October 21, (THEWILL) – Several Nigerian banks have engaged in systems upgrade in recent times which has created service disruptions to the consternation of the customers and other banks’ services users. In the past weeks, major Nigerian deposit money banks have experienced system downtime that stretched beyond what the public had expected, or is used to.
However, despite the prolonged and severe service disruptions, the exercise has not resulted in the loss of customers’ deposits or other assets maintained by the bank – traced directly to it.
THEWILL visited some banks’ branches in different locations of Lagos during last week and spoke with many customers that clustered the banks’ premises who expressed frustration and anger over the effects of the service disruptions. Information gathered through correspondent reports showed a similar experience in the upcountry banks’ branches.
A branch head at the Akowonjo office of a new generation Tier-I bank, in Alimosho LGA of Lagos, told THEWILL on Friday that banks are upgrading to a more secure, efficient and cost-effective core banking system in response to changes in technology and to prepare for the post-recapitlisation era.
Investigations revealed that the banks have a way of tracing customers’ hanging funds to determine the status of a transaction at any time as they strive to reduce the tension. This entails the completion and processing of a ‘NIP Complaint’ form which contains details of the transaction such as date, location, amount, sender and beneficiary’s account numbers.
Most important is the Session ID – a 30-digit number generated by the system. THEWILL observed a transfer from a non-interest bank on Wednesday afternoon, October 16, to the new generation Tier-I bank which was eventually received at 4.30 pm on Friday. This followed the processing of the ‘NIP Complaint’ form containing the Session ID number provided by the beneficiary.
The bank’s branch head explained that the role of the Nigeria Inter-Bank Settlement System (NIBSS) in the financial services industry is instrumental to the security of depositors’ funds and other banks’ assets.
“NIBSS is the unseen hands that shield the depositors’ and other funds in the banks and it is structured in a way that makes fraudulent or illegal access to customers’ account almost impossible,” the branch head told THEILL requesting not to be named as he is not the bank’s spokesperson.
The NIBSS’ dimension
NIBSS is an industry-owned firm that develops and handles the infrastructure for payments between different banks in Nigeria. It is owned by all licensed banks in the country (including the CBN) and is the reason inter-bank transactions are seamless.
NIBSS operates by accessing customer account reports and having banks send financial transaction data through secure online networks. This process aligns with the company’s mandates which include:
“To provide infrastructure for the automated processing and settlement of transactions between banks acting on their own account regarding deposit placements, Treasury Bills Transaction, Naira settlement on inter-bank foreign exchange transactions.
“To initiate and develop an integrated nationwide network for electronic or paperless payments, funds transfer and settlement of transactions.”
This mandate guides all the activities of the NIBSS and dictates the services the company renders in Nigeria.
NIBSS now has top-notch technology infrastructure and security measures to provide payment and settlement services that are among the best in the world. It also effectively reduces operational and credit risks in funds transfer between financial institutions.
According to industry experts, without the NIBSS, banking in Nigeria would be slow and stressful — whether you’re using a regular bank or a reliable fintech App. But for the company’s infrastructure, inter-bank transfers (usually almost instantaneous these days especially if you’re using Pocket App) would take hours or even days to process.
NIBSS has become popular as a platform that simplifies inter-bank transfers in Nigeria;
Data from its Website indicates that NIBSS plays the role of Nigeria’s Central Switch, The company is responsible for the interoperability between the various players in the financial system.
Interoperability involves the ability of the various players, such as: Banks, Mobile Payment Operators, Non-Banking Financial Institutions, Payment Terminal Providers, Card Acquirers, Government Institutions etc., and their customers, to send, receive and process funds, documents and other instruments electronically through a common channel – NIBSS.
NIBSS also ensures that the central switch facilitates the entry of new players into the financial industry; to seamlessly plug into the financial services sector for easy operations, thus, creating a level playing field for all financial institutions and their customers.
More challenges ahead
Industry experts say Nigerian bank customers are likely to experience more disruptions in the coming weeks as several financial institutions upgrade their core banking systems.
This move is aimed at beating competition through improved operational efficiency and enhancing customer experience. The process which has already caused significant service disruptions for some banks, will create more challenges as others follow suit. Insider bank sources agree that the role of NIBSS in the financial services industry will help the banks and their customers enjoy seamless operations.
According to the Managing Director/CEO, Premier Oiwoh, NIBBS has capacity to cope with these challenges. He said the company upgrades its systems continuously. A reason for this is that NIBSS was established to carry on business as a service oriented institution providing mechanisms for problem-solving innovations.
He explained that with 65 million Bank Verification Numbers (BVN) holders enjoying the products offered by the financial services institutions, NIBSS plays a major role in facilitating the technology-based innovations that make for seamless financial transactions.
Oiwoh said NIBSS is working towards a totally biometric system in which the fingertip would play the role of cards because our focus is continuous upgrading of existing facilities.
“We are working to make Nigeria work; hence NIBSS must guarantee Nigeria’s efficient payment system. We will continually remain in our creative thinking because technology is about creating value, and collaboration is the key”, the NIBSS boss told visitors to the facility in July, 2024.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
