By Luqman Balogun
It is not without good reason that Nigeria and Nigerians are unduly maligned for crimes committed in heinous proportions in other climes such as drug trafficking, Internet and credit card frauds, among others. The reason is simple. Nigeria is among the countries in the world where there is inadequate social infrastructure to combat such crimes effectively through an integrated identity management systems which enable security agencies to track, prevent or apprehend those committing such crimes, and to also keep serial offenders under surveillance.
Until the recent introduction of the e-passport in Nigeria, ordinary Nigerians, as well as the criminal minded ones, and even non-Nigerians, especially those from West and Central Africa, can be in possession of as many as two to three Nigerian passports procured through the right channel, under different aliases. This ease of procurement and duplicity of access is not peculiar to the National Passport; it applies to other vital national identification means such as the National Drivers’ License and the National Identity Card, thereby eroding the integrity of these national identification types.
The negative effect of this disquieting development is unquantifiable in proportion. It has not only tainted the image of Nigeria abroad, it has also affected the growth and development of the local economy negatively. For instance, this duplicity has seriously impeded offline and online transaction growth as well as the flow of credit to young Nigerian entrepreneurs because their identities are unverifiable.
For this same reason, activities of Nigerians were restricted on global e-commerce platforms that include Amazon and Ebay before we are able to buy just books, gift cards and flowers. This spawned a lot of how-to-literatures focused on “How to buy from Amazon in Nigeria”. Lots of honest, hardworking and credible Nigerians with credit cards cannot purchase goods and services online because many offshore merchants and payment systems will not process purchases from cards by customers with a Nigerian Internet Protocol address.
We have to thank the young internet savvy entrepreneurs who plugged the e-commerce market vacuum by bringing the Kongas, Jumias, and the Dealdeys to the local internet space. However, the potential of these convenient online stores and their small and medium sized suppliers can only be unleashed with improved access to banking for millions of under banked and unbanked Nigerian adults, and subsequent credit flow to them from the banking industry.
It is noteworthy that economies with thriving small and medium scale business have functional identification system driving the credit administration system – the lifeline of business. As such, banks are able to lend to the people, and are also able address the issue of fraud.
Against this backdrop, the decision of Central Bank of Nigeria (CBN) and the Bankers’ Committee to improve the banking industry Know Your Customer (KYC) requirement by deploying a biometric solution in 2014 is heartwarming. The initiative will strengthen the integrity of Nigeria and its financial services landscape by preventing pervasive identity theft, financial fraud, money laundering and terrorist financing. It will also fast track the attainment of the financial services objectives of the Vision 20 2020 of the Federal Government of Nigeria.
It would be recalled that recent research data on e-fraud in Nigeria by the Financial Institutions Training Centre (FITC) indicate that banks lost a total of N159 billion to electronic fraud between 2000 and first quarter of 2013. This was partly linked to ineffective banking industry KYC standards.
First of its kind in the world, this biometric KYC project is a win-win for the financial services industry and its customers. Apart from yielding significant cost savings to banks, it will also enhance customer trust and confidence in the long term.
In no small measure, the biometric KYC project by the CBN and the Bankers’ Committee will ameliorate the customer identification and verification challenges facing banks and other financial institutions in Nigeria which are rooted in the existence of identity systems that are not standardized and integrated into centralized database for customer identity verification.
Luqman Balogun is the Chams Project Director – Bank Biometric KYC Project.