#1NIBSS TOWARDS A CASHLESS NIGERIA: Tool and Strategies: Business Implications A Presentation of: Adebisi Shonubi Managing Director/CEO Nigeria Inter-Bank Settlement System Plc AT THE NIGERIA COMPUTER SOCIETY 24TH NATIONAL CONFERENCE July 25, 2012.#2BACKGROUND INFORMATION NIB#3The Cash-Less Nigeria Project is an integral part of the shared services project of the Central Bank of Nigeria towards propelling the Nigerian Economy Shared Services Program Cash Management Payment Systems Transformation* IT Infrastructure & Services IT Standards Back Office Operations • Industrialize Cash Management & Logistics (Storage, Processing & Movement) • Facilitate growth of electronic payments • Increase availability, reliab ility and security of electronic channels • Increase efficiency and reduce cost of operations/mainte nance for IT and infrastructure (application management, data centre, shared network, shared power, etc) • Align IT standards across the Industry to improve efficiency, while driving data integrity and enabling • Enable cost reduction through shared back office operations (centralized processing, colle ctions; etc) information exchange 2 Increase access, convenience and service levels across the Industry 1 Reduce Industry cost-to-serve by 30% 3 Enable greater financial inclusion and integration of financial services into the economy, with its attendant positive impact on economic development * Payments is the key driver of cost of distribution, which accounts for almost 60% of the industry cost base Source: Central Bank of Nigeria NIB#4Cash-Less Nigeria Policy is aimed at reducing the high and increasing cost of cash estimated to reach N192 billion in 2012 Direct cost of cash to Financial system (2009) A 5-year projection of the direct cost of cash to Financial System Cash in Transit Cost (24%) N-27.3bn Cost of Cash (CBN + Banks) Cash Processing Cost (67%) N69.1bn A114.5bn Vault Management Cost (9%) N18.1bn* Annual Total Cost (NB) 250,000 200,000 150,000 100,000 50,000 2008 2009 2010 2011 2012 A compilation of actual data from the CBN and 17 banks in the FSI (data extrapolated for 24 Banks). *Does not include bank cash infrastructure costs and employee costs attributable to cash logistics. Source: Central Bank of Nigeria NIBIT#5Cash Related Transactions Represent Over 99% of Customer Activity in Nigerian Banks as at June 2011. ATM Withdrawals Payment Channel Transaction Volume 109,592,646 OTC Cash Withdrawals Cheques POS Web 1% 0% 14% Source: Central Bank of Nigeria 85% 72,499,812* 29,159,960 1,059,069 2,703,516 Cash Cheque POS Web NIB#6. Motives of the Cash-less Nigeria Project The Cash-Less Nigeria Policy was introduced to; Engender the accomplishment of the Vision 20:2020 Modernise Nigeria's payment system in line with international best practices Reduce the cost of banking services which culminated into high cost of credit to the real sector Drive Financial Inclusion ● Improve effectiveness of Monetary Policy ● Reduce high security & safety risks ● Foster Transparency and Curb Corruption/Leakages NIB#7Implementation Modalities of the Cash-Less Nigeria Project The Cash-Less Nigeria Policy was heralded with the setting of Cash Withdrawal and Lodgement Limits The Central Bank of Nigeria (CBN) introduced the policy with a pilot run in Lagos The policy was meant to reduce the volume of physical cash transactions in the economy ➤ Pilot run in Lagos commenced from April 1, 2012 with a daily cumulative limit of N500,000 and N3,000,000 on cash withdrawals and lodgments by individuals and corporate customers respectively without attracting any processing fees NIB#8Individuals and corporate customers that make cash transactions above the limits are to be charged processing fee as follows subject to review every 6 months: Withdrawal above limit: Individual - 3% above limit; Corporate - 5% above limit > Lodgment above limit: Individual - 2% above limit; Corporate -3% above limit Micro Finance Banks and Primary Mortgage Institutions are excluded from the policy of N3,000,000 for corporate bodies to enable them meet the legitimate demands of their numerous customers Cash withdrawal and lodgement limits are applicable to customers of MFBs and PMIS NIB#93rd party cheques above N150,000 shall not be eligible for encashment over the counter. Value for such cheques shall be received through the clearing house Exemption granted on lodgment for accounts operated by Ministries, Departments and Agencies (MDAs) of the Federal & State Governments, for the purpose of revenue collections only Banks to cease cash in transit lodgement services rendered to merchant-customers and to be replaced by CBN licensed CIT providers NIB#10Alternates to Cash Payments I. Cheque II. Bank Transfer(at the Bank Branch or