System Infrastructure Outside-in vision from SIBS Lagos, 21 st - PowerPoint PPT Presentation

Transforming the Nigerian Payment System Infrastructure Outside-in vision from SIBS Lagos, 21 st November 2014

Agenda 1. A COUNTRYWIDE PAYMENT SYSTEM TRANSFORMATION THROUGH SHARED INFRASTRUCTURE PLATFORMS 2. U NLOCKING THE POTENTIALS OF THE N IGERIAN ELECTRONIC PAYMENTS INFRASTRUCTURE PLATFORMS 2

Independent view of the Portuguese Payment System “... the example of the Portuguese system, SIBS, “SIBS’ ATMs are among the most high functional suggests that greater innovation may arise out of Western Europe. A wide range of unusual of a system where all the processing for a facilities are also available (…) . ATMs are also number of payment methods is carried out advanced in terms of hardware features.” centrally.” In Retail Banking Research Bulletin. OFT. “ The cash machine (…) provides the local “A survey conducted for this report looked at the community with a lot more than easy access to availability and use of a non-cash functions at their euro. It is a multi-function kiosk where they cash machines in other countries. Of the survey can book train and cinema tickets, make social security and tax contributions (…) That is respondents, the Portuguese were the leaders in because the ATM in question is part of SIBS ATM the cash machine functionality.” network, (…) that offers more than 60 services .” In APACS’ Report UK Cash & Cask Machines. In Financial Times. The Portuguese Payment System is internationally recognized as a case of success and innovation. 3

Benchmark of European Card Market European terminals and electronic transactions benchmark (2011) ATM per million POS terminals Card transactions inhabitants per 1.000 inhabitants per inhabitant EU (~503 million 870 18 74 inhabitants) +3% +26% +64% France (~65 millions 892 22 121 inhabitants) +18% +23% +114% UK (~63 millions 1.026 158 22 inhabitants) +87% +46% +148% Portugal (~10 million 1.624 26 183 inhabitants) SIBS is one of the leaders in the European Electronic Payments arena. 4 Source: SIBS statistics and BCE (Blue Book - Payments and Securities Settlement Systems in the European Union - October 2012).

Unlocking the potential of the Portuguese electronic payments Portuguese Transformation Roadmap Law SWIFT Payments interface More than 6 Billion Car Park MB DOX contactless Welfare transactions in payments Payments TARGET 2 2013 SEPA CT MB NET Tax Payments Direct PE-ACH Debits interface MB SPOT (for credit transfers) SET Protocol RTGS Gas stations (e-commerce) Road Toll contactless Contactless payments payments Payments Direct (card) Mobile phone Credits e-authentication top-up Draft’s Clearing Public MB PHONE phones’ Cheques’ payments Clearing Road toll First network in the world to POS Network contactless offer Bill Payments and payments Bill ATM payment at Mobile Phone Top-Up. Network ATM 1985 1988 1991 1994 1997 2000 2003 2006 2009 2013 Managed Cards 551 1.240 3.184 5.291 8.132 11.756 14.688 17.642 19.628 19.540 (thousands) SIBS’ position results from high investment and innovation during the last 30 years that have sustained the constant activity growth. 5 Source: SIBS statistics - 2013

Unlocking the potential of the Portuguese electronic payments How SIBS started its transformation journey Other channels POS ATM 278,910 175,036 188,288 Nº transactions 118,351 (in thousand) 87,699 19,074 51,593 7,349 71,546 2,950 71 6 21,914 11,975 49,336 920 33,156 5,525 114 543 20,278 11,861 1985 1986 1987 1988 1989 1990 1991 Transaction volume n.a. x10 x2 x2 x4 x2 x2 growth 6

Unlocking the potential of the Portuguese electronic payments SIBS presently offers a one-stop-shop portfolio of services Channels Acquirers POS Issuers ATM Issuer Issuer processor Internet IPS • Driving • Acquirer Processing Mobile • Switching SWIFT • Issuer Processing Contactless TARGET 2 • road toll Clearing & Settlement EBA Clearing payment • Oversight and anti-fraud Others: • Government • Domestic scheme management Others • Utilities • Telco, Etc. SIBS plays a central and transversal role in the payment system, presenting a wide range of payment services allowing to capture scope economies. 7

Unlocking the potential of the Portugal electronic payments From cash to cashless Millions of operations per year Cashless transactions Cash dispensing transactions Fishing and hunting licences purchase 900 Cheques The SIBS ATM network is being Judicial Travel Pass Issuing increasingly used to perform Reload Payments 800 non-cash dispensing operations (with more than 100 different Transfer to Social Account functions and 52% of total 700 Security transactions in 2013) . Tax Payments Event 600 Ticket Sales Train Ticket Sales 500 Mobile phone top-up 400 Road Toll payments 300 200 Bill ATM Payments 100 Network 0 1985 1989 1993 1997 2001 2005 2009 2013 SIBS success is generated by the investment in innovation and convenience provided to the customers. 8 Source: SIBS statistics - 2013 .

