The Managing Director, Nigeria Inter Bank Settlement System Plc, Mr. Ade Shonubi, says the Bank Verification Number will reduce fraud in the banking sector. He spoke with OYETUNJI ABIOYE

There seems to be some kind of rivalry between the banks and mobile money operators in terms of who should really drive financial inclusion. What is your view on this?

I don’t agree with you. I don’t think there is rivalry. Some mobile money operators have some misconceptions about their licences. We have situations where some of them believe they got a banking licence.

Yes, it is possible to get a financial service licence but mobile money licence is not a banking licence. In essence, they are a transaction company. Customers have the balance with the bank but we are creating a platform for mobile phone users to transact on it through mobile money.

Due to the initial low cost of securing the licence, some people rushed into it without understanding that it is a retail business and retail businesses have longer gestation periods.

We have situations where many of them were not adequately capitalised; for that reason, you find entities searching for quick wins – rather than go to the rural areas where this was intended for they commenced doing business in the cities, where they believe there are millions of people, half of who already have basic understanding of the technology and most of who already have smart phones which will translate into quick business for them. Unfortunately for them, these people already have relationships with banks.

The objective was to encourage the unbanked to come into the financial space, and enjoy the benefits of financial services (such as micro credit, micro loans, online selling and buying/payments, etc) using wallets; not the same customers who already have bank accounts and who are using their phones and applications already provided by the banks. That is why it appears there is rivalry between banks and mobile operators.

What is the level of synergy between the banking industry and the National Identity Management Commission to bring about a sustainable identity management system in Nigeria?

I think we need to understand the concept of identification. The national ID is supposed to be the root means of identifying an individual. This means it is general but you will always find specific ID databases that will be created.

There is the national driving licence that applies to people who are of driving age and have decided they want to drive. They are different from those that may be banking customers that cannot drive. So, you will always have different databases.

However, the idea is to have a common way of linking them. Somebody has a driving licence and at the same time has an ID for health; how do we ensure it is the same person? That is the idea behind the national ID.

With the BVN, we are creating something for banking customers. The purpose is not just to identify but also ultimately to use it to authorise financial transactions. This cannot be done using the national ID which would identify. It is not meant for authorising financial transactions. So, the question then is: how do they work together?

Today, we are already implementing the BVN financed by the Bankers’ Committee. It is a means of sharing data. When one enrols for a BVN, we can make that information available.

If you already have the national ID and you don’t have a bank account, once you use it, we will pull the information from national ID and update it in creating your BVN identification.

This is with the intention of making it easy for people so that when you are enrolled for one, it is easier to enrol with the other and we have actually started that process of integration.

Based on the feedback from banks, how will you describe the level of compliance with the directive on the BVN?

The feedback from the banks is very positive. I think we should start by understanding why we are embarking on the BVN project. This is because if you do, you will see that there is no way the banks would not be enthusiastic about it.

When the BVN project was initiated, there were three key areas of focus. First and most important of all is for us to identify our customers uniquely across banks and across accounts. So, once a customer enrols and obtains a BVN, that same BVN is tied to all his bank accounts.

Now, relating to identifying is the possibility of banks blacklisting people who have committed financial infractions. It could be fraudsters; it could be people who have forged documents; etc.

What happens today is that Mr. A goes to Bank E, commits fraud, then runs to Bank F and because there is no way of tying all these activities across, we found out that there are quite a lot of losses related to these individuals from one bank to another. The BVN removes these losses. The beauty of it all is the unique identification in the financial space.

Generally, people say every Nigerian is a crook but in the actual sense, maybe only one per cent of Nigerians are crooks but the remaining 99 per cent are considered crooks because of that one per cent.

So, the BVN allows us, again, to find these individuals and to create that blacklist that other stakeholders in the financial space can have access to. With this, even foreigners through their banks may be able to identify fraudsters that have been tracked in the Nigerian financial space.

What are the other two key objectives of the BVN?

Second, the BVN will allow us begin to build retail credit. Today, the banks have concerns over identification in retail lending. That is why the entire retail consumer lending portfolio is targeted at people with formal employment whose employers can serve as a point of reference.

