The Nigerian payment ecosystem has grown into one of the finest ecosystems globally with the deployment and adoption of modern payment systems.
This is coming on the back of budding fintech start-ups, active regulator involvement, infrastructure considerations and declining foreign capital inflow. Consequently, most commentators have come to believe that the modernisation of the payment process started in 1993 with the Central Bank of Nigeria (CBN) establishing the Nigerian Interbank Settlement System (NIBSS) followed with the introduction of payment cards and paper based instruments.
Also in 2004, the CBN introduced a broad guideline on e-banking which included the introduction of ATMs, e-money products such as credit and debit cards. This was followed by 2009 release of a regulatory framework for mobile payments with the surge in fintechs revolution that saw over N30 trillion in transaction value processed in 2015.
This was a major revolution in Nigeria’s payment ecosystem and meant that payment for goods and services, trade, e-commerce and social commerce improved on the back of technology and innovative ability.
According to a recent report by McKinsey, Nigeria is one of eight African countries that enable a robust payment architecture today.
The development also points to the fact that Nigeria’s payment system can improve better to enable a robust payment architecture.
However there is still much work to be done to ensure an ideal payment system to overcome the psychology of most Nigeria to physically hold and touch cash.
This became so evident during the last Naira redesign policy and its attendant cash crunch that saw Nigerians suffer hardship, with banks’ infrastructures being vandalised as well as surge in charges per transactions by Point of Sales (PoS) operators.
But the question is what does an ideal payment system look like? Every payment system possesses attributes characterised by the quality and standards executed by the stakeholders within a system. While regulators play such a crucial role in setting the foundation for defining these ideal attributes, the buck stops with operators, who have the responsibility to deliver them individually.
An ideal payment system is a perfect or complete system that allows consumers, businesses and other organisations to transfer funds usually held in an account at a financial institution to one another.
It could also be said that an ideal payment ecosystem must have such attributes like, competitiveness, user-friendliness, future proof, agile, open but secure and responsible, reliability, scalability and interoperability.
Therefore, it is the role of both regulators and operators to define the baseline operating standards based on these features.
But sticking to this standard requires a lot of things being in place before an ideal payment ecosystem can function efficiently.
Infrastructure and regulation
It is necessary to recopgnise that no payment architecture exists without physical infrastructure.
In terms of payment service providers (PSPs), this would include servers, network connectivity & software tools supporting the proper collection, storage & transfer of data to facilitate payment transaction processing. For consumers, this includes mobile devices, mobile & internet connectivity to enable access to e-payment channels.
Economic experts as well as market players have raised their concerns since the cash crunch while stating that there is need for the incoming administration as well as the CBN to invest in expandable infrastructure to accommodate the surge in electronic transactions in the country.
According to them, the reason behind the failed implementation of the CBN’s naira redesign was due to the fact that the apex bank and commercial banks did not have the adequate infrastructure to accommodate the surge in electronic transactions during the scarcity of cash in the first quarter (Q1) of 2023.
Delivering a paper titled; Designing and Implementing a Robust Payment Architecture – A Super Fintech perspective at the just concluded during the 34th seminar for Finance Correspondents and Business Editors held in Calabar, the Chief Executive Officer, eTranzact international Plc, Niyi Toluwalope, said that despite the CBN’s best efforts as regards the evolution of payment trends, there is need to deploy a public application programming interface (APIs).
Toluwalope stated that the current key payment functions exist in siloed networks, isolated from other siloed payment networks.
According to him, multiple payment capabilities can be replicated across PSPs, however PSPs are currently forced to develop non-essential capabilities in order to deliver their core offerings.
He further added that payment networks have to be governed by regulatory guidelines to
enable the responsible deployment of payment solutions to prevent harm to the ecosystem.
“However, regulations have to evolve to enable the payment architecture of the future through the adoption of Regtech to design and enforce guidelines. Furthermore, talent is such a critical requirement to build the payment architecture of the future, as most of the attributes of an ideal payment architecture exhibits, are truly reflection of the quality of talent responsible for design and implementation of individual payment systems that form the whole network.
The ideal payment architecture can only be delivered by the sustainable injection of capital to support the research & development, design, prototyping, sandbox testing, deployment, monitoring and regulation of payment solutions, systems, and the physical infrastructure required to support its 24/7 availability”, the eTranzact boss said.