So, early this year, it was announced that the Central Bank of Nigeria in collaboration with the Nigerian Interbank Settlement Systems (NIBSS) will be launching a new innovation called the Nigerian National Domestic Card Scheme – if everything goes to plan. Many would wonder why that may be necessary and many will again ask if that was the priority or how the innovation will improve the lives of the common man. I think the first thing to clarify is that all our institutions of state must do their work and indeed be seen to do so with the results they put out. But indeed, with this innovation, there are gains for the common man as I will explain shortly.
Nigerians did about $18.2 billion dollars of card transactions in 2021. Most if not all of the debit cards in our system today are issued by the global behemoths Mastercard and Visa. Procuring those cards costs customers quite some money and so does maintaining them. Transactions done on them need to also be settled and that may often entail looking for foreign exchange to manage the obligations. Scanning the international environment, countries have leveraged on technology to improve their payment service situation and many of them are now building on their own strengths, India, Brazil, Turkey are some of those who have created their own domestic cards.
And a lot is happening in that space. Nigeria intends to join these countries, and this is a big do. We have usually led financial innovation on the continent anyway. This time, what are the advantages?
First the idea offers data sovereignty. We can remember once when our national ID card system was almost handed over to one of those behemoths mentioned above to manage. For that company it would have been a financial kill and they would have had the whole Nigeria, those of us living today and those to come, in the middle of their palm. Not only will they be assured of transactions and therefore profits ad infinitum they will also hold Nigeria’s vital identity information – as a private company. Well, many Nigerians will say we were/are not doing much with those information ourselves. But I don’t believe we should give up and sign everything strategic to private companies. So, this idea here is that the Central Bank of Nigeria will lead the charge. Anyone who dares to find out will be surprised at the sheer number of very cerebral people we have in the Apex bank and in other places in Nigeria.
Apart from data sovereignty being enhanced with a Nigerian card, we would not have to scramble all over the place searching for US Dollars to settle foreign card companies. Nigeria is under enough stress already in this regard and our economic managers are looking for ways to lighten the burden. This idea also helps with the concept of financial inclusion because a domestic card, issued and powered in Nigeria, could be more affordable for the unbanked, and can help those people – many of whom may not be well lettered – to begin to get into the cashless world.
These domestic cards can be issued in many varieties. There are debit and credit cards, as well as combo cards which combine the two features and have two stripes and two microchips. These cards could also be issued for government schemes – for example if government wants to help people financially they needn’t chase people around with cash which is usually unaccounted for. We know how those stories go. It will be hard to convince the foreign companies that help issue such cards here or to modify cards for that purpose. By and large this idea is also a coming of age for our tech sector and local capabilities. It is an indication that we are ready to integrate with the international community which has now gone contactless in the wake of COVID-19. This is because the capabilities of these cards could also be contactless or virtual. The world has moved on and people are thinking. Nigeria is also not lagging behind. We may have a plethora of challenges but that does not stop us from thinking ahead.
This domestic card therefore will help with some of the current strategies on monetary policy, such as the currency redesign and cashless policy. Our society must change, and we must lumber less and less cash around. We know that criminals – kidnappers, bandits, corrupt folks in public and private sectors – like to use only cash. One very effective way of tackling crime is to go after the money. follow the money. If the use of cards becomes ubiquitous in Nigeria, even the criminals will find other professions. Nigeria also has an e-Naira to drive for better adoption. So, all of these fall within the territory of our plans for the financial sector.
I did a bit or research on this interesting idea and found out that some countries have gone ahead. We must have to learn from them in terms of risk-managing the process. Nigeria does not have a particularly rosy reputation when it comes to financial fidelity and the meddlesomeness of fraudsters. All that must be figured out and controlled so that the process and adoption go very smoothly. What other countries also do is to strike bilateral deals for the adoption of their domestic cards in foreign countries. China and India have successful domestic cards which are crowding out Visa and Mastercard such that these companies have reported the countries for protectionism. But again, every nation must think for itself.
India’s Rupay (their domestic card) is a particularly interesting study. India is using the card to drive financial inclusion. Companies with large turnovers are mandated to pay customers using Rupay. And the Rupay card is now usable in many countries around the world including in Europe. This means that the card offers a platform for diplomacy and bilateral trade and tourism. The Rupay which was started in the year 2012 now does over $30 billion in yearly transaction turnover. The Chinese UnionPay card is even larger as it overtook Visa and Mastercard in total value of payments made by customers and became the largest card payment processing organisation (debit and credit cards combined) in the world surpassing the two in 2015. UnionPay ranked first by number of cards in circulation worldwide as at the end of 2021 with 9.4 billion, compared with Visa at 3.7 billion and Mastercard 2.5 billion. Though information is scarce around China, the UnionPay card did a transaction of $7.5 trillion in 2015 alone. Transactions are propelled by the rising middle class in China.
It will be great to see how Nigeria makes a success of this initiative. Indeed, we need such a break at this moment. We need to keep encouraging our smart youths to keep coming up with ideas. We also need to keep helping our rural residents to do better and integrate more, as financial inclusion and innovation such as this helps to eradicate poverty. Lastly, we need to get Nigeria moving. I always say that nothing last forever, not even the seeming insurmountable challenges that Nigeria faces. The Indian Rupay card was launched in 2012, 10 years behind the UnionPay card of its neighbor, China. A Swahili proverb goes ‘The best time to plant a tree is 20 years ago. The next best time, is today’.
