Imagine that banking facilities in use today were from decades-old technologies. Let’s say your ATM cards don’t work at all and you have to visit the bank in person for any type of transfer.
Well, that would have been a sorry thing for us considering how much advancement has been achieved.
The Central Bank of Nigeria (CBN) is responsible for ensuring that Nigeria as a country does not experience such backwardness. One of its instruments for this is the Payment System Vision 2025.
The Payment System Vision (PSV) 2025
The Payment System Vision 2025 takes on a new approach to developing payment and settlement systems in Nigeria. It is a radical initiative of the Central Bank of Nigeria aimed at utilising technology and business trends.
According to a CBN release, the initiative is based on the Principles for Financial Market Infrastructure. It will focus on trends like “Open Access, Distributed Ledger Technology (DLT), Big Data and Artificial Intelligence, Cybersecurity, Machine Learning and Robotics Process Automation.”
How the PSV 2025 Differs from PSV 2020
PSV 2020 has been well explained in one of our previous posts. We suggest that you take a good look at the article here if you haven’t already done so.
So how does the PSV 2025 differ from the older PSV 2020 initiative?
It is that the Payment System Vision 2020 covers the introduction of electronic payment systems. It sought to transform the banking and financial environment of the time by applying different payment solutions.
Alternatively, the Payment Vision 2025 focuses on advanced processing. It also features higher industry standards, the use of unprecedented data and digital architecture, and a focus on consumer inclusion and satisfaction.
13 Recommendations of the Payment System Vision 2025
Infrastructure Review
This involves a complete review of the existing payment infrastructure and switching system. Such reviews will seek to confirm that the payment system can handle current demands.
Additionally, there will be considerations for contactless solutions and a Request for Payment (RfP) scheme.
Working Group
The PSV 2025 will go on to establish a working group. This group will be responsible for defining regulatory environments and structures. A core focus here is the Open Banking roadmap useful for the Nigerian market.
The CBN-established Working Group will further outline a list of APIs for use by the industry.
Financial Inclusion Drive
With the Payment System Vision 2025 will come better financial inclusion. More support will be delivered for Agent Banking and the tools or solutions that help the unbanked gain access to relevant services.
In addition to this, increased efforts will be made to bring financial industry stakeholders together. The cooperation between all players is considered highly beneficial to adoption and growth.
Blockchain Monitoring and Development
Blockchain development and impact are rapidly growing. Being so, the PSV 2025 is designed to look out for milestones in the use of this technology. Related technologies like smart contracts and Central Bank Digital Currencies (CBDCs) will also be considered and built upon.
An entire paper and frequent reports on foreign and local blockchain use cases will be made available. This will serve as a source of reference and direction.
Stablecoin Development
Stablecoins are a type of digital asset whose price or market value is fixed to that of another asset. Oftentimes, this second asset is a fiat currency. The price of a stablecoin is “stable” or “steady” and does not fluctuate like that of regular cryptocurrencies.
The CBN understands the potential value of stablecoins. It intends to develop appropriate regulations that will lead to the smooth implementation of the technology.
Furthermore, the possibility of having Initial Coin Offering (ICO) investments will be considered within the PSV 2025 initiative.
Utilisation of Big Data
Another focus of the Payment System Vision 2025 is the utilisation of big data. Precisely speaking, the initiative will investigate possible use cases for big data within the current payment ecosystem.
If an entry point is identified, further investigations will be made to see how this could be implemented.
Security Review
As part of the PSV 2025, security standards set for banks will be put through a review. Changing security situations and industry practices necessitates this action. Multi-layered security solutions and the national payments architecture are two other things that will be scrutinized.
The goal here is to ensure that security is prioritised among stakeholders and maintained across all banking and financial platforms. Among the things that will be analysed are multi-layered security solutions and the national payments architecture.
Continued Support for BVN
BVN has so far proved effective in mitigating fraud in the Nigerian banking and financial system fraud. Its success is glaring.
Under the PSV 2025 initiative, the BVN solution will most likely be implemented on a wider scale. In addition, some support will be provided to explore the possibility of a blockchain-backed BVN solution.
Customer Protection
The aspect of consumer protection primarily concerns banks. It ensures that the process for swift dispute resolutions is in place and actively working. Banks must protect the interests of their customers, ensuring that all complaints are quickly and properly addressed.
Interoperability
The Payment System Vision 2025 promises radical new products and add-ons. With all of that happening, it will be necessary to confirm that the resulting system can function together.
Interoperability is a big theme in this grand payment development scheme. It will require the contribution of all stakeholders and ensure compliance and efficiency.
Quarterly Reporting
Governance will be improved through frequent, accurate reporting of payment and financial activities. These reports will be delivered quarterly and will include information on global standards and development.
Wind down the PSV 2020 Working Groups
The working group in charge of PSV 2020 will round up its activities and permanently shut down. It is important to mention that this group has made significant progress towards its goal. The group has been able to build the country’s financial structure to the level it is today.
Maintenance of Special Working Groups
While the PSV 2020 working groups get a wind-down, special interest working groups will continue operations. In addition to supporting existing special interest groups, the CBN will also establish a Fintech special working group.
Conclusion
Most of the prospects of PSV 2025 are yet to be fully or meaningfully implemented. That said, there have been some significant efforts from stakeholders such as the CBN.
One peculiar example is the approval of the cNGN naira stablecoin in early 2024. In a separate event last year, the government approved a National Blockchain Policy for Nigeria.