NIBSS performs three major e-payment functions: - Switching (as the NCS) - Payment terminal service aggregation (as the sole PTSA) - development of other tech for the FSI (e.g issuer of BVN, and builder of e-Bills Pay) Notice, some of its functions are exclusive to just them.

For instance, they are not the only ones with a bills payment platform. Interswitch has quickteller, and many players in the industry use it. But for PTS they are the only aggregators, while others are PTSPs (providers). Their transactions must register at NIBSS as the agg.

Similarly, they are not the only switch. We have at least 13 companies with switching licence, including OGs like Interswitch, eTranzact and newbies like TeamApt. Switches are the main guys for funds transfer. Debit money from Bank A and credit Bank B. Then, they do settlement

NIBSS is an entrenched player for a few reasons. - backed by CBN. And co-owned by licensed banks - launched early 1993, which gives them an advantage - operate as a public utility, instead of as a for-profit co like others.

Being backed by CBN sorts them out on policy and adoption. Starting early allowed them time to integrate all the major players and get others to buy in. Think about this: NIBSS started operating in 1994, and it took 17 (!) years before they launched NIP (NIBSS Instant Payment).

Fellow comrades, when NIBSS launched NIP, their funds transfer solution, they had only two banks! "Today, the number of participants has grown to include all commercial banks, Micro-Finance banks (MFBs), and Mobile Money Operators (MMOs)." This gives them an insane moat becuz

This gives them an insane moat because switching transactions across participants thrives on the strength of its network Every licensed player wants to be on NIP, to allow interoperability for their customers. Each added player strengthens NIPs value to the existing participants

So, the reason why you as John Doe (bank: PHB) can easily search for Jane Doe's bank name (bank: ABC) and pay her is because both PHB and ABC are on the same network. Which can be NIP or any other switch's fund transfer solution. Oh, and btw, NIBSS is working on central listing.

With Central listing, you no need provide the bank name, all you need is the account number. The point no 3 above needs no explanation. While NIBSS can offer interbank transfer at ₦10 to its participants (who can then mark it up and make a profit), it might not make fin. sense

it might not make financial sense for your other switches to go so low, because they need to turn a profit. We've established why NIBSS is entrenched. This will be a good foundation for why fintechs appear to go or not go after such licences. But, let's answer why

- a switching licence is expensive to get. You need ₦2 billion naira in shareholders fund - there is little incentive for the CBN to issue new switching licences. Because just like the MMO (also, 2B SHF), it thrives on network effects. And for existing licence holders to max

for existing licence holders to maximise the value of their licence, they need customers to have fewer choices. So, issuing more switching licences dilutes the potential of someone every cashing in on their licence.

- Switching is a very key and sensitive part of the payments infra in a country. The CBN is not just going to issue it to anyone, just because that person has the money. You need to show demonstrable prowess and fluency in the country's payment system. It's why many tend to

It's why many tend to start doing business in Nigeria with a PSSP licence before going for a Switching licence. Because if you just wait for switching only, you fit wait long.

- getting the licence is one part of the work. Now, convincing participants to come onboard your own network is the harder part. Cause in this case, participants are not just there for distribution. You need them for you to be able to build your core product! So, many switches

So, many "independent" switches end up working with NIBSS because it's the fastest way to connect to all banks😆 A conundrum, you see? And NIBSS, by law is required to open up to the licensed switches. Otherwise, what's the incentive for a bank to invest engineering resources

Otherwise, what's the incentive for a bank to invest engineering resources in coming onboard your platform? When, they are not even sure that other players will come onboard, they are short-staffed, and have something that already works.

In conclusion, fintechs are trying. They are young (new). The system (policy) and market (acceptance) limit how far they can and will go. Thanks for getting to the end. Feel free to share with people who might benefit from this.

Acronyms and their meanings, as used in the thread: NIBSS (not NIBBS) - Nigerian Inter-Bank Settlement Scheme NCS - Nigeria Central Switch FSI - Financial Services Industry

Nigeria* not Nigerian