Payment Modes in Nigeria
There are various payment instruments in the Nigerian payment landscape which enables the holder/user to effect payments. These are made up of cash and non-cash media. Over the years, cash has continued to be dominant in Nigeria, despite the growing use of other payment channels.
Available data on non-cash retail payment channels at end June 2014 indicated that Automated Teller Machines (ATM) remained the most patronized channels accounting for 85% of the total e-payment transactions while web payment was the least with 2%. See the detailed breakdown below:Volume terms
- ATMs: 85%
- POS 7%
- Mobile 6%
- Web (Internet): 2%
- ATMs: 90%
- POS 5%
- Mobile: 4%
- Web (Internet): 1%
3.1 Cash payments
Cash is the most common form of payment media in Nigeria. It should be noted that part of the total monetary liabilities of the CBN are in currency outside the banking system (COB). Money outside the banks cannot be subjected to regulatory and operational procedures, and the ability of monetary policy to achieve set objectives in the presence of sizeable COB is therefore limited. However, the Bank is making effort to promote the use of the formal payment systems, thus, enhancing the ability to execute and manage monetary policy.
3.2 Non-cash payments.
The volume and value of cheques cleared decreased by 13.48 per cent and 8.90 per cent to 7,144,340 and N3,710.67 billion in the first half of 2014 compared with the level of 8,257,330 and N4,073.15 billion in the second half of 2013 respectively. The decrease was attributed to customer preference for electronic and other payment channels.
3.2.2 NIBSS Instant Payment (NIP)
The volume and value of NIP rose to 16,839,648 and N9,137.76 billion in the first half of 2014 from 11,186,930 and N6,666.17 billion in the second half of 2013, indicating an increase of 50.53 and 37.08 per cent, respectively. The significant increase in the use of the channel was attributed to the growing awareness of the scheme as a result of cash-less policy implementation as well as users’ preference for its quick settlement cycle.
3.2.3 NIBSS Electronic Fund Transfer (NEFT) Transactions
The volume and value of NEFT transactions decreased by 14,260,732 and N7,356.90 billion in the first half of 2014 compared with 16,115,171 and N7,569.17 billion in the second half of 2013, reflecting a decline of 11.51 and 2.80 per cent, respectively. The decline was due to users’ preference for NIP, which was an instant payment platform.
3.3 Electronic Card Payments
3.3.1 ATMs Transactions
The number of ATMs deployed stood at 14,764 in the first half of 2014, representing 15.75 per cent increase over the figure of 12,755 in the second half of 2013. Also, ATM transactions increased in volume and value by 10.64 and 6.08 per cent to 175,506,932 and N1,636.41 billion in the first half of 2014, from 158,629,927 and N1,542.59 billion in the second half of 2013, respectively. The increase could be attributed to a number of factors which include increase in the number of ATMs, removal of N100 interchange fee on “remote-on-us” withdrawal, ease and convenience of the system.
3.3.2 PoS Transactions
The number of PoS deployed stood at 121,886 in the first half of 2014, representing 1.4 per cent increase over the figure of 120,191 in the second half of 2013. Also, the volume and value of payments via PoS terminal increased to 8,971,501 and N137.72 billion at end-June 2014 from 6,194,467 and N103.79 billion in the second half of 2013, representing an increase of 44.83 and 32.69 per cent in volume and value, respectively. The increase was due to sustained public awareness and acceptance of PoS usage.
3.3.3 Mobile Payments
The volume and value of mobile payments increased by 27.90 and 53.49 per cent to 12,575,523 and N139.69 billion in the first half of 2014, from 9,832,224 and N91.01 billion in the second half of 2013.The increases was due to growing awareness and sensitization in the use of mobile payments as alternative and easier mode of payment.
3.3.4 Internet (Web) Transactions
The volume and value of Internet (Web) transactions increased by 24.46 and 15.61 per cent to 2,230,353 and N30.74 billion in the first half of 2014, from 1,791,988 and N26.59 billion in the second half of 2013 respectively. The increase was as a result of growing public acceptance of web payments.
3.4 Payment Cards:
Payment Cards were introduced into Nigeria some years ago, but suffered low acceptability at the initial stages due to a number of factors which included amongst others: lack of shared network, epileptic services, limited ATM and Point of Sales (POS) Terminals and high cost of operations.
The Central Bank of Nigeria in an attempt to promote the use of cards for making secured payments in Nigeria, issued the guidelines on e-banking in Nigeria in 2003 and subsequently issued guidelines on transaction switching services, guidelines on ATM operations, Guidelines on Direct Debits, Guidelines on Stored Value Card, Regulatory Framework on Mobile Payments, amongst others. These have encouraged e-payment initiatives such as the establishment of switching companies that facilitate interconnectivity, introduction of shared ATMs and the establishment of Independent Service Operators (ISO) for massive deployment of ATMs and POS, which gave rise to significant growth in the use of payment cards.Types of Payment Cards
Payment Cards - are cards issued by a CBN licensed issuer to cardholders (individuals or corporates) and accepted at terminals (ATMs, POS, Web, Mobile, Kiosks etc.) to make payments, purchases or withdrawals. Types of payment cards used in Nigeria include:
a) Stored-value cards - Payment cards where money is on deposit with the issuer, but the card account is not linked to a current or savings account. Funds and data on a stored value card are metaphorically ‘physically’ stored on the card. Stored value cards are usually anonymous in nature and issued outside of banking halls.
b) Prepaid cards - Payment cards where money is on deposit with the issuer, but the card account is not linked to a current or savings account. Funds and data are maintained on computer systems affiliated with the issuer.
c) Credit card - Refers to a payment card assigned to a cardholder, usually with a credit limit, that can be used to purchase goods and services on credit or obtain cash advances. Credit cards allow cardholders to pay for purchases made over a period of time, and to carry a balance from one billing cycle to the next. It is the least used of all the available payment cards in Nigeria, due to the stringent conditions and collaterals attached to it, unlike other payment cards
d) Charge Card – A charge card is a credit card that requires all outstanding to be settled on due date without the feature to revolve balances (i.e., carry a balance to the next billing cycle).
Card Schemes operating in Nigeria include; MasterCard, Visa, Verve and Genesis cards.
3.5 Electronic Funds Transfer
Electronic Fund Transfers are used in transferring value between banks on behalf of customers. There are various forms of electronic fund transfers including the NIBSS Fast Fund, NIBSS Electronic Funds Transfer (NEFT) which operates GIRO payments for retail transfers of banks customers, NIBSS Instant Payments (NIP) and many others.
3.6 Mobile and Internet Banking Services
Mobile phones and Internet are increasingly being used for financial services in Nigeria. Deposit Money Banks and Non-Banks are enabling their customers to conduct some financial transactions using these channels.
3.7 International Payments (SWIFT)
In Nigeria, international money transfers are largely through telegraphic means. All the twenty five licensed banks are members of SWIFT and are therefore on the SWIFT network.