Review of Evolution of Payments in Nigeria between 2000 & 2019

Background

Evolution of Payments in Nigeria

Payments: Journey so far

Regulatory Journey

Key Industry Metrics

Volume Trend of Electronic Payment Transactions

Current Status of Payments

Financial Inclusion Journey

Forces Driving Digital Payment

Digital Payments …..Today

Digital Payments …..Tomorrow

Table of Content

• More and more banked customers are migrating from the traditional banking platforms like cheques, over-the-counter (in-branch)transactions etc. to the digital platforms like USSD, mobile banking and web.

•

• Between 2000 and 2018 digital payments have grown by about 400%

• Digital payments have also grown with a CAGR of 30% while cheque payments have declined by a CAGR of 26% between 2000and 2018

• In Q1 2019 , over N23trn worth of payment transactions were generated from about 500m transactions (about three times theNigerian 2019 expenditure budget)

• Financial inclusion growth has been slow up till 2018 with major policy thrust from the CBN

Background

Evolution of Payments in Nigeria

• Value Card proliferation• Introduction of mobile telephone

• Commencement of Universal Banking

• Mastercard started operation through CTL (Cards Technology Limited)

• Interswitch started operation

• Interswitch, began ATM operations with 5 ATMs from United Bank for Africa (UBA) and First Bank of Nigeria (FBN).

• Commencement of e-Cash

Commencement of Internet Banking

Commencement of Naira Credit Card

2000 2002

2004

2006

2007

Evolution of Payments in Nigeria……\contd

2009 2010

2011

2012

2013

Verve Cards commence operation

• Introduction of NUBAN• Commencement of e-commerce

(online shopping) in Nigeria

Commencement of NIBSS Instant Payment ( NIP)

Commencement of Mobile Money• Licensing of Paga,

Teasymobile, Eartholeum and other Banks

• Commencement of Interoperable POS

• Introduction of cashless policy

Payment through USSD started

Evolution of Payments in Nigeria……\contd

2014

2015

2016

2017

• Commencement of BVN• Outbound cross-border remittance

Introduction of Treasury Single Account (TSA)

Fintech penetration • Flutterwave• Paystack e.t.c.

Digital Lending commenced

2013

Payment through USSD started

2014

• Commencement of BVN

• Outbound cross-border remittance

2015

Introduction of Treasury Single

Account (TSA)

2016

Fintech penetration

• Flutterwave• Paystack e.t.c.

2017

Digital Lending commenced

Evolution of Payments in Nigeria Contd.

The chart above which shows the annual trend of electronic payments from 2012 to 2019 (H1) by NIBSS reveals Compounded Annual

Growth Rate (CAGR) of 120% i.e. transaction volume doubles yearly. This is a strong indication of the rapid growth of digital payments

with great potentials to do more as the financial inclusion rate increases.

SOURCE: NIBBS

Payments: Journey So Far

< 1999

1994 Establishment of Nigerian Interbank

settlement System

2000-2003

2002 Full implementation and live operation

of Nigeria

Automated Clearing

System

(NACS)

2004-2005

2004 New settlement framework for

cheque clearing.

2002 Reduction of clearing cycle to

T+3 (local) and T+5

(upcountry)

2003 Definition of guidelines for e-

banking

2006-2008

2006 Implementation of RTGS System

Temenos T24

2006 Establishment of National Central

Switch (NCS)

2006 Cheque standard and cheque

Printers

Accreditation

2007 Payments System Vision 2020 (PSV

2020)

2007 Harmonization of clearing

cycles(upcountry

and local) at T+2.

Regulatory Journey

2009-2010

2009 Issuance of Mobile Payment

Regulatory

Framework

2011-2012 2013 2014

2014 Issuance of revised Guidelines for card

issuance and

usage in Nigeria

2014 Abolished fees on cash deposit above

the Cash-less

Policy threshold

2014 Implementation of Bank Verification

Number (BVN)

Scheme

2014 Guidelines on International Money

Transfer services in

Nigeria.

