Government agencies at all levels are tasked with creating objectives and processes that level up against global standards. One such is the Payment System Vision 2020. According to the former CBN governor, Godwin Emefiele, this initiative is set to make the Nigerian payment system “nationally utilized and internationally recognised.”
The Payment System Vision (PSV) 2020
Payment System Vision 2020 - referred to in this article - reflects on the initiative of the Central Bank of Nigeria. There are other Payment System Vision projects started by financial authorities in other countries across the globe.
The overarching goal of the CBN’s PSV 2020 was to envision and subsequently deliver a better, more advanced, and highly reliable payment system.
Two iterations of this PSV initiative exist. The first edition of this was created in 2006. Its purpose was to serve as a roadmap for reform, adoption, and resilience of the payment system in Nigeria.
A second edition of the PSV 2020 document was released in 2013 and according to CBN, it is “a complete rewrite based on new and aggressive objectives.”
Core Considerations of the Payment System Vision 2020
The Payment System Vision 2020 sought to address a number of verticals. They included;
Agriculture
This vertical sought to promote financial literacy among farmers, improve access to swift and seamless funds transfers, and create alternatives to cash payment for agricultural processes.
Smart Cities
The Central Bank of Nigeria included smart cities in its Payment System Vision verticals. This consideration was made to cover existing Nigerian cities and the so-called “greenfield cities.”
Government Flows
Government flows were determined to be a good inclusion for the PSV initiative. All forms of salaries, pensions, and government payments were to be made solely through e-channels.
Hotels and Entertainment
Hotels and entertainment agencies were set to make use of electronic payment systems. This sector witnesses a high volume of transactions and people interaction making it suitable for the PSV initiative.
Transport
Another vertical of the Payment System Vision was in the area of transport. The CBN envisioned having transportation costs slashed for users when they pay through e-channels.
Education
The education sector makes for another vertical within the Payment System Vision 2020. Grants, scholarships, research and publication, as well as tuition and other fees will all pass through electronic payment channels.
Health
Payments for medical diagnosis or treatment were captured within the CBN’s plans. Things like healthcare bills and services, including ID procurement and data processing, made up this vertical.
Bill Payments and Direct Debits
What is a payment improvement plan if actual bill payments and direct debits are not considered?
Banking and Financial Sector Achievements Linked to the PSV 2020
You will agree that the Payment System Vision 2020 was truly a success. The remarkable achievements linked to this banking and financial sector initiative are listed below:
Deployment of the Nigerian Uniform Bank Account Number
In August 2010, the CBN came up with guidelines for Deposit Money Banks (DMB) to implement what it called the Nigeria Uniform Bank Account Number (NUBAN). This scheme was put in place to achieve uniform structuring across all customer account numbers.
NUBAN provides an easy way of identifying individual customers. Of course, it also ensures quick identification of the specific bank operating a NUBAN account.
Introduction of the FG Treasury Single Account
In 2012, the administration of former president Goodluck Ebele Johnathan introduced the idea of a Nigerian Treasury Single Account or TSA. This was intended to accumulate government revenue from all sources into one single account.
Clearly, such a setup fosters transparency and the effective management of monetary resources.
The next presidential administration effected the Treasury Single Account. This system has been in use since then.
A Shift to Digital Transfers and Cash-less Policy
A predominant focus of the Payment System Vision 2020 was to improve Nigeria’s electronic payment systems.
It is interesting to say that the initiative not only focused on material or technical resources. Instead, it directed significant effort into promoting adoption among Nigerians. So while banks changed their old systems for new ones, customers were being heavily educated on the need to embrace the new banking systems and platforms.
Introduction of Scripless Security Settlement System
Another important achievement of the CBN’s PSV 2020 was the introduction of the Scripless Security Settlement System. Also termed S4, this financial mechanism handles the transfer and subsequent book entry of dematerialised securities.
Introduction of Cheque Truncation
As part of the PSV2020 initiative, a cheque truncation system was deployed in Nigeria. Cheque truncation is a process in which a scanned copy of a physical cheque is made. This scanned copy is then used in place of the actual paper document.
In addition to the scan, data from the original cheque is sent in a Magnetic Ink Character Recognition (MICR) line.
Institutions receiving such digital cheque formats may retain them for up to ten years. In addition, this method of processing cheques is preferred for its security against fraud and theft.
Real-Time Gross Settlement System
RTGS or Real-Time Gross Settlement System was well analyzed in a previous Monierate blog article. However, to give some context here, RTGS is an instantaneous bulk payment system. It operates without the need for immediate account reconciliation.
The system was introduced in 2006 but was then referred to as the “CBN Inter-bank Funds Transfer System” (CIFT).
Payment Cards Migration from Magnetic Strip to Chip or EMV
All payment cards in Nigeria fall under the EMV card classification. What it means is that these cards come with a chip made of glass, small circuits, and gold or silver connectors.
The EMV card type replaces magnetic strip cards which were formerly in use across the country. This migration was ordered by the Central Bank of Nigeria sometime between 2008 and 2009.
Conclusion
The Payment System Vision 2020 turned out as a robust agenda developed by the Central Bank of Nigeria (CBN). In all, the initiative has inspired several improvements to the existing payments/financial systems. It is also the driving force behind a good number of new developments.
What is more interesting is that a completely new Payments Vision System is already in play. Our next article will introduce you to the Payment Vision System 2025.
