CBN Set To Revolutionalize Nigeria's Payment System With PSV 2020 Strategy

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The Payments System Vision 2020 (PSV2020) of the Central Bank of Nigeria (CBN) is already revolutionizing payment system landscape of the country, extending availability and usage to all sectors and geographies, banked and unbanked while conforming to internationally accepted regulatory, technical and operational standards.
 
But despite progress, the CBN is taking next steps in this critical strategy – setting up new Initiative Working Group which would work on the principle of identifying quick wins for an initial period of two years at least.
 
PSV 2020 is an integral part of the CBN’s Financial Systems Strategy (FSS 2020) which seeks to facilitate 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.
 
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With the launch of the strategy in 2007, the CBN tried to identify series of recommendations to increase the resilience of the payments system infrastructure and work-streams which would then encourage the usage of electronic payment methods.
 
The Central Bank believes that it can be a strong catalyst for the adoption of electronic payments, as it identified eight industry verticals as offering particular opportunities for adoption of electronic payments.
 
The identified industry verticals are: Agriculture, Smart Cities, Government Flows, Hotels and Entertainment, Transport, Education, Health, Bill Payment and Direct Debits.
 
The payments strategy was one that reflected months of collaborative work with the leading banks in the country and conformed to internationally accepted regulatory, technical and operational standards.
 
The objective was simple – to drive a shift from a cash-based economy to one where electronic payments are at the centre of commercial activity.
 
Nigeria is acknowledged as a major economic force within Africa, and also increasingly an active player in the global economy. To participate actively, its payments system must be successfully benchmarked against the best practice adopted by the most developed nations and, as importantly, be recognised for it.
 
A sound payments system infrastructure, where banks and their customers can transact business with confidence an convenience, trust and timeliness, therefore underpinned many of these reforms.
 
The implementation of the strategy created an industry structure that has successfully instigated, promoted and implemented numerous successful initiatives. And as a result of these impressive achievements, Nigeria’s payments landscape is appreciably different today and the Africa’s largest economy can be justifiably proud of the recent progress in creating a robust financial system framework through several reform initiatives targeted at fostering stability, sanitising governance and restoring confidence in the system.
 
The national payments infrastructure has indeed improved substantially both in variety and efficiency since 2007. Consumers and Businesses are embracing innovative new technologies available today such as the use of mobile technology, and the level of expectation is equally significantly higher.
 
Greater engagement in governance and direction of the payment systems from Commercial Banks has also been witnessed. Other national initiatives such as Identity Management and Credit Bureaux are also being implemented today – eventhough work remains around wider adoption.
 
The CBN Governor, Godwin Emefiele, said recently that the core objective of PSV2020 is to make Nigeria’s payments system “nationally utilised and internationally recognised”.
 
“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 said earlier in the year at the inauguration of the Payments System Strategy Board, Scheme and Initiative Working Groups,
 
The recent formation of Working Groups, comprising of the user community, banks and other service providers, is to drive adoption.
 
The group would work on the principle of identifying quick wins and success transfer and would be formed for a limited period only- two years maximum with the option to extend for one further term should all parties agree.
 
According to Emefiele, 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.
 
And this can be seen in the implementation of the Nigeria Uniform Bank Account Number; deployed the real time gross settlement systems 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 initiatives are the 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 is also 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. Although the system has recorded some significant achievements so far in this journey, the governor notes still that a remains to be done assuring that the CBN would not rest on its oars.
 
A detailed assessment of the Nigerian payments infrastructure, identifies eight new industry verticals where advancement in needed in the adoption of the electronic payments despite progress.
 
Emefiele, observes for instance that in agriculture sector, focus would be to develop electronic payment methods to support the value chain from inputs to tertiary production and supply, while noting need to develop a cashless model for Smart Cities.
 
For the smart cities scheme, the focus would be on both existing cities and “greenfield cities”, to ensure that less cash is used as a means of payment in retail outlets, transportation, and food.
 
Government’s cash flows would be reformed to ensure adoption of end-to-end electronic channels for all forms of salaries, pensions, suppliers, individual & business taxes payment and collection of reven ues by private and public sector organisations.
 
In hotel and entertainment, the governor sees need for more work with key pilot hotels and other key entertainment venues such as restaurants, cinemas, sports centres to promote the cash-less initiative.
 
Under the transportation sector, the new focus would develop strategies for getting the public to pay for transportation (inter-city and intra-city) electronically, while a pilot implementation would be organised with various transportation companies.
 
While Emefiele raised confidence on the success of in the transport sector, a lot of traction has been gained on air transportation, while a lot still remains to be done on land, water and rail transport systems.
 
Other areas of focus, going forward include education, health and bill payments and direct debits, by designing and developing channels with components such as grants, scholarships, consultancy services, Internally Generated Revenue (IGR), tuition and administrative fees. provision of personal and medical information and payments for health and medical services and driving the current initiative for bill payments like insurance, pensions, telecommunications, Cable TV and utilities to conclusion are also imperative.
 
It was therefore in the bid to achieve these that the CBN invited nominations from the stakeholders to seek capable hands to serve in any of the new Initiative Working Groups – one for each industry vertical, comprising the user community, banks and other service providers.
 
The groups would 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.
 
Source: BusinessDay
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