World Bank Fast Payments ToolkitCase Study: NigeriaNIBSS Instant Payment 2011Payment InstrumentsCreditTransferDirect DebitE-moneyUse Cases/ ServicesMerchantPaymentBillPayment

Glossary of termsS. No.TermDefinition1GDPGross Domestic Product at current price2Income CategoryClassification as per World Bank based on Gross National Income (GNI) per capita3CPMICommittee on Payments and Market Infrastructure4FPSAs per CPMI, fast payment System is defined as payments in which the transmission of the payment message and theavailability of final funds to the payee occur in real time or near-real time and on as near to a 24-hour and 7-day (24/7) basisas possible5OversightRegulating or governing body supervising the payments system6OperatorInstitutions responsible for the operation of the payment system7AliasAlternative to bank account numbers for increased convenience of the customer. For e.g., mobile number, nationalidentification number8Access ChannelsModes used by customer to initiate transaction on FPS. For e.g., branch, internet, mobile9Individual Payment TypePerson to person (P2P) – Payment between individuals for non-business purposes10Business Payment TypePerson to Business (P2B) – Payment from an individual to a business entityBusiness to Person (B2P) – Payment from a business entity to an individualBusiness to Business (B2B) – Payment between two business entities11Government Payment TypePerson/Business to Government (P/B2G) – Payment from person/Business to a government institutionGovernment to Person/Business (G2P/B) – Payment from government institution to a person or business entity12Credit transfersCredit transfers are payment instruments based on payment orders or possibly sequences of payment orders made for thepurpose of placing funds at the disposal of the payee13Direct DebitsDirect debits are payment instruments in which the transaction is pre-authorized, and funds are blocked in account for a debitto be initiated at a future date. In direct debits, payer’s account is debited on execution of mandate by merchant or payee14E-moneyE-money is a prepaid value stored electronically, which represents a liability of the e-money issuer (a bank, an e-moneyinstitution or any other entity authorized or allowed to issue e-money in the local jurisdiction) and which is denominated in acurrency backed by an authorityWorld Bank Fast Payments Toolkit2

AbbreviationsS.No.TermExpanded form1BVNBank Verification Number2CBNCentral Bank of Nigeria3IBANInternational Bank Account Number4MFBMicro-Finance banks5MMOMobile Money Operator6NCSNigeria Central Switch7NIBSSNigeria Interbank Settlement System8NIPNIBSS Instant Payment9NGNNigerian Naira10NRICNational Registration Identity Card11PSBPayment Scheme Board12PICCPayment Initiative Coordinating CommitteeWorld Bank Fast Payments Toolkit3

Select parametersGDPIncome CategoryPopulationGDP – 448 billionLower Middle Income201 millionAccess to mobile phone*Access to internet*Bank account*70.60%27.50%39.6%Branches per 100,000adultMade or received digitalpayment in last 1 year*Received government wagesor transfer in account*4.4429.67%9.8%Source : World Bank – 2019, Income Category: World Bank – June 2019Currency Exchange Rate USD 1 NGN 306.92 2019 Average, World Bank Others – World Bank 2017 World Bank * For age 15 yearsWorld Bank Fast Payments Toolkit4

Table of ContentsSlide numberA.Executive SummaryB.Detailed Report18Overview1.1.2Background11Business and Operating Model2.1.FPS Structure132.2.Participants142.3.Payment Instruments, Transaction Types, Aliases and Use Cases/Services152.4.Channels and Agent Network163User Adoption4Technical Details and Payment Process4.1.5Technical Details (Messaging Format, Customer Authentication and Settlement Mechanism)1719Governance Framework5.1.Legal and Regulatory Aspects215.2.Risk Management22-235.3.Dispute Resolution246Annexure6.1.Key Features26World Bank Fast Payments Toolkit5

