The Central Bank of Nigeria has said banks and other electronic payment service providers must navigate the evolving and increasing complex regulatory environment to avoid penalty.

The Director, Banking and Payments System Department, CBN, Mr. ‘Dipo Fatokun, described fraud as the biggest challenge facing the electronic payment sector, stressing the need for banks, customers and regulators to tackle it.

Fatokun stated this at the Finance Correspondents Association of Nigeria Bi-Monthly Forum in Lagos on Saturday, while making a presentation, a copy of which was made available to our correspondent.

“Electronic payments continue to be a growth story across the world and Nigeria is not an exception, but banks and other service providers face a number of challenges in ensuring that they make the most of this opportunity,” he said.

He said the Nigerian electronic payments industry had been evolving in line with the evolution in global payments in both wholesale and retail systems.

Fatokun said banks, payment service providers, and the CBN had played various roles in developing the payments system and creating products and channels for electronic payments.

He said the Retail Payments Transformation Programme of the CBN had led to the introduction of various electronic payment products and services by operators in the industry.

“The electronic products are gradually reducing the usage of cheques and cash, as noticed consistently in the annual performance report since the inception of the Cashless Policy in 2012,” he said.

Fatokun said the volume and value of transactions based on cheques and National Electronic Funds Transfer had been consistently reducing annually since 2013, while same data for the NIBSS (Nigeria Interbank Settlement System) Instant Payment, Automated Teller Machine, and mobile money channels had been on the increase.

The CBN director said, “The ATM channel accounts for the highest volume of transactions, while the NIP accounts for the highest value of transactions annually. This is because the ATM is usually the e-payment channel that new and lower value account holders always interface with, while corporates and upwardly mobile middle class customers make transfers using NIP.”

According to Fatokun, banks and other e-payment service providers operate in a highly regulated environment.

He described regulation as necessary to ensure that “operators focus on delivering products and services that enable compliance, efficiency, financial stability and a positive customer experience.

“The regulatory landscape remains complex for operators; they not only need to comply with existing regulations but also adhere to new regulatory initiatives, some of which affect established operating or business models.

According to him, increased complexity in the regulatory landscape sometimes creates the need for banks to leverage new technology for compliance purposes.

“Required rate of policy review is increasing due to technology changes and innovations. This creates disruption in the smooth flow of implementation, where a policy becomes ineffective as a result of better technology,” Fatokun said.