There are, however, lots of self-employed people as well as others working in smaller organisations that require this, but do not have access due to the identification issue as no bank will take the risk of lending to them – considering cases of resignation and eventual run off, how will the banks get repayment? But with the availability of the BVN, these set of individuals will also benefit from retail lending as identification and tracking issues will be mitigated.

The third, which I have already alluded to, is that we want to be able to authorise financial transactions down the road, on an Automated Teller Machine or a Point of Sales. You can use your biometric identifier to say ‘Yes, this is me and I am authorising the payment.’

Everybody is expected to have been captured by the system by June 30; do you envisage any change in the date?

I think we are doing well. Just as most projects, you start slow but as time goes on, it picks up. The number of enrolment doubles every week. So, given the number of the BVNs generated so far, I think June 30 is achievable.

For those that have enrolled, when are they likely to receive their BVN card?

I have got my BVN card. I encourage bank customers to talk to their banks so that they can get theirs as well. The BVN cards are being printed and sent to the banks to distribute to the branches where customers have enrolled. You will be sent a Small Messaging System and for those that have their emails stipulated, they will be sent email.

What about the cost implications?

It has no cost implication to the customers. We are giving them out to the customers for free. The cost is borne by the Bankers’ Committee, which considers the BVN project very important and that is why they have been bearing the entire cost. The cost of the cards, the cost of integration with the NIMC and almost everything else that has to do with the BVN is borne by the Bankers’ Committee.

Is the NIBSS that provides the infrastructure for automated processing, settlement of payments and fund transfer instructions not concerned about the rising cases of fraud in the banking system?

We are very worried and what gets us even more concerned is that as one executes electronic transactions, a lot more people are participating in that space and cloud. So, it is easier for the banks to invest in new technologies to protect themselves.

But now, every business person wants to create a website to sell their products and wares and some of them may not have the capacity to invest in technologies to protect themselves. Thus, once one of them creates a point of leakage, it affects the whole chain.

To curb this, one of the initiatives the Bankers’ Committee is putting in place is the anti-fraud platform that payment transactions are connected to; such that if one has a transaction that is fraudulent, it flags it off immediately.

It allows us to identify cards that have been reported as fraudulent; it also allows us to do analysis of a particular location or website where fraud is frequently reported for proper monitoring and this initiative is not only for cards.

What we are implementing, which is very unique in almost all areas, is to centralise handling of cards, electronic payments and PoS. Most of the solutions available elsewhere are mainly for cards but we had to modify it to allow transactions on other electronic payment platforms. It can create patterns and also highlight suspicious transfers and payments. This platform has gone live; it is currently being used and we are already seeing the benefits.

Most of these fraud cases are more or less insider-related. Is there no way to set a limit or threshold on the value of transactions allowed at a particular time?

This is part of the things the anti-fraud initiative caters for. We agree there must be a limit, either in frequency or value; all transactions going through the Anti-Fraud Systems are tracked such that if it exceeds that frequency or limit, it is flagged.

We are currently building rules now in collaboration with the banks, such that when the system receives transactions that are outside the agreed parameters, these transactions are blocked or flagged and the banks are advised immediately.

It is very difficult to say you want to eliminate fraud, but with all these being implemented, it is our expectation that fraud will be highly mitigated.

What have been your challenges?

Well, I think the biggest challenge so far is trying to get the industry to understand what we at the NIBSS are trying to do. Unfortunately, those who do not understand our business strategy perceive us as being in competition and that the competition is disruptive because it affects the way they were doing business before.

Even for some banks, we are seen as removing what they would have considered as propriety or niche because we try to create a uniform platform for the industry. We are however driven by the Bankers’ Committee. If they say roll out this service, our aim is to go ahead with the rollout as quickly and as efficiently as possible.

For us, misunderstanding has been the biggest challenge. Some of my colleagues who are bankers ask: ‘What exactly is the NIBSS doing there?’ For us, the answer is very simple. We are a shared service platform that is supposed to reduce the cost of providing financial services by banks to the public. So, once we reduce that cost for the banks, they are in a position to pass this, in either pricing or better quality service to their customers.

The Punch