions within minutes from anywhere and at any time.
Innovations in the banking industry had helped in fast tracking this goal as customers can now make transfers, check account balance, pay bills from their phones even if they are not using smart phones. This has been made possible with USSD codes.
Globally, the way goods and services are paid for has evolved tremendously from the era of shells to paper, and now “data money” is fast becoming the norm. Payments is to every economy what blood is to every human circulatory system, and the further adoption of e-Payments in emerging economies like Nigeria will translate into further cost savings, increased economic activity and capital accumulation. A cross-sectional analysis of 50 countries suggests that consumer spending increases by 0.5 percent for every 10 percent increase in the share of e-payments in a country.
Electronic payment is a lower cost, higher value approach that is transforming consumer behaviour worldwide, and Nigeria, which has seen some success in this regard, should take more steps to further digitize its economy and lead the rest of Africa on an upward trajectory to optimal “cashlessness.”
The Nigerian banking system has evolved with the introduction of the automated teller machines (ATM), the use of debit cards, Internet banking, mobile banking, point of sale terminals (PoS), agent banking amongst others which has seen more people being financially included.
A revolutionalised payment system has been assessed to have facilitated economic activities, by providing safe and efficient mechanisms for making and receiving payments with minimum risks to the central bank, payment service providers and end users, extending the availability and usage to all sectors and geographies, banked and unbanked, and conforming to internationally accepted regulatory, technical and operational standards.
According to the CBN governor, Godwin Emefile, while it is “gratifying to note that our country is not only acknowledged as a major economic force within Africa, but also increasingly becoming an active player in the global economy and to participate actively, our payments system must be successfully benchmarked against the global best practices.”
Emefiele noted that through the implementation of the original PSV2020 initiatives by the CBN, in association with the banking community, Nigeria has witnessed an impressive growth of electronic payments and a shift from the overwhelming dominance of cash as a means of payment.
Through the PSV 2020, Nigeria has seen the implementation of the Nigeria Uniform Bank Account Number; (NUBAN), the deployment of the real time gross settlement systems (RTGS) where transfer of money or securities takes place from one bank to another on a “real time” and on “gross” basis, without waiting period and the popular cash-less policy.
Others were the deployment of deployment of the Scripless Securities Settlement System; introduction of Cheque Truncation, which reduced clearing cycles for Automated Clearing House payments and cheque from three days (T+2) to next day (T+1); and enthronement of limits on encashment of third party cheques and a maximum cap of N10 million for cheque payments, to encourage the use of electronic payments channels.
There has also been the adoption of mobile money as a major channel for delivering financial inclusion; support for the implementation of the Federal Government’s Treasury Single Account; and migration of all payment cards from magnetic stripe technology to Chip-and-PIN, otherwise known as EMV, due to the weaknesses of the former.
With these achievements however, there are still areas of focus that the country needs to fully achieve the goals of the PSV 2020. The CBN governor while speaking at the inauguration of the Payments System Strategy Board, Scheme and Initiative Working Groups had noted that while the system has recorded some significant achievements so far in this journey, a lot still remains to be done.
He identified new industry verticals aimed at advancing the adoption of the electronic payments in Nigeria some of which include agriculture, transportation, education, hotel and entertainment, health and bill payments, government revenues amongst others to create smart cities.
This had been the basis of the inaugurating the Initiative Working Groups, one for each industry vertical, comprising the user community, banks and other service providers to work on the principle of identifying quick wins for an initial period of two years, with an option to extend for another two-year term, subject to the level of achievements.