2009 Guidelines on Transaction switching

2009 Guidelines on Stored Value/ Prepaid Cards

2009 Establishment of Direct Debit Rules

2010 Directive enforcing a cheque cap of N10

million

2010 Migration to EMV Cards

2010 Guidelines on ATM Operations

2010 Nigeria Uniform Bank Account Number

(NUBAN)

2011 Issuance of Cash-less policy circular

2011 Guidelines for card issuance and usage

in Nigeria

2011 License of 6 PTSPs for deployment and

maintenance of POS

2012 Introduction of charges on cash

withdrawal/deposit

charges above the

cash-less policy

threshold (Lagos)

2012 Implementation of cheque truncation in

Lagos

2012 Reduction of clearing cycle from T+2 to T+1

in Lagos

2013 Nationwide Implementation of

Cheque truncation

2013 Reduction of clearing cycle to T+1 from

T+2

2013 N150,000 limit on encashment of 3rd

party cheques

2013 Licensed 10 additional PTSPs

2013 Compliance monitoring with

Payment Card

Industry Data and

Security Standards

(PCIDSS)

2013 Issuance of Guidelines for the

regulation of Agent

Banking in Nigeria

2013 Payment System Vision 2020

Release 2

Regulatory Journey…../contd.

2015

2015 Regulatory Framework for

Mobile Money

Services in Nigeria

2016-2017

2015 Guidelines on Mobile Money Services in

Nigeria

2015 Guidelines on International Mobile

Money Remittances

in Nigeria

2016 Guidelines for the operation of TSA by

State Governments

2016 Guidelines on Operations of

Electronic Payment

Channels in Nigeria

2016 Guidelines on Transaction Switching

in Nigeria

2018 2019

2019 Regulation on Electronic

Payments and

Collections for

Public and Private

Sectors of the Economy

2019 Regulation for the Operation of

Indirect Participants

in the Payment

System

2018 Guidelines for Regulation of

Payment Service

Banks

2018 Regulation for Bills Payment in Nigeria

2018 Circular on the Regulatory

Framework for

use of USSD in

the Nigerian

Financial Service System

2018 Regulation of instant

(Interbank)

Electronic

Funds Transfer

Services in Nigeria

2018 Regulation for Direct Debit Scheme in

Nigeria (Revised)

Regulatory Journey…../contd.

2000 2010 2019

No of Banks 64 commercial Banks24 merchant Banks

24 23 commercial Banks2 non-interest Bank, 5

merchant Banks, 3 PSBs

Bank Accounts 12,989,993 43,209,198 124,116,098

Debit Card issued 0 20,910,344 92,894,384

No of ATMs Live 0 10,003 17,808

No of POS Deployed 0 11,455 287,759

Cheque processed 2,893,979 10,097,340 8,401,947

Interbank Transfers0 26,088,634 803,149,223

Mobile Payment0 0 217,841,265

Key Industry Metrics

Volume Trend of Electronic Payment Transactions

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

1,800,000,000

2,000,000,000

2012 2013 2014 2015 2016 2017 2018

Volume Trend of Electronic Payment Transactions

Cheques ATM POS NIP

Cheque transactions thinning out

0M

250M

200M

150M

100M

50M

VO

LU

ME

CHANNEL

Mobile USSD Internet

Banking

TPP ATM Other

ChannelsVendor

Mench

POS

80% of all instant payments, over the stated period, occurred using a Mobile Phone (and or a Tablet).

2019 (Jan –Jun)

Current Status of Payments

(43.1%)

(36.9%)

(8.1%)(5.9%)

(4.9%)(0.7%)

(0.3%) (0.1%) (0.2%)

20162001

2018

2019

Mobile

MoneyPolicy

Ubiquity

of USSD payment

Commence

ment of SANEF

CBN Revised

regulation on licensing of PSBs

for mobile money

Interoperability

of Mobile wallet/ Banks and

Micro Loan/ Micro

investment and Savings

Aggressive

payout of social intervention

funds2020 and Beyond

Continuous Improvement

Licensing

of Super Agents

Licensing

of PSBs

Licensing

of Mobile money

operators

Toda

y

Social

Intervention funds

payment

Popularity

of Agency Banking

Financial Inclusion Journey

Physical distribution is no longer an advantage New Narrative

• Failed attempts to challenge the incumbents

• Tough to disrupt banks

The rise of the Millenials and the Digital Natives

• Significant demographic shift and impact on positioning

The proliferation of Mobile• Building a strong case for personalization and

customization

The Force called Data• Glabally available, transparent and accessible

Each of the highlighted forces come with mineable opportunities

Soucrce: Interswitch

Forces Driving Digital Payment

Digital Payments …..Today

Source: CBSINSIGHTS

Thank you

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2 0 3 0

A h y p e r c o n n e c t e d

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Payments

T h e r i s e o f d i g i t a l c u r r e n c i e s

t h a t w i l l b e i s s u e d b y c e n t r a l

b a n k s a n d c o r p o r a t e p l a y e r s w i l l f u r t h e r a c c e l e r a t e t h e

t r a n s f o r m a t i o n o f p r o d u c t s a n d s e r v i c e s .

Digital currencies

Digital Payment …..Tomorrow