INTRODUCTION
The CBN has, on 13th of September, 2018, issued a circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria to all Deposit Money Banks, microfinance banks, other financial institutions, mobile money operators, development finance institutions, payment service providers and other stakeholders. The regulation is said to be made in furtherance of CBN’s mandate for the development of electronic payments system in Nigeria; and is to come into effect from 2nd of October, 2018.
The purpose of this regulation is to set out the rules for the operation of Instant Electronic Funds Transfer services in Nigeria; prescribe the rights and obligations of the parties to such services; provide the minimum standards for the operations of the parties to EFT services and stipulate procedures geared towards the enhancement of the soundness of instant EFT services, while adequately protecting the interests of instant EFT customers and operators[1].
To which transaction(s) does this regulation relate?
The regulation covers Instant Electronic Funds Transfer (EFT) Services in Nigeria on various payment channels and any payment platform that seeks to provide Instant Electronic Funds Transfer Services in Nigeria[2]. The regulation further explains EFT to mean “Electronic Funds Transfer and Instant (Inter-Bank) EFT or Instant EFT or Instant Payment shall mean Instant EFT Payments system between two distinct entities when delivery from the Sending Entity to the Receiving Entity takes place within 1 minute (60 seconds). A payment system where delivery to the Receiving Entity occurs beyond 1 minute is considered to be an ACH system”.
The transaction types allowed for Instant EFT are one to one (single debit and single credit), one to many (single debit and multiple credits) and many to one (multiple debits and single credit).
Who are the players/participants in the Instant EFT transaction?
To avoid ambiguity and ensure clarity of purpose, the regulation spells out the rights and responsibilities of each player under the regulation.
Instant (inter-bank) EFT service provider is explained to mean “a Nigerian company or Financial Institution licensed by the CBN to carry on the business of facilitating Electronic Funds Transfer services in partnership with Sending and Receiving Entities”[3].
Among other responsibilities, every EFT service provider to which this regulation applies is expected to ensure compliance with the minimum standards issued by the CBN, establish and implement operational guidelines specifying in clear terms the responsibilities of each party, operational rules and procedures (including dispute handling) and liabilities of parties in the event of loss of funds arising from negligence of any of the parties. They are also expected to develop and circulate user guides to educate and enlighten other stakeholders on its Instant EFT services as well as maintain confidentiality of Instant EFT transactions and information obtained in the course of discharging its responsibilities and ensure that these responsibilities extend to its employees.
Such EFT service provider is to provide Name Enquiry support to minimize instances of wrong credits; put in place a robust Dispute Resolution System (DRS) for users of its platform; establish adequate security procedures to ensure the safety and security of its information and those of its client and maintain a robust anti-fraud management system approved by the CBN or connect to the CBN industry Anti-Fraud system[4].
A sending entity is a “Nigerian company or Financial Institution licensed by the CBN to carry on the business of facilitating Electronic Funds Transfer services in Nigeria and who initiates an Instant EFT on behalf of its customers”.
The regulation has mandated every sending entity in an Instant EFT transaction to provide name enquiry support to the customer to minimize instances of wrong credit fully secure debit against customer account before initiating transfer; provide notification of debit to customer’s account, as agreed with the customer and ensure that EFT messages contain the sender’s name, BVN and account number, beneficiary name and account number, narration and other information specified by customers at the point of initiating a transfer.
They are to notify customer of the status of Instant EFT as agreed in the terms and conditions of its platform and where the Sending Entity is unable to process within one (1) hour after the next settlement closure, refund into customer’s account full proceeds of such transaction. Similarly, it shall, within 10minutes, refund into customer’s account full proceeds of failed transactions returned by the Receiving Entity[6].
It is further required that the sending entity permit transfers from all its service delivery channels – branches, internet banking, mobile banking, ATM/Kiosks, etc; publicize instant EFT services and the instant EFT FAQ to its customers; receive customer complaints regarding EFT problems, and pursue resolution to a logical conclusion.
