DESIGN
AND IMPLEMENTATION OF ONLINE BANK VERIFICATION NUMBER SYSTEM 2
CHAPTER ONE
INTRODUCTION
1.1
Introduction
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 enrolment 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 determinedhow 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.
Dermalog BMS, the German
company which handled the project, stated that it was the first time thatany
country had implemented the platform for national use. Therefore, this may be a
positive first forthe Nigerian banking industry and, in the longer term, the
African banking industry. Deposit money banks were expected to commence
biometric registration of customers in the 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.