By helping banks to identify and blacklist fraudulent customers, the Bank Verification Number (BVN) initiative will help to boost retail credit in the banking industry, the Managing Director of the Nigeria Interbank Settlement System (NIBSS), Mr. Ade Shonubi, has said.
The NIBSS boss, who is responsible for the implementation of the BVN, in a statement, explained that once banks are able to identify and blacklist fraudulent customers, they would be encouraged to extend loans to those customers that are credit worthy and do not have any record of being delinquent borrowers.
The BVN is an initiative aimed at protecting bank customers and further strengthening the Nigerian banking system. 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.
He said: “When the BVN project came up, there were three key things. First and most important of all 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 identifying is the possibility of banks blacklisting people who have committed financial infractions. It could be fraudsters; it could be people who have gone to forge documents because what happens today is that the same guy will go to a bank, commits fraud, then runs to another bank and 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.
Consequently, he said the BVN would allow lenders begin to build retail credit. He explained: “This is because a concern for bank is, if I lend you money now and you go away, how do I identify you? So, you find that the entire retail consumer lending is to people with formal employment, that is why you see everybody running to the oil companies to say ‘let’s give your staff car loan; let’s give your staff consumer loan; let’s give your staff TV loans.’ 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.”
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.
As part of efforts to encourage enrolment on the BVN, the CBN directed banks to only honour transactions over N100 million from customers with BVN from March 2015. Such transactions according to the apex bank, include but not limited to, money transfers, loans, and contingencies, among others.
The regulator also urged all bank customers to register for their BVN by June 2015, warning that any bank customer without a BVN would be deemed to have inadequate know-your-customers (KYC) by that date.
Analysts have also described the BVN as a ‘silver-bullet solution’ to many of the challenges in the banking industry. The BVN is a unique identifier for each bank customer across the financial industry, making it possible to build and track customer financial history and activity. This will allow banks’ access to more reliable information that could inform decisions on customer loan and credit applications and other complex transactions.
The initiative, which was launched on February 14 2014, will also encourage financial inclusion as those who have typically stayed away from mainstream banking due to low literacy levels will be able to open and access their bank accounts using their biometric information rather than traditional identification methods.
The NIBSS, which is owned by the 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.