Design and Implementation of Online Bank Verification Number System
Faced with the problem of insecurity on customer accounts, the Central Bank of Nigeria (CBN) on February, 2014 initiated a compulsory bank verification number exercise which provides account holders with a unique number that enables the account holder to have a single identity in the banking system aimed at protecting bank customers from identity theft and other financial/economic crimes emanating in the banking sector of Nigeria (Orji, 2014).
The Bank Verification Number (BVN) is a bold step taken by the Central Bank of Nigeria, to strengthen security in the banking sector of Nigeria. One beauty of the BVN is that transactions will be safer once it is implemented fully. The BVN exercise aims at ensuring that bank transactions are safer and fraudulent transactions are minimized, if not totally eliminated. The campaign is on, but the public may not realize its importance until it closes in on the new extension deadline, October 2015.
BVN uses biometric technology to register customers in the banking sector. It records these physical features which are unique to individuals – fingerprints and the face. The record would be used to identify the person afterwards. Once a person’s biometrics have been recorded and BVN issued, the account would be accessed through BVN. The major objectives of the initiative are to protect bank customers, reduce fraud and strengthen the Nigerian banking system.
Biometric enrollment is helpful to people who cannot read and write. Their finger prints and pictures would serve the same purpose as signatures. Multiple account holders would be covered with a single registration in any of the banks where they have accounts.
BVN will help the banking system reduce situations where loan defaulters, for instance, move from one bank to the other and the banks extend new credits to them, without knowing their history. Banks would be able to track transactions across all banks in Nigeria with more ease.
1.2 Background Of The Study
The Central Bank of Nigeria (CBN) has introduced a bank verification number scheme into the banking system. The scheme aims to revolutionize the country’s banking and payment systems. The bank verification number scheme is designed to address issues such as:
l. Ensuring the safety of depositors’ funds
2. Avoiding losses through the compromise of personal identification numbers
3. Preventing identity theft
4. Checking fraud, and
5. Including illiterate persons in the banking system.
The CBN initially planned to roll out the scheme to 1,000 bank branches in Lagos State, Nigeria’s commercial capital. The success (or otherwise) of this rollout determined how it was implemented in other states.
In essence, the bank verification number is a biometric registration of customers in the financial system. Its introduction is intended to tackle cybercrime and ATM fraud. The CBN has stated that the bank verification number allows a customer to have “a single identity within the financial system”. Thus, people who are unable to read and write will be able to use their biometrics for banking transactions, as this cannot be replicated. It will tackle incidents of identity theft and enable banks to verify their customers easily in the context of the “Know Your Customer” initiative.
Derma-log BMS, the German company which handled the project, stated that it was the first time that any country had implemented the platform for national use. Therefore, this may be a positive first for the Nigerian banking industry and, in the longer term, the African banking industry. Deposit money banks were expected to commence biometric registration of customers in a week beginning June 16 2014. The Nigerian Inter-Bank Settlement System (NIBSS) is providing the connectivity service for the initiative. NIBBS believes that the project is a major landmark for the Nigerian financial industry as it will promote financial inclusion and prevent money laundering, as bank verification numbers will give customers unique identities, which will be difficult to replicate.
The introduction of the initiative has divided opinion in the Nigerian banking sector. Supporters of the initiative say that the added security features will lead to increased consumer lending and will boost the economy, irrespective of customers’ status and class. However, critics of the bank verification number scheme state that it is a duplication of efforts due to the introduction of the Nigerian uniform bank account number system (NUBAN) into the Nigerian banking system a few years ago. NUBAN, which was introduced by the CBN in 2010, is a 10-digit bank account numbering system which is easier to use than the traditional longer account numbering structures. It conforms with the requirements of the West African Money Institute, which promotes the financial integration of the Economic Community of West African States countries.NIBBS officials have stressed that NUBAN identifies a customer within his or her own bank, while bank verification number scheme will identify a customer across the entire banking industry. Thus, a customer will have the same bank verification number even if he or she has multiple accounts at different banks.
It remains to be seen whether the introduction of the bank verification number scheme will combat financial crime and boost the economy as its supporters claim. Only time will tell if this will be a successful project or an expensive but failed venture. Whatever the case, it will be a watershed moment in the Nigerian financial industry.
1.3 Statement Of The Problem
Over the years, the banking sector of Nigeria has played the role of the intermediate body in regards to ensuring the smooth running of the economy and coordination of other sectors involved in the circular flow of income in the Nigerian economy. However, growth in this sector has been reduced due to high cases of economic and financial crimes (Udenze, 2014). Fraud and money laundering have had adverse impacts on our national development and particularly on the financial system. They have caused damage to the reputation of the image of the country, loss of FDI, poor infrastructural development, dwindling confidence and distortions in our political as well as financial systems, among other things.
In view of these crises, crimes perpetuated by cyber thieves, the mandatory bank verification number exercise embarked on by all banks nationwide has also caused congestions in banking halls. Although the exercise commenced since February, 2014, the fire brigade approach of most Nigerians has warranted most bank halls to be filled to its maximum capacity. Queues in some banks even extended outside the banking hall. This development has caused confusion in some banking halls as other transactions are placed on hold due to inadequate staff to attend to clients or delayed indefinitely.
1.4 Aim and Objectives Of The Study
The main aim of this research work is to design and implement a computerized Bank Verification Number System for Nigerians in the Diaspora and at home to use. Specific objectives of the study are:
1. To examine the benefits of adopting an online BVN system.
2. To identify the necessary structures needed to run a successful online BVN system.
3. To identify challenges in the design and implementation of an online BVN system.
4. To ensure smooth and more effective banking in Nigeria.
5. To reduce fraud and other theft in the banking sector.
1.5 Significance Of The Study
The study will aid in reducing queues at banking halls and reducing identity theft if successfully implemented. Bank managers and other stakeholders in the banking industry of Nigeria can use this web application to restore confidence in the banking sector as more clients will be assured that their funds are safe, and the stress of queuing at banks will be totally eliminated.
The study will also serve as a guide to other student researchers who may want to conduct further research on the subject matter. Findings and recommendations from this system will aid in developing newer versions to serve optimally.
1.6 Definition Of Terms
BVN: Bank Verification Number. It is a unique number given to all bank account holders and an accepted means of identification across all Nigerian banks.
CBN: Central Bank of Nigeria. It was established in 1958 by the CBN act to maintain the external reserves of the country, promote monetary stability and a sound financial environment, and to act as a bank of last resort and financial adviser to the federal government.
Biometrics: Biometrics refers to identification of an individual based on physiological attributes- fingerprint, voice, facial features etc.
Bank Account: This could be a deposit account or any other type of account offered by a financial institution that represents the funds a customer has entrusted to the financial institution and from which the customer can make withdrawals or other transactions.
Fraud: This is a deliberate deception to secure unfair or unlawful gain. It is both a civil wrong and a criminal wrong.
Cybercrime: This can be seen as any crime that involves the use of a computer system and a network.
Identity Theft: This is the deliberate use of someone else’s identity, usually as a means to gain a financial advantage or to obtain credit and other benefits in the person’s name.
NIBSS: This is an acronym for Nigeria Inter-Bank Settlement System which was set up in 1992 as a banking industry shared service to help streamline inter-bank payments and settlement mechanisms, and to promote electronic payments in Nigeria.
NUBAN: The Nigeria Uniform Bank Account Number is a 10-digit bank account numbering system which is simpler to use than traditional account numbering structures and is in line with the requirements of the West Africa Monetary Institute towards the economic integration of ECOWAS countries.