Nigeria Central Switch (NCS)

Objectives of the NCS

• To serve as front-line catalyst for economic growth and support the financial sector reform.
• To foster healthy competition between switch operators and related service providers.
• To optimize investment and transaction processing costs.
• To ensure safety and security of all services rendered.
• To promote integration with global networks for straight-through processing (STP).
• To fully protect the interests of and promote patronage of the consumers (end-users).

Goals of the NCS

• To provide interconnectivity and interoperability in retail electronic payment system in Nigeria;
• To resolve exclusivity problem of POS devices
• To resolve exclusivity problem for merchants and cardholders
• No bilateral contracts between participants.
• To attain a critical mass in a short time and more optimal use of installed electronic payment capacities of switches and banks;
• To provide a mechanism for proactive detection of EFT/card frauds;
• To provide vital retail payment statistics for strategic planning purposes as may be required from time to time by the regulatory authorities;
• To provide an industry-owned electronic payments infrastructure in a cooperative manner, which individual bank will leverage upon to deliver modern electronic retail payment services to the banking public in a competitive way;
• To provide seamless integration of the Nigeria retail payment system with the West African Monetary Zone electronic payment system plan, and promote integration with global networks for straight-through processing.
• To deploy a central switch network which complies with all relevant international standards

What is Interoperability?

Ubiquitous Card Acceptance i.e. Every Card Acceptance Device deployed in Nigeria should accept all cards issued by Banks i.e. cards of CBN-licensed card schemes.

(Section 1.5.21 of The Guidelines on Transaction Switching Services)

The NCS Partner Institutions

Section 4 of the NCS Operational Rules and Regulations of June 2009 (released by CBN) identifies the followings as NCS Partner

• Switching Companies
• Deposit Money Banks
• Others:
• Independent ATM Deployers (IAD)
• Independent Point of Sale Terminal Deployers (ITD)
• Web Merchants (CNP)
• Mobile Payment Operators(MPO)

Direct Connection to the NCS

Section 5.1 of the NCS Operational Rules and Regulations directs all NCS Partner Institutions, as enumerated earlier, to connect directly to The NCS;

Advantages of Connecting to the NCS as Directed by the Guideline

1. Partner Institutions would be in a position to accept all cards through The NCS i.e. effective interoperability;
2. All Banks will be in a position to acquire any transaction even where they don’t issue cards of all such card schemes.
3. Emerging NCS partner institutions (that is new investors in the Nigeria payment system space) will be able get to the market quickly with no hindrance from existing switches or having to go through the cumbersome process of connecting to all banks, thereby encouraging innovation.
4. Also a new Bank would get involved in cards payments quickly (acquiring transactions of existing card brands) without having to connect to all existing card schemes.
5. The NCS would not have to go through an existing retail switch thus creating a level-playing field for all;
6. Confidentiality would be achieved i.e. no switch should have knowledge of other switches’ transactions, to prevent switches from taking advantage of knowledge of transaction details and statistics
7. Anti-competition practices would be controlled i.e. No switch should have control over processing of other switches transactions to the extent of blocking them or giving them lower processing priorities
8. Provide one ‘unbiased’ and authentic source of card payment statistics for Nigeria.
9. Boost transaction volume of all licensed switches
10. Position NCS for centralised card Fraud Management service, providing alerts to Banks (card issuers)
11. Others:
• Avoid settlement confusion – Only one switch is involved with the settlement of every card transaction, not two or three switches.
• This structure will let NCS Routing fee to be minimal because of high volume of transactions that will pass through it.
• Some Banks have connection to some switches for special purposes e.g. Revenue collections. Such Banks would be able to operate unhindered