framework for concentrators v 14022013...nibss aggregator engagement procedure version 3.0 2...

FRAMEWORK FOR ENGAGING AGGREGATORS AS DIRECT CLIENTS TO NIBSS FOR E-PAYMENT FACILITATION

Version: 3.0 Date: FEBRUARY 7, 2013 Status: Final

EXPRESSION OF PROPRIETARY RIGHTS ON DOCUMENT BY NIBSS PLC

The information contained herein is proprietary and shall not be duplicated, published or disclosed to any third party in whole or in part without its prior written consent, which shall never be presumed of:

NIGERIA INTER-BANK SETTLEMENT SYSTEM (NIBSS) PLC Plot 1230, Ahmadu Bello Way, Bar Beach, Victoria Island, P. M. B. 12617, Lagos Phone: 234-1-2716071-4 / Fax: 234-1-2716075

NIBSS Aggregator Engagement Procedure

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Technical Data Document Title: Framework for Engaging Aggregators Version: 3.0 Status: Draft

Authors and Participants Name Contact Signature Function Aituaz Kola-Oladejo Business Intelligence Analyst Creation

Samuel Oluyemi Head, Strategy & Marketing Revision

Christabel Onyejekwe ED, Business Development Approval

Niyi Ajao ED, Technology & Operations Approval

Ade Shonubi Managing Director Approval

Revisions Version Data Description Author 1.0 25/06/2012 Document Creation Strategy & Marketing 2.0 02/11/2012 Document Revision Strategy & Marketing


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Table of Contents 1 Introduction ............................................................................................................................ 4

2 Definition of Aggregators ....................................................................................................... 6

3 Basic Assumptions/Justification for Engagement of Aggregators ..................................... 7

4 Criteria for Engagement of Aggregators ............................................................................... 8

5 Aggregator Stratification ...................................................................................................... 11

6 Procedure for Engagement of Aggregators ........................................................................ 13 of 17


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1 Introduction

Nigeria Inter-Bank Settlement System (NIBSS) Plc provides inter-bank

electronic funds transfer services through the NIBSS Electronic Funds

Transfer (NEFT) and the NIBSS Instant Payments (NIP) platform.

NEFT is a paperless and batch-based funds transfer service introduced on

March 15, 2004 to broaden e-based retail payment options in Nigeria

NIP on the other hand, is an On-Line-Real-Time Account-based Inter-Bank

funds transfer service introduced to meet the yearnings of the Nigeria

financial system customers, who desire immediate value for beneficiaries of

funds being transferred from the

NIBSS on January 9, 2006 established an Automated Bulk Clearing (ABC)

Services that enables corporate bodies, government ministries, departments

and agencies to deliver electronic (bulk) files containing several payment

instructions through their respective Bankers or directly to NIBSS for

processing at the Automated Clearing Sessions. With ABC, processed

payment instructions are delivered to bank account in any Bank and Other

Financial Institutions (micro-finance banks and mortgage institutions) across

Nigeria. The ABC Service was introduced in three variants of:

a. Automated Direct Credits (ADC) - Salaries, Pensions,

Allowances, Benefits Payments etc; and

b. Automated Direct Debits (ADD) - Insurance, Premiums, Lease Rentals, Utility Bills Payments etc.

c. Funds Sweeping on behalf of collection agencies from the

accounts of agency/collecting banks

The NIBSS ABC Services operate like the American ACH and the British BACS. The service has since 2007 been used for the payment of Federal


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Civil Servants Salaries, Allowances and Deductions under the Integrated

Payroll and Personnel Information System (IPPIS) scheme. It has also seen

ABC Services processing transactions on behalf of some aggregators like:

1. ACL Enterprises 2. Access Solutions Limited

3. E Softies Limited

4. Soft Alliance & Resources Limited 5. SW Global Limited, and

6. Pay 4 Me Limited

NIBSS engaged the clients directly where Aggregator had indicated interest

in using the NIBSS platform on the ascribed failure of the banks and card-

based payments processors to directly process these transactions on behalf of the clients of Aggregators. NIBSS undertakes direct processing of

payments and/or execution of collection mandates where the clients insist

that NIBSS should handle the e-payment on the consent of the Banker(s).

