By Babajide Komolafe
Efficient electronic payment system thrives on cooperation and competition among operators.
Chairman, Committee of E-banking Industry Heads (CeBIH), Mr Chuma Ezirim stated this at the 2nd annual conference/retreat of the Committee of E-banking Industry Heads (CeBIH) held in Calabar, Cross River State.
“The extent to which efficiency in retail payment system and other important policy objectives are attained in retail payments systems is partly determined by the complex interplay of competition and cooperation among market players”, he said.
Ezirim noted that while cooperation is necessary to set standards and build platforms to reduce transaction cost, it can also undermine product innovations.
He said, transaction costs can be mitigated through cooperation by private sector providers in the establishment and operation of financial infrastructure taking advantage of economies of scale, scope and network economies. Effective cooperation is also crucial for setting standards that will secure compatibility between the various products.
“However, centrally-agreed common features can sometimes hamper product and/or service differentiation and innovation at the individual service provider level. A key question is what factors should the authorities and key stakeholders consider in balancing cooperation and competition in retail payment systems?
“Although the dividing lines among payment services are not always clear, the sequence of payment operations can be divided generally into access services, messaging services, clearing services, and settlement services.
“Some payments services may be more efficiently provided under competitive conditions (access) versus others that may have natural monopoly features (messaging, clearing and settlement).
“Central Banks provide oversight and regulatory functions to deal with conflicts of interest and balance cooperation and competition in order to achieve optimal availability and affordability of payment instruments.
“We appreciate the role of Central Bank of Nigeria in the formulation and implementation of policies and regulations affecting deployment of electronic banking in the country. We commend specifically the various initiatives by CBN to reduce the volume of cash transactions in the economy through the Cashless Project, setting up of a National Switch and retail payments transformation policies (which amongst other benefits have reduced the cost of POS terminals by over 30%).
“CBN should however not unduly interfere in the provision of electronic payment access services in the country, which as stated earlier is an area that gives banks the opportunity to compete for product/service differentiation and innovation. Also the input of relevant stakeholders in the industry in the formulation of policies cannot be over emphasized because of the huge impact of a wrong policy on the growth of the Industry”, he said
In his keynote address, Managing Director/Chief Executive, Nigeria Interbank Settlement System (NIBSS), Mr Adebisi Shonubi said harped on the need for increased cooperation among electronic payment operators in Nigeria.
Represented by the Executive Director, Business Development, Mrs Chritabel Onyejekwe, Shonubi said, “Developing a Nigeria payments system that works, requires: Unbiased regulation and oversight over the financial system practitioners by the regulatory authorities; Collaboration between major stakeholders in the e-payment value chain.
Specifically, he said there is need for increased collaboration between CeBIH to ensure the success of the various initiatives to improve the electronic payment market. “CeBIH needs to get more involved and should set industry targets with NIBSS which they both should work towards on a recurrent basis”, he said.
He noted that the shared services initiatives introduce by the CBN to drive down cost in the banking industry, offers lots of opportunities for collaboration in the industry and banks should embrace these initiatives to facilitate progress in the electronic payment market.