‘Retail credit’s growth, confidence in banking hinged on BVN’

The Nigeria Interbank Settlement System (NIBSS), said the unique ability of the Bank Verification Number (BVN) initiative to identify fraudulent customers in the banking system, leading to their blacklisting, will help to boost retail credit in the industry.

The strategy, which would also restore and strengthen confidence in the system, according to the Managing Director of NIBSS, Ade Shonubi, would encourage banks to extend loans to those customers that are adjudged credit worthy.

The NIBSS boss, who is responsible for the implementation of the BVN, explained that once banks are able to identify and blacklist fraudulent customers, the challenges of credit and electronic payment systems would have been under control.

The BVN involves the registration of customers in the financial system using biometric technology, making accounts more secure by using unique identifiers such as fingerprints.

It is an initiative of the Central Bank of Nigeria (CBN), in conjunction with the Bankers’ Committee meant to address the safety of customers’ funds, avoids losses through compromise of personal identification numbers and other criminal activities in the industry.

Shonubi noted that apart from the challenge of identifying customers, a major hindrance to retail credit in the Nigerian environment was the perception that most Nigerians are crooks who would look for ways of failing to repay loans.

He pointed out that the BVN would address this problem by helping to identify and distinguishing fraudulent Nigerians from law abiding and honest citizens.

“When the BVN project came up, there were three key things. First is for us to identify our customers and to identify them uniquely across banks and across accounts. So, once you have BVN, even if you have 10 bank accounts, it is the same BVN that will be tied to the bank accounts.

“Now, relating to identification is the possibility of banks blacklisting people who have committed financial infractions. It could be fraudsters.

It could also be people who forged documents to commit fraud in one bank and then runs to another bank, because there is no way of tying all these activities across. So, we found out that there were quite a lot of losses related to these individuals from one bank to another.

“The concern of every bank is, if I lend you money now and you go away, how do I identify you? So, the entire retail consumer lending is around people with formal employment and that is why you see everybody running to the oil companies to say let us give your workers car loan or finance their household appliances.

But there are a lot of self-employed people working in smaller organisations, who should also benefit. “Nobody wants to take the risk on them because if they resign today and run off, how are you going to get your money? Once they have bank accounts, the BVN allows us to identify them,” he said.

As part of efforts to enforce enrolment on the BVN project, CBN directed banks to only honour transactions over N100 million from customers with BVN from March 2015 and such transactions include, but not limited to, money transfers, loans, and contingencies, among others.

The regulator also urged all bank customers to register by June 2015, warning that any bank customer without a BVN would be deemed to have inadequate know-your-customers (KYC) by that date, with further consequences.

The BVN is a unique identifier for each bank customer across the financial industry, making it possible to build and track every customer’s financial history and activity.

This, on the other hand, will allow banks’ access to more reliable information that could inform decisions on customer loans, credit applications and other complex transactions.

However, the NIBSS, which is owned by CBN and all licensed banks in the country, provides the infrastructure for automated processing of data, such as customers’ biometric information, settlement of payments and fund transfer instructions between banks, discount houses and card companies in Nigeria.