How to read this report This deep dive report relates to the NIBSS Instant Payment in Nigeria This deep dive report relates to the Express Elixir System in Poland It has been developed based on research done by leveraging secondary sources and the information needs to be validated from relevantIt has beendevelopedlikebasedprimaryinterviewswith key stakeholders such as regulators, operators and participants in theauthoritiestheoncentralbankand the operatorsystem Key secondary sources include NIBSS website, CBN website and CBN publications The table below presents a legend to assist readers as they navigate through different sections of the report The table below presents a legend to assist readers as they navigate through different sections of the reportLegendThe green box with adjacent icon indicates section / sub-section summary across the report. Reader may choose to readThe first slide of every section includes a chapter summary to provide readers with an overview of the section contentsthrough this for a high level overview on the selected topicThe strikethrough ‘CONFIDENTIAL’ indicates that the information in that particular section or sub-section is confidentialThe green box with the adjacent icon indicates section/sub-section summary across the report. Reader may choose toand cannot be published as indicated by the relevant stakeholderread through this for a high-level overview on the selected topicWorld Bank Fast Payments Toolkit6

A. Executive Summary7

Faster Payment System Nigeria NIBSS Instant Payment NIBSS Instant Payment is a fast payment system in Nigeria launched in 2012, NIPenables their customers to make cross-bank payments by entering account member ofthe recipient, with funds available to the recipient almost immediately. The Express Elixirsystem operates on 24x7 basis and supports payments in Nigerian Naira NIBSS Instant Payment is owned and operated by Nigeria Interbank SettlementSystem (NIBSS) which is a key financial infrastructure institution in Nigeria, providingclearing and settlement services. NIBSS is jointly owned Central Bank of Nigeria (CBN) &all licensed banks NIP allows both banks and mobile money operators to participate in its system as directparticipants and transactions between the both are completely interoperable NIBSS announced that it is working towards developing the NIP Central Listingfeature. Currently, the payer is required to provide the account number and bank namedetails of the beneficiary. However, with Central Listing, all that will be required is theaccount number of the beneficiary Users can make payments in NIP system via their internet, mobile banking platforms,PoS, Agents, USSD, ATM and bank branches Real time payments Only IBAN as an alias Supports Mobile MoneyOperators Operates 24x7x365 Deferred Net settlement Supports only Nigerian Naira NIBSS has announced that it aims to extend NIP services beyond the Nigerian borders,first to neighboring African countries and then to the rest of Africa and other continentsWorld Bank Fast Payments Toolkit8

B. Detailed Report9

1. OverviewChapter sections:1.1. BackgroundWorld Bank Fast Payments Toolkit10

1.1. Background NIBSS Instant Payments (NIP) is an account-number based, online-real-time Inter-Bank payment solution developed in the year 2011 by NigeriaInterbank Settlement System (NIBSS) Nigeria is predominantly a cash-based economy, as a result, there was a need felt to develop a payment solution that is very close to cash in terms of some of itsunique characteristics – immediate, readily available and universal (i.e. can be used and accepted by all) In 2011, Nigerian Interbank Settlement System(NIBSS) developed NIBSS instant payment system where transactions can happen in real time, 24 hours a day, 7 days aweek, 365 days a year (i.e. 24/7/365) and the transferred funds will be available immediately for use by the recipient Its service commenced with only two commercial banks as participants. However, today, the number of participants has grown to include all commercial banks, MicroFinance banks (MFBs), and Mobile Money Operators (MMOs) in Nigeria It has become a foundational platform on which banks and other payment service providers operate services such as Chat Banking, card-less payments, and IOT proofof concept initiatives thereby promoting innovation in the payment space in NigeriaWorld Bank Fast Payments ToolkitSource: NIBSS11

2. Business and Operating ModelChapter sections:2.1. FPS Structure2.2. Participants2.3. Payment Instruments, Transaction Types,Aliases and Use Cases/Services2.4. Channels and Agent NetworkWorld Bank Fast Payments Toolkit12

2.1. FPS StructureNIBSS developed and operates NIP (NIBSS Instant Payments), a real-time account-to-account payment system2NIBSS Instant PaymentPayment Exchange & /MobileWallets41Settlement Request& Notification3SettlementNotificationNigerian Central Switch(RTGS Settlement)Key entitiesNigeria Inter-Bank Settlement System Plc (NIBSS)Central Bank of Nigeria Deputy Governor, Financial System Stability of the Central Bank of Nigeriaheads the board of NIBSS CBN performs the role of regulator and overseer, CBN establishedthe Payments System Policy and Oversight Office, for effective monitoring ofexisting and planned payments system NIBSS was incorporated in 1993 and is jointly owned Central Bank of Nigeria(CBN) & all licensed banksIt has put in place modern world-class infrastructures for handling inter-bankpayments in NigeriaIt is responsible for the operation of Nigeria Central Switch & other structuressuch as NACS, NEFT, etc.World Bank Fast Payments ToolkitSource: NIBSS CBN13

