WINDHOEK – Imagine receiving an eWallet of N$500 from a friend and instead of taking a taxi to the nearest FNB ATM machine, you simply use the Bank Windhoek ATM not far from where you are standing waiting for a taxi when that SMS notification beeped on your cellphone. Just close your eyes for a moment, and visualise if you will, the flood of relief and joy of convenience that would jolt through you were that a real option.
Now open your eyes, and read this: That is exactly what the Bank of Namibia is compelling the local financial industry to do by 2025. And if the regulatory bank is to have its way, that scenario would be reality by 2025, even it means issuing new regulations or directives to force the finance industry to do just that.
“The current rise of non-interoperable e-money schemes restrict consumer choice, as they are either forced to receive funds using an institution chosen by the sender or institutions with limited availability,” the Bank of Namibia said in its newly released position paper.
The discussions for interoperability of Namibian banking systems are nothing new. In fact the industry, together with Bank of Namibia, conceived a document of commitment to make at least 70 percent of that dream a reality by 2020. The end result is a 13-page document titled ‘Namibia National Payment System 2020,’ and signed by representatives Bank Association of Namibia – which represents all banks, the Payment Association of Namibia, and the Governor of Bank of Namibia Ipumbu Shiimi. The document has clear strategic objectives and timelines. The last page clearly lists the names of all midwives who participated in birthing the document to reality.
But judging from the tact diplomatic tone of the Bank of Namibia’s position paper, very little has been done in implementing that document. That is why, perhaps, the last points of the position paper read: “The NPS [National Payment System] is encouraged to act in accordance with this position.” Then this nugget in the last two sentences: “The bank reserves the right to add more principles in the envisaged regulation not contained in this position paper,” and “the bank further reserves the right to amend this position from time to time or use any regulatory tool, i.e. guidelines, determinations or directives to mandate interoperability.”
The Bank of Namibia being a reserved and cautious institution by design, it is not often that it induces actions through a public position paper dotted with such legal undertones.
The nitty-gritty of the position paper is a tad technical and awash with financial jargon, but suffice to say this: By pushing to have “interoperability” the Bank of Namibia is advocating a single system that connects all other systems of different banks, and non-banking financial institutions, offering money and payment terms. This single system would, in simplest terms, allow anyone to do whatever e-money transactions they wish without the inconvenient restrictions that dictate eWallet be only transacted on FNB ATM machines, BlueWallet on Standard Bank ATMs and EasyWallet only on Bank Windhoek ATMs.
According to Bank of Namibia the interoperability would not only be applicable at commercial banks, but also what is called the electronic money (e-money) issuers, which are the services offered by companies such as MobiPay. The interoperability aspects that Bank of Namibia is pushing for include all other aspects of electronic fund transfers (EFT), cheques, Point of Sale (POS) system, e-money, and virtually all payment systems or instruments available in the industry.
“To ensure an efficient and cost effective National Payment System (NPS), it is the objective of the Bank of Namibia to achieve 70 percent interoperability of all payment instruments by 2020 as envisioned in the NPS Vision 2020, and to ensure that full interoperability is achieved by 2025,” said the Bank of Namibia in its position paper dated 02 August.
The bank says the number of e-money issuers, as well as the volumes and values of e-money in Namibia, have grown considerably over the past five years. In 2013 there was only one company issuing e-money but today there are eight companies registered and licensed with Bank of Namibia as e-money issuers. These are three banks – FNB, Standard Bank and Bank Windhoek – and five non-banking companies in the likes of Virtual Technology Services, MobiPay and Nam-mic Payment Solutions.
The transaction volumes – or the volumes of electronic money that changed hands – as of last year alone stood at 17.8 million transactions and valued at N$10.6 billion in money ‘ewalleted’, ‘bluewalleted’, ‘easywalleted,’ and whatever other catchphrases used by the non-bank issuers of e-money.
It is a huge amount of money considering that at the beginning, in 2013, the volume stood at a meagre 8.3 million transactions valued at N$1.5 billion.
“There has also been an expansion in the type of e-money services and value addition services, namely e-commerce payments, merchant payments, subscriptions, airtime and utility payments i.e. water and electricity,” said the Bank of Namibia.
It is for these reasons that the Bank of Namibia is convinced that the absence of interoperability of the services and systems are holding back the growth of this industry and services. Not to mention the increases in inefficiencies and the possible hampering of financial inclusion objectives of “holistically bridging the gap between the banked and unbanked population”.
“Interoperability is considered important because it allows e-money issuers to offer e- money customers more flexible and accessible payment options which could further increase the number of transactions and speed of money circulation in the NPS and in the end enhance financial inclusion,” says the paper.
To nudge the industry towards interoperability the Bank of Namibia drops the hint that it “will consider mandating interoperability in the NPS by 2025”. It also says it is looking for an effective cooperation and collaboration between banks and non-banks in achieving full interoperability of payment instruments. The bank wants, perhaps for the benefit of consumers, “a level playing field among all e-money issuers” – be they banks or non-banks. The industry would have to make sure that it agrees on standards for interoperability and standards that not only conform to international best practices but which are also in the public interest, said the document.
The central bank says e-money services normally allow people with access to mobile phones and remote e-money outlets to access basic financial services and perform person-to-person and person-to-business transactions. “With interoperable e-money services, the unbanked and people with limited access to basic financial services have the opportunity to use any channel such as ATMs, POS devices or agents, to perform financial transactions without being clients of all the available service providers,” the bank says in the paper.
This would make it possible for people to send money to anyone without a bank account who would then be able to access their money for as long as they have access to a mobile phone and network coverage.
It has been a long road for Namibia to get here. Namibia only set up the system to process payments and transactions among banks in 2002, and in 2004 it became possible for individual customers to make Electronic Fund Transfers (EFT). It was only from 2008 that we, as Namibians, have been swiping our cards left, right and centre, thanks to the operationalization of the card payment system called NamSwitch. Yet despite all these achievements, the systems of different banks and non-banks do not talk to one another. Frankly, they barely recognise one another, hence people would still need to operate the bulk of services using their respective bank’s infrastructure and systems. And that is what Bank of Namibia does not want. The systems must talk to one another, and also, the bank warns, it is not going to tolerate arrangements of exclusivity where only few institutions agree to have their systems interoperable but excluding others who have not joined their club of few.
“While the bank is supportive of an industry-led approach in achieving the aims and objectives of the NPS Vision 2020, it is also the bank’s role to induce change. In this instance, it is the bank’s intention to mandate interoperability by the year 2025 through the issuance of a regulation,” said the Bank of Namibia in its position paper.