They are however precluded from providing instant EFT services to Walk-in customers without any bank account in Nigeria. A walk-in customer is explained to mean “a person that does not have a bank account maintained by the Sending Entity”[7].
A receiving entity is “a Nigerian company or Financial Institution licensed by the CBN to carry on the business of facilitating Electronic Funds Transfer services in Nigeria and who receives the proceeds of Instant EFT on behalf of its customer”[8].
Receiving Entity in an Instant EFT transaction are to provide name enquiry support to EFT Service Provider to minimize instances of wrong credits and apply Instant EFT proceeds to the customer’s account within 60 seconds. Such receiving entity must ensure that Instant EFT proceeds have been credited to customer’s account before confirming to the Sending Entity that transaction was successful and where it is impracticable for the Receiving Entity to credit the customer’s account within 60 seconds, due to security, system or other considerations, the Receiving Entity shall notify the Sending Entity, beneficiary and/or the EFT service provider(s) shall be notified.
In all of such instances, the receiving entity must give the assurance that pending credits will be applied as soon as the issue is resolved but not exceeding 24 hours, notify customer of the Instant EFT receipt and ensure that bank statement of the beneficiary features the Sender’s name and Transaction Narration Information as contained in the inward EFT message.
Whenever there is a notification of an erroneous credit and necessary reversal authorization from a customer, the Receiving Entity should reverse the erroneous credit[9].
The customer on his part has the responsibility to provide accurate beneficiary account details for every EFT instruction and report problems arising from EFT transactions promptly to the Sending/Receiving Entity.
Whenever a credit has been erroneously applied to the customer’s account with the Receiving Entity, the customer is required to promptly notify the Receiving Entity and authorize the reversal of such erroneous credit.
Where the customer has authorized a transaction and his account is unfunded, the customer shall provide funds within 24 hours. Failure to provide funds will be a ground for watch-listing of the customer in the banking industry, Credit Bureau and reporting to law enforcement agencies[10].
Limitations
The limitations on Instant EFT values are as may be set by customer, Sending and Receiving Entities based on individual entity’s’ risk appetite subject to the single Instant EFT limit per transaction as stipulated by the CBN.
Sending and Receiving entities are to advise the EFT Service Provider of such limits who would circulate platform limits to all Sending and Receiving entities, to guide platform operations[11].
Settlement system
Instant EFT transactions are to be settled as may be agreed amongst participants but not later than T+1 basis and the EFT service provider may operate more than one settlement cycle per day to minimize the settlement risk associated with Deferred Net.
There are two modes of settlement systems identified in the regulation: the instant EFT settlement cycle and the instant EFT settlement collateral.
The instant EFT settlement cycle is that Instant EFT transactions should be settled as agreed amongst participants but not later than T+1 basis.
The instant EFT settlement collateral on the other hand is that the Sending and Receiving Parties to EFT transfers shall provide adequate collaterals under CBN approved collateral management system[12].
Fees and Charges
Instant EFT service providers and Sending entities shall apply fees and charges in compliance to the approved Guide to Bank Charges. The Receiving entity shall not earn income on funds transferred. However, statutory levies/charges shall apply[13].
Dispute Resolution
Whenever there is dispute among the players in the Instant EFT, the regulation require the Instant EFT Service Provider to properly document and circulate among Sending and Receiving entities a Dispute Resolution System (DRS) process and all Instant EFT disputes shall be resolved within 3-working days. Should the Sending and Receiving entities fail to agree, the aggrieved entity shall report to the Director, Consumer Protection Department, CBN within five (5) working days of the failure to resolve the dispute so as to minimize customer pain.
The EFT service provider is permitted to operate more than one settlement cycle per day to minimize the settlement risk associated with Deferred Net Settlement system[14].
What happens if there is wrong transfer due to bank error?