2.2. ParticipantsNIBSS Instant Payment allows membership pf banks, micro-finance banks and mobile money operators as direct participants.Membership in NIPDirectMembershipCommercialbanksMicro-Finance Mobile moneyoperatorsBanksAdoption Statistics (as on May-2020) The NIP service commenced with only two commercial banks asparticipants. Today, the number of participants has grown to include allcommercial banks, Micro-Finance banks (MFBs), and Mobile MoneyOperators (MMOs)World Bank Fast Payments ToolkitSource: NIBSS CBN14

2.3. Payment Instruments, Transaction Types, Aliases and Use Cases/ServicesNIP enables payments via banks account with the help of mobile, internet banking, PoS terminals, agents, ATM and USSD. Banks are at liberty todecide the access channels they provide to their customersPayment Instruments SupportedCredit TransferDirect DebitMobile WalletsInteroperability Payment Types, Limit and CurrencyNigeria Central Switch(NCS) enables mobilemoney operators tointeroperate with banksand other financialinstitutions, therebyallowing them to offer awide array of services totheir customersIndividualNIBSS Instant Payments uses bank account number for all typesof transaction initiated on its platform Transactional data generated by NIBSS leverages Nigeria’s BankVerification Number (BVN), a unique customer identifier usedtogether with bank account details for every transactionprocessed by NIBSSTransaction Currency Retail: NGN 1 Million (dailylimit of NGN 5 Million) Corporate: NGN 10 MillionBusinessAliases Transaction LimitTransaction TypeNigerianNaira Use cases/Services NIBSS eBillPay is an account-number-based, online real-time Credit Transfer product thatenables customers to make electronic bills payment services through payment channels whichleverages the NIBSS Instant Payment (NIP) platform In 2016, NIBSS collaborated with Central bank of Nigeria, MNOs and commercial banks, tolaunch the mobile payments innovation mCash, which was designed with a financial inclusionfocus, leveraging on NIP to make low-value instant payments to merchantsMerchant PaymentsBill PaymentsWorld Bank Fast Payments ToolkitSource: NIBSS CBN BIS The Asian Banker15

2.4. Access channels and agent networkNIP enables payments via banks account with the help of mobile, internet banking, PoS terminals, agents, ATM and USSD. Each banks are at theliberty to decide the access channels they provide to their customersAccess channels and Agent networksMobile InternetPoSAgent#USSDATMBranchNIP allows transactions across mobile banking, e-banking, ATMs, PoS terminal, Agents and USSD code Mobile and USSD channel are the most popular means of payment, particular for small value transactions In 2019, mobile channel accounted for 43% and USSD channel accounted for 37% of all transactions by volumeNIBSS Instant Payment by Channel43%44%(Channel share by volume)43%35%201737%20182019 (Till June)25%16%11%11%8%MobileUSSDInternet Banking6%6%Bank Teller4%3%5%TPP (Agent)1%1%ATM0.7%0.1%0.1%0.1%Vendor MerchantWorld Bank Fast Payments ToolkitSource: NIBSS CBN16

3. User AdoptionTransaction Volume (in Million)Transaction Value (in NGN 182019Growth%Growing adoption of Instant Payment System NIBSS instant payment (NIP), accounts for around 70% of all monthly transactions (volume) processed by NIBSS. Growth in transaction by NIP comes from increaseduse by new customers in recent years Average transaction value for NIP have declined in nominal terms. A decline in average or median transaction values is consistent with a broadening of the customerbase and/or transaction types associated with lower-value payments USSD channel which accounts for a large number of NIP transaction is associated with the lowest-average transaction values indicating adoption of NIP amongst the lowincome groupWorld Bank Fast Payments ToolkitSource: NIBSS CBN Insight Impact17