SIBS scale and scope leverages a competitive price offering efficiency to the financial community Evolution indexes (1999=100) Average fees (left scale) Transactions (right scale) 120 350 100 250 Evolution 80 200 indexes for SIBS’ average 60 150 fee (all services 40 100 combined) 20 50 1999 2001 2003 2005 2007 2009 2011 2013 SIBS has a proven track record on transferring scale gains to its costumers, through a sustainable price reduction path. Source: SIBS' fee structure, SIBS’ Statistics 2013. 9

Agenda 1. A COUNTRYWIDE PAYMENT SYSTEM TRANSFORMATION THROUGH SHARED INFRASTRUCTURE PLATFORMS 2. U NLOCKING THE POTENTIALS OF THE N IGERIAN ELECTRONIC PAYMENTS INFRASTRUCTURE PLATFORMS 10

Unlocking the potentials of the Nigerian electronic payments POS terminals activity growth December 2011 October 2014 ~2,000,000 ~ 90,000 x20 transactions transactions ~40,000 ~5,000 active POS terminals active POS terminals The cashless initiative has placed Nigeria growing fast. 11 Source: NIBSS.

Unlocking the potentials of the Nigerian electronic payments International benchmark - Angola and Nigeria ÷9 Population ~177 ~19 (2014 - Values in millions) GDP ÷4 (2013 - ~478,500 ~131,800 values in billions USD) Monthly ~2.0 x2 ~3.6 POS trx (October 2014 - values in millions) Source: NIBSS, EMIS, CIA. 12

Unlocking the potentials of the Nigerian electronic payments Unused POS Unused POS Registered Deployed/Connected Active ~132 thousand POS unused, that 172 represents (100%) ~24,000,000 € (~5.1 billion N) 134 (78%) 40 (23%) October 2014 In spite of the effort made in coverage, there is still a huge number of unused terminals. 13 Source: NIBSS.

Unlocking the potentials of the Nigerian electronic payments Main findings of market research for POS Terminals without “...only 15% of Technical malfunctions connectivity are the major transactions are perceived and network connectivity cause for discouragement by the merchants as are among the reasons for for consumers’ POS successfully performed.” still not having a POS. usage. 14 Source: NIBSS.

Unlocking the potentials of the Nigerian electronic payments Reliable power and communication infra-structure 15

Unlocking the potentials of the Nigerian electronic payments New POS terminals technologies – e.g. MPOS and E-POS + + MPOS Application Connectivity Reader and Pinpad E-POS 16

Unlocking the potentials of the Nigerian electronic payments ATM network - improve network management • Improve quality control (e.g. certification, homologation, centralized monitoring) • Improve service levels increasing competition in the ATM maintenance market • Develop interbank (systemic) innovation • Promote scale economies by making available central shared platforms 17

Unlocking the potentials of the Nigerian electronic payments Shared Global Terminal Management System (GTMS) POS Global Terminal Management • Operating cost System (GTMS) efficiency • Security improvement compliance • Quality assurance / ATM improve customer satisfaction • Ability to innovate (and renovate) Mobile • Better decision- making (more adequately informed) 18

Unlocking the potentials of the Nigerian electronic payments Assure basic infrastructure quality (e.g. Datacentres) Illustrative picture Looking forward to the constant improvement of service quality and resilience, there is the need to enhance technology infrastructure to support industry growth. 19

Unlocking the potentials of the Nigerian electronic payments Improve quality and security Illustrative pictures 20

Unlocking the potentials of the Nigerian electronic payments Nigerian Payments Market immediate priorities Assure basic infrastructure - e.g. improve connectivity, data centers, power, quality certifications - through an industry program office and specific initiatives Focus on Cashless Nigeria progression, i.e., electronic payments adoption - e.g. promotion, prioritize areas/clusters and merchants, etc. Make use of the shared resources - GTMS, technical monitoring, business activity monitoring, etc. 21