E -payment: the CBN model

By Paulette Orjime

Despite the fact that the adoption of an electronic payment (e-payment) system may have come with its challenges, the Central Bank of Nigeria (CBN) insists that Nigerians can reap a number of benefits from this digital revolution.

An e-payment system is a way of making transactions or paying for goods and services through an electronic medium, without the use of checks or cash. It’s also called an electronic payment system or online payment system.

The electronic payment system has grown increasingly over the last decades due to the growing spread of internet-based banking and shopping.

As the world advances more with technology development, we can see the rise of electronic payment systems and payment processing devices. As these increase, improve, and provide ever more secure online payment transactions the percentage of check and cash transactions will decrease.

The lessons learned from the 31st seminar for Finance Correspondents and Business Editors, hosted by the CBN recently in Enugu are testimony to the fact that the digital economy is the way to go.

Theme “Trends in Nigerian Payments System: Regulating the Digital Playing Field”, participants at the seminar alluded to the fact that it was indeed an eye-opener to this novel brand of financial transactions.

The benefits of e-payment are unquantifiable, according to CBN; it would galvanize Nigeria into a cashless society while eliminating the fear of the unknown.

The arrival of the internet has indeed taken electronic payment and transactions to an exponential growth level. In this discovery, consumers could purchase goods and services from the internet and send unencrypted credit card numbers across the network.

A wide variety of new secure network payment schemes have been developed as consumers became more aware of their privacy and security.

Though e-payment is faced with challenges like public acceptability, lack of uniform platform being generated by the banks, lack of adequate infrastructure and issues of security, with the proper use of e-payment system, corruption which is cancer in the government arena will be holistically addressed

This e-payment system which is an advent of digital money is highly beneficial to financial institutions, banks, and merchants. For instance, a secure electronic cash system can guarantee the anonymity of legitimate users, but also provide traceability about illegally issued cash or laundered money. If the illegal activity did take place, it can eliminate the anonymity of digital cash in order to protect the banks.

CBN as a regulatory authority has continued to support e-payment transactions, putting measures in place to curb cybercrime, thereby eliminating fears that might arise from the digital economy. Electronic payment is therefore consumer-focused, as it is made convenient for the consumer. In most cases, you only need to enter your account information such as your credit card number. Such information is then stored on a database on the retailers’ web server.

As a novel payment system, e-payment provides a number of benefits. The system allows consumers to lodge cashless payments for goods and services through cards, mobile phones or the internet, cost and time savings, increased sales, and reduced transaction costs. However, these benefits are vulnerable to internet fraud, and could potentially increase business expenses.

E-payment is very convenient compared to traditional payment methods such as cash or cheque. As internet banking and shopping became widespread, the number of people making cash payments is decreasing. Electronic alternatives are increasingly becoming the preferred payment option.

As such, e-payment enables businesses to make sales to the consumers who choose to pay electronically and gain a competitive advantage over those that only accept traditional methods.

In the financial space, the Central Bank Digital Currency (CBDC) has recently emerged as a hot topic. Banks, institutions and governments are performing research on the economic and technical feasibility of introducing a new form of digital money, and its impact on monetary and fiscal policy.

The report states that the Central Bank of Nigeria is already researching CBDC. It then begs the question: why are these institutions preoccupied with CBDCs?

In this explainer, the article covers CBDCs, their digital economies, countries that are exploring their use cases, and the road to mass adoption.

Cryptocurrencies, as we know them today, are extremely volatile, and lack government backing. CBDCs are therefore able to overcome these concerns while using the same underlying distributed ledger technology of cryptocurrencies. Governments recognize CBDCs as legal tender in issuing CBN’s jurisdiction, meaning anyone can use them for payments.

CBDC is an electronic form of digital currency that citizens can use to make digital payments, and restore value.

The CBDC increases the safety and efficiency of both wholesale and retail payments. It could improve the efficiency of making payments at the point of sale or between two parties.

Given the considerable efforts and attention that the Central Bank of Nigeria is dedicating to CBDCs, they will soon become a reality. Introducing CBDC to the world will help boost crypto adoption as people will have access to the platforms to convert cryptocurrencies to legal tenders. Moreover, in Nigeria, it will also help in the financial inclusion of the bank’s less population.

Through the sustained efforts and also campaigns by the CBN, Nigerians have no choice but to embrace the digital technology-driven system.