4. Technical Details and Payment ProcessChapter sections:4.1. Technical Details Messaging Format,Customer Authentication & SettlementMechanismWorld Bank Fast Payments Toolkit18

4.1. Technical Details Messaging Format, Customer Authentication and SettlementMechanismBelow are the technical details of NIBSS Instant Payment covering the messaging format, customer authentication and settlement mechanism.The messaging standard is extremely important in terms of connectivity and interoperabilityMessaging Format Customer Authentication The Central Bank of Nigeria through the Banker’ Committee and incollaboration with all banks in Nigeria on February 14, 2014,launched a centralized biometric identification system for thebanking industry tagged Bank Verification Number (BVN) It needs to be confirmed if it applies specifically to NIP The Customers unique BVN is accepted as a means ofidentification across all Nigerian Banks A unique ID number shall be issued to every Bank customer atenrolment and linked to every account that the customer has inALL Nigerian Banks.Individuals shall be required to submit an acceptable means ofidentification as prescribed for enrolment For authentication purposes, individuals performing bankingtransactions shall be required to identify themselves using theirbiometric features which will be matched against information inthe central database The BVN and unique features of an individual should be used inconjunction with a PIN on a point of transactionNIBSS Instant Payment is based on XML based messaging formatSettlement MechanismApproachHubType TimeDeferred Net Settlement1 cycle per daySettlementInstitutionCentral Bank ofNigeriaWorld Bank Fast Payments ToolkitSource: NIBSS CBN19

5. Governance FrameworkChapter sections:5.1. Legal and Regulatory Aspects5.2. Risk Management5.3. Dispute ResolutionWorld Bank Fast Payments Toolkit20

5.1 Legal, Regulatory and Governance Aspects The laws of Nigeria form the legal basis for the operations of NIP, supplemented by various statutes, regulations and contractualprovisions. All the relevant documents are governed by Nigerian law and are legally binding and enforceable Central Bank of Nigeria oversight policy is primarily addressed to entities which operate systems subjected to oversight, i.e., payment systemsoperators and NIP is governed by the same While the applicability of the same is universal, it needs to be confirmed if it applies specifically to NIPInstitutional andGovernance FrameworkAs per Central Bank of Nigeria The primary legal basis for the payment systems infrastructure is the Central Bank of Nigeria Act No. 7of 2007 (CBN Act) whichprovides CBN with the right and responsibility for national payment systems One of the mandates of the CBN is the promotion of a sound financial system in Nigeria. Promotion of a sound financial systemnecessarily entails active support for the effectiveness, efficiency and systemic safety of the payments systemLegal Framework: The CBN Act 2007 was passed into law to further clarify the mandate of CBN in providing oversight of the payment systemCBN Act of 2007 CBN is 'Lender of Last Resort' for ultimate default of a participant in deferred net settlement systems The Central Bank of Nigeria mandates that each Scheme Board shallRegulator and Overseer:Central Bank of Nigeria(CBN)i.ii.iii.iv.v.Recommend clear rules with regards to the irrevocability of transactions, finality of payment and settlementRecommend and communicate settlement procedures to all participants; furthermore, each participant shall ensure fullcompliance with settlement rules as it applies to the scheme and take adequate steps to mitigate its exposure to liquidityand credit risks that may impact on the scheme settlementRecommend well defined procedure for the management of default. Such procedure shall be in line with existing PFMI;where appropriate, the scheme board shall define who bears any losses that may result from a default, what actions aretaken against the defaulting party and any other steps required to ensure the continuity of the schemeDevelop appropriate credit risk management practices to limit the risk associated with counter party and settlementfailureAgree a unified risk based collateral requirement for participation in the payment spaceWorld Bank Fast Payments ToolkitSource: CBN Nigeria PSV 202021

