The disruptive impact of technology on the financial services industry would soon usher in instant clearing of other bank cheques in the country, according to Yele Okeremi, the chief executive officer of Precise Financial Systems Limited.
Yele disclosed this at the maiden business a.m./GTI Finance and Investment Dialogue held on Thursday in the Marina Central Business District of Nigeria’s financial capital city of Lagos.
Speaking on the topic, “Technology Disruption in the Financial Services Sector: How Prepared is the Nigerian Market?” he said technology disruption has become the new normal, and that the current 24 hour wait for other banks’ cheques to clear would soon be a thing of the past as Nigeria Inter-bank Settlement Systems Plc. (NIBSS) was ready with the technology and to deploy the application that would
clear cheques for instant transfer of value to beneficiaries.
Okeremi said NIBSS is only waiting for legislative nod to go ahead with the deployment, adding that the threat of monetary authorities relinquishing control has been at the root of hedging on technology hence the delay in deploying some of the disruptive innovations in the financial services industry.
He said authorities’ fear of a deregulated banking service is why central bank governors globally are critical of cryptocurrency, adding that the recent pace of technology innovation would make legislation lose its grip on the payment system and be part of the drivers of disruption in the financial services industry with positive consumer experience being the major lever.
“Legislation has delayed the technology that would clear cheques instantly in the country either upcountry or local, as the Nigeria Interbank Settlement System (NIBSS) has in place a technology that would clear cheques instantly,” he said.
He recalled how in the 90s people had to wait for 21 clearing days to get value for upcountry other banks’ cheques, which was later cut down to 7 days, 3 days and now 24 hours.
Okeremi, former head, Systems and Logistics, Ventura Savings and Loans Limited, said technology disruption in the financial services sector has empowered and freed customers to make transactions and get instant value, without physically visiting providers of the service.
He said digital banking is the future of the banking industry, tracing the rise of fintechs to the realization by technology companies that they were getting low value from selling their services to the banks and they then decided to provide such services themselves.
Precise Financial System has been working with NIBSS on the project, which has recorded some progress, especially with the launch of the automated cheque clearing application called i-Teller in 2017, which allows banks to clear cheques within hours on special arrangement.
business a.m. learnt that the forthcoming application would be an improvement on the i-Teller since the instant cheque clearing would be across the board and there would be no need to call for special consideration.
The current platform allows cheques to be cleared within hours in what is called ‘special clearing’. What a customer needs do is to inform the bank so that they take special care in quickly processing the cheque. The system also allows for multiple clearing sessions as well.
The development is coming at a time the use of cheque for transactions is crashing as electronic transfers gain uptake by customers.
According to data from NIBSS, in 2015, the total number of cheques issued by individuals and organisations in Nigeria stood at 13.4 billion. In 2016, this dropped to 11.7 billion while in 2017, the cheque transaction volume stood at 10.8 billion.
The drop in usage from between 2015 and 2017 thus represents a dip of about 2.6 billion, equivalent to 19.7, approximately 20 percent, in the three years period.
Investigation showed that the transactions, hitherto conducted by the banking customers through cheque and other physical cash transactions, are now being executed via electronic payment channels.
Bank Verification Number (BVN) data show that about 60 million bank customers had been enrolled. Also, in 2017, NIBSS reports that over N60 trillion transactions were carried out through the NIBSS Electronic Fund Transfers (NEFT) and National Instant Payment (NIP).