Did We Score an Own Goal with NUBAN: CBN’s Response — One Giant Leap for Payments in Nigeria
Executive Summary, (for all my senior people who don’t have the time to read the full article :D):
Eight months ago (March 2018), I wrote an article about the flaws of the NUBAN account system implementation in Nigeria, you can read it here. Last week, Central Bank of Nigeria (CBN) released a draft proposal to review NUBAN implementation and proposition is in line with the recommendations from my March 2018 article; but CBN takes the implementation a bit further. At first glance, it looks like the apex bank is playing it safe with 16 digits and in turn causing Nigerians more problems by tasking them to remember their multiple 16 digits account numbers (more than 30% of banking Nigerians have more than one bank account); however, a critical look shows that CBN is playing the long game with NUBAN, and long game is good game for the industry. This is good news for wallet-based services offered by FinTechs, as NUBAN may soon be available to wallets, allowing ease of transactions between wallets and bank accounts based on a unified NUBAN nomenclature.
Almost two years ago, I got the opportunity to contribute my quota to the adoption of Open Banking in the Nigerian financial industry; I did this from my corner at GTBank by helping to re-position the Bank’s corporate payment solutions as democratized APIs for consumption by FinTechs and MSMEs. It was a challenging experience — from convincing senior management to embrace long-term, win-win partnerships with FinTechs as enablers and not solely as competition; to getting the right support from the Bank’s technology team for go-to-market (timeliness & readiness). Integrating the bank’s payment APIs with these FinTechs also threw up a myriad of technical issues; and in analyzing these issues, one of the biggest contributing factor was found to be in the way NUBAN was implemented in Nigeria.
There were cases of the same NUBANs existing in different banks; with increasing occurrences as more NUBANs are generated. This defeats the purpose of NUBAN as a unique bank account identifier in Nigeria. As it stands, NUBAN’s uniqueness depends on the customer or user’s conscious usage of bank codes / bank names with the NUBAN, even at API level (requiring the inclusion of an interface to identify bank code or bank name mapped to the bank code).
When uniqueness of an identifier depends on user input, it loses the potency for uniqueness.
There was also the implicit problem of the character length and how quickly the unique combination of the (10 digits) of NUBAN will be used up, given the rise in MFBs and OFIs. Given these challenges, a practical solution was recommended here (also published on LinkedIn) to include the 3-digit unique bank code to the current implementation dynamics to arrive at a 13 digit NUBAN that will truly be unique, and vastly expandable to accommodate an exponentially larger instances of NUBAN. Below is a snapshot of the proposal:
Eight months later, the CBN has not only considered this proposition, it has issued a draft of how it plans to revise the implementation architecture of NUBAN in alignment with this recommendation. The apex bank has gone further to introduce 3 extra digits taking the tally to 16 digits (i.e. from Step 5 above, the CBN is introducing three preceding zeros as a buffer for when more Banks, MFBs and OFIs are incorporated for business). This implementation will further ease integrations between banks, OFIs, FinTechs and the many MSMEs that will embrace open banking for innovative developments and implementations to deliver quality financial services to Nigerians. Also, CBN is doing this to rubber-stamp its strategy to open up NUBAN issuance to more non-DMBs, implying that you may not need to hold a bank account before you have a NUBAN number. However, funds (value) transactions will happen across issuers and providers within the ecosystem. This is good news for wallet-based FinTechs.
One of the expected criticism to this new approach is the shift from remembering your 10 digits NUBAN to 16 digits; this is anticipated and highlighted in the initial article, with the comfort being that in the days before NUBAN, Nigerians were provided with 12–15 digits account numbers by their banks based on differing account numbering nomenclatures unique to each bank. (In those days, Banks’ account number system depended hugely on the architecture of their core banking applications).
I believe the CBN considered critical feedback and recommendations on how to reposition NUBAN to achieve it’s intended aim of unifying account number nomenclature in Nigeria; and this highlights the importance of independent contribution to the general body of knowledge for the advancement of underlying infrastructure (standards, policies and procedures) that power financial service delivery in Nigeria. If implemented right, I believe this will position NUBAN as the truly unique, unified account numbering system that will be the bedrock for the CBN National Financial Inclusion strategy outlined in its CBN-funded Shared Agent Network Expansion Facility (SANEF) initiative.