5.2. Risk Management (1/2) The Central Bank of Nigeria (CBN) has released the Nigerian Payments System Risk and Information Security Management Framework designed tomitigate risks associated with payment systems in January 2020 applicable on operators and users of the payment systems across Nigeria While the applicability of the same is universal, it needs to be confirmed if it applies specifically to NIPObjectives of Risk Management framework Identify and address sources of systemic risks within the Nigerian Payments System landscape Establish sound governance arrangements to oversee the risk management framework by ensuring that risks are identified, monitored and treated Establish clear and appropriate rules and procedures to carry out the risk management objectives Employ the resources necessary to achieve the payments system’s risk management objectives; and e. integrate risk management into the decision-making processesof the Scheme Boards and Working Groups under PSV 2020. Scope1The Framework is designed to guide the operators andusers of the payment systems across Nigeria. Thesesystems may be organized, located, or operated withinNigeria (domestic payments), outside Nigeria (offshorepayments), or both (cross-border payments) and mayinvolve currencies other than the NairaPAYMENT INITIATIVE COORDINATING COMMITTEE (PICC) The membership of PICC is composed of all the Chairpersons of thePayment Scheme Boards, Payments Initiative Working Groups, SpecialInterest Working Groups and Independent Director(s) representing theend-user community. The PICC is Chaired by the Director, PaymentsSystem Management Department GovernanceStructureThe Payments System Management Department of the CBNis responsible for setting, applying and coordinating riskstandards across the Nigeria Payments space. It issupported by the Payments Initiative CoordinatingCommittee and the four Scheme BoardsPAYMENTS SCHEME BOARD (PSB)2 The PSBs are responsible for monitoring full conformance to the Principlesof Financial Market Infrastructure and other best practices The PSBs shall recommend initiatives, strategies and policies to the CBNwith a view to close any gaps related to full conformance to agreed bestpracticeWorld Bank Fast Payments ToolkitSource: CBN Nigeria PSV 202022

5.2. Risk Management (2/2)As per the guidelines issued by the central bank System operators, Participants and PSPs shall:CyberSecurity i.establish and implement Information Security policies that are in line with ISO 27001 standards or subsequent standardsii.ensure the confidentiality, integrity and availability of all information, systems and networks that are critical to the success of the scheme.The owners of such information, systems and networks shall be responsible for deploying the required resourcesParticipants and PSPs shall conduct annual Information Security assessment including penetration and vulnerability tests to ensure it is aware andis taking adequate steps to address current and on-going issuesWorld Bank Fast Payments ToolkitSource: CBN Nigeria PSV 202023

5.3. Dispute ResolutionInter-Bank Dispute and Customer ComplaintsAs per guidelines issued by CBN Each scheme shall establish its dispute resolution mechanism to serve as an additional dispute resolution mechanism that will help participants resolve disputes in atimely and cost-effective manner Disputes that arise between or across schemes may be referred through the Director, Payments System Management Department of the CBN to the PICC for resolutionWorld Bank Fast Payments ToolkitSource: CBN Nigeria PSV 202024

6. AnnexureChapter sections:6.1. Key FeaturesWorld Bank Fast Payments Toolkit25

6.1. Key FeaturesFeaturesKey HighlightsOperating hours 24*7 including weekends and bank holidaysPayment speed Real timeTransaction limit Retail: NGN 1 Mn (daily limit of NGN 5 Mn)Corporate: NGN 10 MnAlias No aliases Internet banking, bank branch, Kiosks, mobileapps, Unstructured Supplementary ServiceData (USSD), POS, ATM Each bank individually decides on the policy offees and varies by transaction amount (rangefrom NGN 40 to NGN 500)ChannelUser chargesInfrastructure setup New systemUse of Open APIs No Open access API interfacePayment Types & Use Cases/ServicesIndividual Bank Verification NumberSource: NIBSS CBN Integration guide for NIP FIS Reports Nigeria PSV 2020 Technical specification documentGovernmentMerchantPaymentsBulk / BatchPaymentsCross-borderPaymentsRequest to PaySchedule futurePaymentsBill pe TimeHubDeferred NetsettlementRTGSDistributedclearingOne cycle per dayWorld Bank Fast Payments Toolkit26

World Bank Fast Payments Toolkit 4 Select parameters Source : World Bank -2019, Income Category: World Bank -June 2019 Currency Exchange Rate USD 1 NGN 306.92 2019 Average, World Bank Others -World Bank 2017 World Bank * For age 15 years GDP GDP - 448 billion Income Category Lower Middle Income Population 201 million Access to .