Meanwhile, NIBSS under the recent transformation project for the positioning of the Company as a truly shared services company to the Nigeria financial

system sees the Deposit Money Banks (DMBs) as its critical client. The

strategic focus of the management of NIBSS is to avoid competition with the Deposit Money Banks (DMBs) in the discharge of her catalytic role of

facilitating e-payment services.

Nonetheless, the stifling pressure on NIBSS to act as middle man between the

Aggregators and their customers, which necessitates NIBSS processing payments and collection on behalf of the Aggregators demands putting

mechanisms in place for handling these class(es) of payments and collections processors in the Nigeria financial system.


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2 Definition of Aggregators

In the context of this document, an aggregator is an institution with a

registered company name and a sizable number of clients aggregated into

their e-payment platform with which they perform electronically

consummated processes. These are enterprise/payroll solution providers

who have extended their operations to payments and/or collections on the

demand of their clients for straight through processes (STP). These are

solution providers set up by private companies to address challenges usually

experienced by large corporate bodies, small and medium enterprises

(SMEs), educational institutions and other business entities in data

generation necessary for processing payments and receiving collections from

many payers through any bank or to a bank customer in either Deposit

Money Banks (DMBs), Primary Mortgage Institutions (PMIs) and Micro

Finance Banks (MFBs).


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3 Basic Assumptions/Justification for Engagement of Aggregators

Aggregators, as they are set up, have potential to generate critical mass

payments and/or collections files that could enhance the volume of

transactions that would further deepen e-payments adoption in Nigeria

especially in the areas of salary, allowances and pensions payments; and

revenue, premium and taxes/rates collections.

These Aggregators are spread across Nigeria trying to rake in payments and

collections transaction processing mandates from Government Ministries,

Departments and Agencies (MDAs) at Federal, State and Local Government

levels as well as Big Businesses/Corporate Bodies; and Public and Private Educational Institutions at Nursery, Primary, Secondary and Tertiary Levels.

Some of these Aggregators currently use Card Companies who have made

incursions into batch-based payments using unsuitable mechanism of switch

engine to process these Aggregators payments and/or collection files

OnLine-Real-Time. Some have been found to use the Deposit Money Banks as

conduit to pass these files.


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4 Criteria for Engagement of Aggregators

A critical assumption for the focus of this document is that Aggregators have

significantly become inalienable ally for growing in the volume of e-payment

business in the Nigeria financial system generally. NIBSS consequently

cannot continue to ignore them.

The engagement of Aggregators therefore needs to be a volume-driven strategy to deepen e-payment adoption in Nigeria. The giant stride already

made in Automated Direct Credits which is a transaction push was not

without the run they gave the Deposit Money Banks in their desperate move

to corner all Government payments processing. The currently weak adoption

of Automated Direct Debit through transaction pull of collections on behalf of

Government Agencies, Parastatals, Billing-based Companies, among others

call for strategic decision to integrate and incorporate Aggregators into

NIBSS strategies for deepening e-payment processes and processing. Within the above context, it is being suggested that:

a. Aggregator to be considered shall be an indigeneous registered Enterprise Solution Provider registered by the Corporate Affairs

Commission;

b. An aggregator must provide a letter of intent from the prospective clients if a start-up.

c. Aggregator to be enlisted to work with NIBSS shall have evidence of

at least a mandate to process payments or collection for at least a

Federal Ministry, Department or Agency; State Government Ministry,

Parastatals or Agencies; 3 or more Educational Institutions;

Corporate Bodies and/or Corporate bodies or billing institutions

recouping collection

d. Record of having processed similar payments or undertaken

collections on other payments processing platforms would be an


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added advantage for easy accreditation to connect to NIBSS

platform

e. Aggregator shall grow payments and/or collection volume by at least

5 per cent annually of current clients and/or enlistment of new clients f. Aggregators must have database of its own staff salaries, allowances

and deductions for the pilot test of the e-payment solution of NIBSS

g. Aggregator must have obtained an SLA tripartite agreement from its

Banker accepting to accept settlement responsibility for transactions

processed by NIBSS on behalf of such Bank’s customer (hereby

attached)

h. Aggregators shall pay integration fee of Two Hundred Thousand

Naira Only (N200,000) or as reviewed from time to time as

necessary, which it shall be advised before technical integration to

the NIBSS payment platform

i. Aggregators shall pay the necessary transaction processing fees per

item in a file to be processed through NIBSS.