Internet Banking system) Same-Day Inter-Bank Transfer NIBSS Instant Payments (NIP) Standing Orders Direct Debits III. Payment Cards Automatic Teller Machines (ATM) Point of Sale (POS) Payments IV. Mobile Payments (micro-payments) NIB#11Role of Nigeria Inter-Bank Settlement System(NIBSS) Plc NIBSS is owned by all Licensed Deposit Money Banks in Nigeria and the Central Bank of Nigeria (CBN). NIBSS - a shared infrastructure company of the Bankers Committee with a mandate to continuously enhance the Nigeria Payments System. NIBSS Board comprise Deputy Governor (Operations), CBN, as Chairman, representatives of Banks and NIBSS MD/CEO NIBSS has operated for 19 years. Has eight (8) operating offices - Lagos, Abuja, Port Harcourt, Kano, Benin, Ibadan, Enugu and Ilorin. NIB#12Banks & NIBSS Initiatives towards promotion of e-Payment 1 CHEQUE 2 BANK TRANSFER . Operators of the Nigeria Automated Clearing System(NACS), which has reduced clearing to T+2 Soon to commence Cheque Truncation, which will reduce clearing to T+1 Same-Day Inter-Bank Transfer (NEFT) NIBSS Instant Payments (NIP) Automated Direct Credits & Debits (NEFT) • • Central Mandate Management System (CMMS) 3 CARDS . 4 MOBILE PAYMENT • 5 CAPACITY BUILDING Nigeria Central Switch (NCS) POS Transaction Aggregator(Interoperability, Terminal Monitoring, Global statistics) T+1 Merchant Settlement • • Interoperability Settlement Cash In Cash Out E-Payment Training Facility NIBST#13The Position of NIBSS in Cash-Less Nigeria Project Acquiring Side Mobile Payment Operators Acquiring Bank GTBank POS Terminals NIBSS NES NIGERIA CENTRAL SWITCH International Gateway for Retail Payments nterswitch UNIFIED PAYMENTS eTranzact≫≫ Issuing Side CHLOED BLODEMET GTBank Other Banks#14E-Payment Challenges 1. E-payment systems are not immune from the general infrastructure problems - Power, Telecoms, etc 2. Incessant GPRS network down-time. Every voice network down-time translates to GPRS down-time. 3. NIBSS has made available various technologies (GPRS, WiFi, CDMA, DSL, LAN) to ensure reliable POS operations 4. Many telcos have been engaged to provide a workable POS connectivity solutions. POS Cluster connections are being put in place also 5. These measures are stabilising POS operations. NIB#15EMPIRICAL E-PAYMENT STATISTICS NIB#16CHEQUE VOLUME PROCESSED BY NIBSS 1,400,000 1,200,000 1,000,000 800,000 642,229 600,000 400,000 200,000 999,814 1,188,548 860,230 1,116,927 964,710 O Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 NIB#17CHEQUE VALUE PROCESSED BY NIBSS 900,000,000,000 800,000,000,000 700,000,000,000 600,000,000,000 500,000,000,000 400,000,000,000 300,000,000,000 449,133,223,389 200,000,000,000 100,000,000,000 0 683,570,768,732 862,505,804,721 678,818,930,937 616,346,075,179 607,890,726,941 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 NIB#18160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 NUMBER OF POS TERMINALS REGISTERED ON NIBSS PLATFORM 5,720 42,327 93,133 117,192 110,729 151,717 JAN FEB MARCH APRIL MAY JUNE NIB#19NIBSS PTSA POS Terminal Transaction Volume 250,000 200,000 150,000 100,000 50,000 1,956 O Jan-12 24,648 92,016 114,495 192,154 179,524 Feb-12 Mar-12 Apr-12 May-12 Jun-12 NIB#20NIBSS PTSA POS TRANSACTION VALUE (N) 4,000,000,000 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 38,571,946 369,875,248 1,456,918,176 2,057,594,560 3,130,737,499 3,549,778,070 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 NIB#21NIBSS INSTANT PAYMENT (NIP) VOLUME 300,000 250,000 200,000 150,000 100,000 87,257 50,000 177,150 155,983 194,824 276,083 267,585 0 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 NIB#22NIBSS INSTANT PAYMENT VALUE (N) 300,000,000,000 250,000,000,000 200,000,000,000 150,000,000,000 100,000,000,000 50,000,000,000 0 51,668,366,178 180,889,351,614 146,561,449,370 108,487,581,146 284,372,470,141 246,281,336,636 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 NIB#23Conclusion NIBSS is committed to the Cash-Less Nigeria Project of the Central Bank of Nigeria The Nigeria populace possess the numeracy acumen required for the success of the Cash-Less Nigeria Project far above the utopian literacy skills The adoption and continued encouragement of the use of POS Terminals is a major step for the success of the Cash-Less Project We strongly believe that the enhancement of POS adoption relies on high POS availability and connectivity consequently the expansion of TELCO facilities beyond the conventional GPRS to CDMAS NIBSS is committed to playing stronger and more frontal roles in policy formulation and initiations in the Nigeria financial system NIB#24We at NIBSS are delighted to be associated with the NIGERIA COMPUTER SOCIETY which accounts for the annual organisation of this Conference. NIB#25THANK YOU NIB