By Babajide Komolafe

Electronic payment experts have identified   smart regulation and increased innovation as critical factors to achieving the objectives of the nation’s Payment System Vision 2020

Mobile Money

Speaking at the 2014 annual retreat of the Committee of e-Banking Industry Heads (CeBIH), held in Abuja, epayment experts including officials of the Central Bank of Nigeria (CBN), Nigeria Interbank Settlement System (NIBSS) emphasised the need for review of the policy regulatory environment of the country’s payment system, so as to improve on the progress recorded in the adoption of electronic payment in the country.

Making a case for smart regulation of the payment system in Nigeria, John Chaplin, a global retail payment expert, noted that though banks desire less regulation, regulation is critical to sustainable competition which is necessary for the growth of the payment industry. He said banks however have a right to better and smarter regulation.

“Frequent rule changes are a sign of bad regulation and deter investment, industry must actively work with regulators to achieve a good outcome. Clear, consistent, even handed and risk-based regulation is the goal”, he said.

Speaking further, he said that, “Leaving the market to market forces will lead to higher cost, which would drive out everybody. Hence the aim of regulation should be to drive down cost”.

In a presentation titled, “Towards smart payments regulation: Global best practice in balancing growth, profit, innovation and fairness in retail payments”, Chaplin called the attention of participants at the retreat to the outcome of a 2012/13 project which reviewed the role of domestic approaches to card payments in global world: Input from 17 schemes. He said among other things, the study reveals a consensus among epayment operators on the need for regulation that encourages level playing field and promote sustainable competition.

On his part, Akeem Lawal, Divisional Chief Executive, Interswich, called for a review of some aspects of regulation of epayment in Nigeria. He said for example, the regulation of pricing is not encouraging to investment, adding, the CBN should allow flexibility in pricing of services in the industry. He said that though the CBN can regulate interchange, it should allow banks to determine incentives offered to merchants and customers.

In his opening remarks, CeBIH Chairman, Mr. Tunde Kuponiyi, called for regulation that would enhance prosperity and innovation in the industry. He said, “It is worthy to note that for the industry to prosper and for innovation to thrive, a sound complementary regulatory framework is very much required. Such a framework should provide a level playing field for all players to enable the customer to exercise his choices as regards choosing a particular service provider. Other important components for such a regulatory framework would also encompass customer protection issues, fraud prevention issues, security related issues and fair pricing.”

In his keynote address, Deputy Governor, Operations Directorate, CBN, Alhaji Suleiman Barau said the apex bank is ready to adopt regulation that would facilitate the achievement of the objectives of the Payment Vision 2020, and hence called on participants at the retreat for ideas that can further strengthen the nation’s payment system.

Represented by Mr. Dipo Fatokun, Director, Banking and Payment System Department, CBN, Barau disclosed that in line with global best practices, the CBN has decided to adopt a more collaborative approach to its regulation of the payment system in the country as well as promote self regulation among epayment schemes.

He said, “ Our clear objective is “to facilitate economic activities by providing safe and efficient mechanisms for making and receiving payments with minimum risks to the central bank, payments 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.

“We are not oblivious of international best practices and global standards and we strive continuously to ensure that the Nigerian payments system is at the forefront of payments system development.

Having benchmarked against the Principles for Financial Market Infrastructure issued by the Committee on Payment and Settlement System (CPSS) of the Bank for International Settlement, we seek to bridge observable gaps through specific recommendations.

“Let me also highlight that the Central Bank of Nigeria has indicated a shift in its payments system regulatory stance. The Bank through the Payments System Vision 2020 signified a more collaborative approach to overseeing the national payments system through the following recommendation within the strategy: The strengthening of scheme governance structure to reflect the significantly greater responsibility of scheme management, covering all aspects of risk, business management and operational resilience; The setting up of Scheme Management Board which has the responsibility to complete an annual self-assessment against the CPSS/IOSCO PFMI.

