Nigeria: Hullabaloo, dissatisfaction trails implementation of National Central Switch

Nigeria: Hullabaloo, dissatisfaction trails implementation of National Central Switch
Ben Uzor Jr
The Central Bank of Nigeria’s (CBN) recently issued directive that all banks connect to the National Central Switch (NCS) has drawn the indignation of electronic payment providers who have expressed their reservations about their narrow understanding of the model employed by the Nigerian Interbank Settlement System (NIBSS) in implementing the switch. Furthermore, they maintain that the resultant frustration and confusion about the NCS is a culmination of NIBSS’s laxity in the area of interfacing with stakeholders on the implementation process as well as its inability to provide the needed answers to the numerous questions and worries of service providers concerning the operations of the central switch. According to them, NIBSS has not addressed their concerns about implementation, hence their lack of enthusiasm to partake fully in the switch because of limited understanding of the model adopted. They however further expound that there is immense value in possessing a central switch but it must work hand in glove with the model that recognises the existence of other switches. The issue of mandating banks to also connect to the central switch, they claim negates this model making the NCS a competitor to existing switches rather than a regulator. In sharp response, NIBSS has dismissed these accusations claiming that they have been open and fair in their mandate of setting-up the National Central Switch (NCS). The NCS was created to address one of the major problems often encountered by banks’ customers in the use of payment card products like debit and credit cards. The project was embarked upon to assist bank customers who on many occasions experience the frustration of not being able to use their card on ATM or PoS irrespective of the bank that issued the card or the bank that owns the ATM or PoS terminal. Accordingly, bank customers have had in their possession many cards belonging to different banks or card schemes (switches). Conversely, to further add value to end users seeking financial services through cost reduction and improved service delivery, there was a need to carve out reciprocal interoperability and unhindered interconnectivity between all stakeholders in the industry. To address this problem, the Bankers Committee, in 2005, initiated the establishment of the NCS to be operated by NIBSS, and which would connect all the banks and card schemes (switches), hence, making it possible for banks customers to use their cards on any payment device irrespective of the owner. Paul Lawal managing director, NIBSS stated: “The primary objective of the Nigeria Central Switch is interoperability. That is any payment device will accept any card from any switch or any bank. The other objective is to be the gateway for foreign electronic payment transactions. “We are saying less frustration for the Nigerian banking public because they don't have to care where they have to buy, they will just carry their card and it is accepted anywhere. That is the value proposition”, he said. The operating guidelines require all existing switches to connect to the NCS but Lawal stated that though the central switch has been running since 2007, electronic payment providers (switches) did not connect to it until recently when they were mandated by the CBN to do so. He said even though they have now connected, they are yet to allow transactions within the system to pass through the central switch. In all, what remains imperative is the need for stakeholders, including NIBSS, the Bankers Committee and existing switches to meet and deliberate on the modalities for implementing the NCS. Speaking at the 2nd Techno-Interactive Series of the E-Payment Providers Association of Nigeria (E-PPAN) held in Lagos recently, Francis Ebuechi, chief executive officer, Chams Switch stated: “If you tell the switches to talk to the NCS and the banks stayed away from that kind of discussions, I don’t think that the NCS will listen to the switches. I think the Bankers Committee, which set up the NIBSS and then the NCS, should actually sit the NCS down and say this is what we want you to do. And if you can also coordinate all the stakeholders to be there and explain to everyone there what the NCS should do, it would be better.” In response to questions asked by other participants at the conference, Akeem Lawal, chief technology officer, Interswitch said: “There is value, and this is speaking as Interswitch, there is value in having an NCS in the model that recognises there are existing players in the market who already create significant value and, there fore, what they add should be additional value that either increases business either for existing players, for banks, for new entrant or that reduces cost. “In the discussions we had with the central switch over the last year, a lot of the comments and questions that was discussed and answered were focused on creating that value. Now, the implementation thereafter may not follow directly under the original guidelines and principles and that is where I support the other speakers who said earlier that there might be a need for industry stakeholders to go back to the drawing board and say fine we recognised that there is value in this, however, that value can only be achieved if certain things are implemented in certain ways. “There is no clarity in terms of rules and regulation. And therein lies one of the key stumbling blocks that needs to be overcome before we can see the benefits that we expect to see from NCS”, Lawal added. Kyari Bukar, chief executive officer, ValuCard who delivered a presentation at the conference entitled: “Achieving Interoperability & Interconnectivity: What Options?” noted that interoperability and interconnectivity is not only desirable but achievable; further explaining that achieving the objectives rests on three critical pillars. “There must be a common and appropriate understanding by all industry stakeholders of the concept of interoperability. Also, there must be a common and appropriate understanding of the roles and functions of payment card industry players. Most importantly, the strict adherence to professionalism and the distinct roles and responsibilities of the different players built on the concept of separation of roles”, Bukar posited. Commenting on dangers in non-interoperability, Adesola Adeyiga, head, strategy and new business, e-Tranzact explained that this would translate to inadequate value to the banks, end users and industry players. It would also lead to ineffective market penetration as well as stiffen innovation in the e-payment industry, he further added.