Where a Sending Entity erroneously sends value contrary to customer’s instructions due to wrong account number, wrong amount, duplication, etc to a Receiving Entity and requests the reversal in writing within 14 working days of the transaction, the Receiving Entity shall oblige within one (1) business day without recourse to the customer (beneficiary) of the Receiving Entity provided funds are available. An automatic indemnity shall be inferred against the Sending Entity making the reversal request. However, where funds are not available, the Receiving Entity shall immediately notify its customer that the account was wrongly credited and provide proof of such notification to the Sending Entity. The Receiving Entity shall further notify the customer the consequences of not funding the account within 24 hours, which includes watch-listing in the banking industry, Credit Bureau and reporting to law enforcement agencies. If despite the warning, the customer still fails to provide fund within seven (7) days, the Receiving Entity shall watch-list the customer and refund the transaction as soon as funds are either partially or fully available.
However, the Receiving Entity shall neither use the wrong credit to settle the customer’s outstanding indebtedness to it nor consider such credit as the property of the customer[15].
Transfer Recall Due to Customer Error
Where a customer claims to have made a transfer in error and the beneficiary is known to the complainant, the Sending Entity shall encourage the complainant to contact the beneficiary for an amicable settlement. However, where the beneficiary refused to effect a refund to the complainant, or the beneficiary is unknown to the complainant, the Sending Entity will notify the Receiving Entity who in turn will place a lien on the amount in the account of the beneficiary and thereafter obtain the consent of the beneficiary to execute refund.
If the beneficiary does not give consent, the internal auditors of the Sending and Receiving Entities shall mediate between the two customers within 2 weeks of the complaint to resolve the issue, and their decision shall be final. Accordingly, the lien on the amount in the beneficiary’s account shall not last more than 2 weeks.
Per adventure the contested beneficiary has utilized the fund such that lien could not be placed, and he/she refuses to fund the beneficiary account to facilitate refund, the Receiving Entity’s Internal Auditors shall watch-list the beneficiary’s BVN and the Sending Entity may report the incident to law enforcement agencies.
In all instances however, the dispute resolution procedure put in place by the Instant EFT service provider shall make provisions for exception handling where the status of a transaction between the EFT service provider and the Sending or Receiving Entities is indeterminate[16].
Penalty
Upon complaints of sender and/ or beneficiary, every failed Nigerian Instant Payment (NIP) transaction not reversed into customer’s account within 24 hours will attract a penalty of N10,000.00 per item and every delayed application of inward NIP into beneficiary’s accounts beyond 4 minutes will attract a penalty of N10,000.00 per item[17].
The regulation is however silent on who the recipient of the penalty is. That is, whether it is the aggrieved customer or the CBN that the fine of N10,000.00 should be paid to.
CONCLUSION
The jury is in and the verdict is that this regulation is a step in the right direction. Banks customers have long suffered on account of failed e-funds transaction and it is quite relieving to now know that someone can be held accountable. However, the CBN has unequivocally stated in this regulation that the condition precedent to evoking the penalty in this regulation is that the aggrieved customer should lay a complaint regarding the failed transaction. It is unclear whether such complaint should be to the affected bank or the CBN; and if it is to the CBN, the means of lodging such complaint was not stated in the regulation.
[1] Article 3.0 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[2] Article 2.0 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[3] Article 13.3 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[4] See generally Article 5.1 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[5] Article 13.4 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[6] See Article 5.2 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[7] Article 13.6 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[8] Article 13.5 circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[9] See Article 5.3 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[10] See Article 5.4 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[11] See Article 7 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
See Article 8 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[13] See Article 9 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[14] See Article 10.1 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[15] See Article 10.2 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[16] See Article 10.4 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
[17] See Article 11 generally circular on the regulation on instant inter-bank electronic funds transfer services in Nigeria
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Pls assist me to unravel this painful experience. I transfered some to a friend in Abuja with GTB account since Wednesday till this hour he has not gotten alert or since the money. We my receiving friend went complaining in bank, he was told he should exercise patient for 24hrs since yesterday afternoon. That if he could not see the alert they will do a reversal. Till this hour, we've not seen or heard anything from the bank. Pls am very confused her, what should we do next?