e-Payment: Infrastructure duplication hindering cheaper transactions – NIBSS

The Managing Director, Nigeria Inter-Bank Settlement System, operator of the Nigerian Central Switch, Mr. Paul Lawal, has said that the multiplicity of infrastructure and investments is the bane of cheap electronic payment services in Nigeria.

Speaking in an exclusive interview with our correspondent on the sidelines of an e-Payment forum organised by Digital Jewels in Lagos recently, Lawal said that all the banks in the country were spending a lot of money on e-Payment infrastructure.

This, he said, was aimed at connecting different card schemes such as Verve, Visa and MasterCard, as well as various payment switches such as Interswitch, Valucard and Chams.

This, according to him, amounts to multiplicity of infrastructure with higher cost implications for the consumers.

He noted that many banks in the country were connected to at least three switches and the central switch contrary to the directive of the Central Bank of Nigeria.

Lawal added that consumers would continue to bear high cost of electronic transactions as solution providers, who invested so much to provide the services, must recoup their investments.

He said, “As at now, we have banks investing in connecting to various solutions providers and e-Payment companies. Any bank that wants to make any payment scheme to work must connect to the solution provider or to the card scheme. So, what they are having is multiplicity of investments.

“A lot of foreign exchange is being invested on connecting the various card schemes. So, any new card scheme coming to Nigeria must connect to all the banks if the promoters want all Nigerians to be able to access it. This is gulping a lot of foreign exchange and banks indirectly are investing in areas that may not necessarily add value.”

Lawal noted that the NCS was established by the Bankers Committee as an industry-owned infrastructure to ensure interconnectivity of all payment facilitators and interoperability in the country’s financial industry.

A switch is an electronic fund transfer and e-Payment transaction switching and processing system, which facilitates the exchange of value between financial service providers, card scheme operators, their customers and other stakeholders.

Lawal said that the central switch was supposed to serve as the national gateway for payment services in the country.

To achieve its aim, he said that over N500m had been invested in the NCS by the NIBSS over the past four years.

He, however, lamented that there had been apathy on the part of the partner institutions to the central switch, thus leaving the N500m facility somewhat dormant.

The NIBSS CEO said that, though all the banks and the payment switches in the country, such as Interswitch, were already connected to the central switch, they had yet to activate their lines.

This, according to him, means that the banks have subscribed to the central switch but have yet to make use of its services, thereby making it somewhat dormant.

Lawal said, “As at today, all banks are connected to the central switch. All switches are also connected to the central switch, but many of them have yet to go live. It is like when you buy a SIM card and you put it in your phone, you can’t start making calls until the network provider activates your card.

“This means that communication from that card will be routed through the network. As at now, they are all connected, they are all tested, they can all work tomorrow morning, but many have not activated those lines.”

Speaking on the benefits of the central switch, Lawal said, “Our interest is the savings to the financial sector, which we expect will now lead to cheaper electronic transaction delivered to customer. We are sure that multiplicity of infrastructure will not be there and Nigeria will save a lot of foreign exchange.”

He explained that the vision of the central switch was to achieve greater financial inclusion through a cashless economy, where the consumer could get instant services at very low rates because the centralised system had reduced costs, minimised financial wastes and significantly improved efficiency of industry targeted e-Payment schemes.

Lawal argued that the essence of the central switch was to give access to a more efficient, technology-driven payment system, with its attendant cost reduction, as well as lower transaction fees.

According to him, the central switch is also expected to prevent infrastructure duplication, while providing a single platform for a variety of payment needs, infrastructure and instruments.

However, if the stakeholders failed to route their transactions through the central switch, the benefits would not be accessed, he said.

Stakeholders in the e-Payment industry, our correspondent gathered; saw the NCS as a parallel entity to the privately-owned switches such as Interswitch, Valucard and Chams.

Our correspondent also learnt that the major electronic transaction switches believed that the NCS management was trying to take advantage of the industry after the private operators had relentlessly toiled to build it to its current status.

An expert, who asked not to be named because he was not authorised to do so publicly, said the Central Bank of Nigeria should not expect the banks who own the switches to abandon them for the NCS.

Lawal, however, reiterated that all stakeholders stood the chance of benefiting from the NCS if they embraced it.

According to him, the central switch is an enabler and not an inhibitor.

Source : Punch