Above all, the following must be done to engage an aggregator: I. A Business Case must be written before any aggregator can be

integrated to NIBSS payment platform. II. A review of 3 years audited financial statement provided by the

Aggregator OR A start-up must provide a Letter of Intent (LOI) detailing the prospected clients and expected volume.

III. A tripartite agreement will be signed by the Aggregator, nominated Bank and NIBSS.

IV. A due diligence must be conducted by the Legal team on submission of the following documents:

・ Certified True Copy of Memorandum and Articles of Association ・ Certified True Copy of Statement of Authorized share capital - Form C02 ・ Certified True Copy of Certificate of Incorporation.


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・ Certified True Copy of Particulars of Directors - Form C07 ・ Notice of Address


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5 Aggregator Classification

The emerging e-payment transaction aggregation opportunities occasioned by the increasing adoption calls for the categorisation of aggregators into

high, medium and low volume players. Aggregators that shall be engaged by NIBSS shall be categorized into two:

・ Super Aggregators ・ Medium Aggregators

5.1 Super Aggregators They shall on enlistment on the NIBSS e-payment platform show evidence of

capability to drive payment and collections above 200,000 transactions items in

the first year of enlistment with annual growth rate of a minimum of 5 per cent

going forward.

Super Aggregators shall be entitled to concessionary pricing based on volume trends. 5.2 Medium Aggregators

They shall on enlistment on the NIBSS e-payment platform show evidence of

capability to drive payment and collections in the range 50,000 and 200,000

transactions items in the first year of enlistment with annual growth rate of a

minimum of 5 per cent going forward. 5.3 Exceptions (start-ups)

A start-up must show evidence of business potential of 50,000 annual

volume at the minimum. The following additional clauses shall be applicable to Start-ups:


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5.3.1 A start-up shall provide a letter of Intent from prospective clients indicating the transaction volume and business type i.e. payments or collections.

5.3.2 The least volume required in this category is 50,000 annual volumes. 5.3.3. Failure to meet this annual volume attracts an annual penalty charge of N200, 000.


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6 Procedure for Engagement of Aggregators The engagement of Aggregators shall pass through a painstaking procedure

of: 6.1 Receipt of Letter of Intent to process payments using NIBSS

Payment/Collection platform. This will contain a brief introduction of the company; its business intent; and

expectations from integration to the NIBSS payment platform,

with clear identification of the NIBSS product or service being

sought. Where NIBSS identifies an Aggregator playing

dominant role in the e-payment sphere, NIBSS may invite such

Company for discussion towards enabling e-payment

handshake.

6.2 NIBSS shall invite the Aggregator for first hand discussion on

business idea and on conviction of genuine business idea proceed to the conduct of due diligence

6.3 NIBSS shall perform appropriate Due Diligence to:

6.3.1 Confirm corporate status

6.3.2 Confirm if it is a legal entity

6.3.3 Confirm experience in the field (with proof e.g.

certificates, licenses)

6.4 Impressive Due Diligence shall give way to preliminary discussion of Terms and Conditions of Engagement, or the dos

and don’ts of engagement

6.5 Preliminary discussion should give clear timelines for the execution of Non Disclosure Agreements (NDA), Memorandum of

Understanding (MoU)

6.6 Appointment of Banker to the payments/collection scheme by

Aggregator


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6.7 Step 5.6 shall prepare ground for necessary Business Case

documents to justify engagement of Aggregators

6.8 Signing of Tripartite Agreement between Aggregator; the

Banker and NIBSS

6.9 Payment of integration fees

6.10 Exchange of information - both parties exchange information,

technical data, and system parameters, etc.

6.11 Both parties perform system development/system integration

according to agreed user requirements.

6.12 Pilot run

6.13 NIBSS shall issue a certificate of partnership to an Aggregator

6.14 Go live

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