“The significance of this is that self-regulatory principle is being embraced by the Central Bank of Nigeria. This is intended to foster discipline among participants and enhance compliance level to regulations. It is however, in no way an abdication of the overseer role of the Central Bank of Nigeria for the national payments system.”

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On the need for innovation, Hany Fekry, Chief Commercial Officer of Emerging Markets Payments, and Omar El Moatez, Senior Strategic Accounts Director, African Regional Financial Solutions Division, NCR, noted that banks and epayment providers in Nigeria are pursuing the same set of customers, and there is need for innovation to offer their services to more people especially the millions of unbanked Nigerians.

In a presentation titled, “How Technology is transforming customer experience”, Fekry noted that credit card and mobile payment is very low in Nigeria. He also noted that despite the fact that Nigeria is one of the highest internet penetrations in the world; the level of e-commerce is very low. He called on the e-payment industry, to find a way to use the high internet penetration in the country to drive e-commerce. Drawing the attention of the gathering to the growing prominence of mobile e-commerce, Fekry, said that to overcome the challenges of mobile payment in Nigeria, banks could form a consortium that would establish a common mobile payment platform that each bank could access and use to offer and drive mobile payment in the country. He noted that this strategy would enhance extension of mobile payment to the millions of unbanked people in the country.

Also speaking on the need for efforts to extend epayment to the unbanked in the country, Kuponiyi said, “The benefit of modern payment system is yet to fully percolate to all segments of the society. As a result, a substantial portion of the population is still outside the realm of the formal and modern payment system.

Thus the stage is set for all of us especially the banks and the Central Bank of Nigeria along with other stakeholders in the industry to collaborate with each other in a co-operative effort to expand the reach of banking sector and modern payment systems by making all efforts towards the realisation of the PSV 2020 20. In this endeavour, educating customers on the security comfort afforded by the payment products and the measures required to be taken by the customers for minimising fraud and misuse should also be an integral part.”

Speaking on the need for innovation, Barau said that one of the aims of the Payment System Vision 2020 is to encourage innovation guided by the outlined strategy. “Innovators in the payments system are our partners in progress and we are committed to promoting creativity and dynamism in the national payments system.” he said.

John Chaplin however noted that global experience show that innovation usually comes from new entrants and not established operators. He said that is why the regulatory framework must be designed to encourage new entrants into the epayment industry, adding, this is the only way to guarantee constant introduction of innovative products and services, and growth of the epayment industry.

The recommendations and views expressed during the retreat was summarised in a communiqué issued by the Committee. The communiqué stated, “The committee appreciates the Central Bank of Nigeria for driving the cash-less policy and active engagement of industry players in the payments industry. However, in order to improve on the current gains brought about by the policy, the committee recommends as follows: Introduction of tax incentives for merchants who adopt electronic channels, benchmarking the South Korean model which recorded a huge success upon the implementation of such a scheme;

“Payment of subsidies, grants and any social security benefits (e.g. aids to victims of violence, natural disasters, Internally Displaced Persons (IDPs), etc. through electronic channels;

“Allowing the market to determine the price of electronic payments to engender innovation and healthy competition which eventually benefits the final consumer and indeed the market. We believe that this resonates with the CBN objectives.

“There is a strong need to re-evaluate the concept of shared services to promote “choice of service providers” and encourage competition. Switches and service providers should be allowed to compete while services that could be shared such as Settlement and Clearing services are handled by NIBSS

“There is an urgent need to review the current model for POS terminal deployment as the structure is not sustainable. The committee is worried by the issue of interoperability, non-uniformity of standards, number of parties in ecosystem with huge impact on the cost of operations and profitability, proliferation of terminals at merchant locations, weak operational framework, imperfect pricing and revenue sharing formula, amongst other factors including infrastructural challenges, which have led to high rate of inactive POS terminals in the market.

“Given the myriad of challenges that have bedevilled the POS operation, as highlighted above, the committee hereby commits to setting up a sub-committee comprising major stakeholders in the payment system. The main objective is to analyse and review the failure points of POS transactions over a period and present to a larger committee, including CBN with a view to fixing all the issues as applicable.”








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