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1.1 1.1 Background of the Study
In banking, security is paramount to protect depositors’
funds. It is in the light of this that the Central Bank of Nigeria (CBN),
through the Bankers’ Committee, Deposit Money Banks and Nigeria
Interbank-Settlement System (NIBSS), introduced the centralised biometric
identification system, and tagged Bank Verification Number (BVN) (Ehi 2015).
Therefore, going by the spate of frauds and cashless
policy, the CBN in conjunction with all Nigerian banks launched the BVN project
to enhance the operation of banks.
The BVN became imperative following the increasing
incidence of compromise on conventional security systems such as password and
Personal Identification Number (PIN) of customers (Vanguard Newspaper 2015).
The Bank Verification Number, BVN, is a
unique identification number for all Bank Customers within the Nigerian banking
industry. BVN is a biometric authentication of Each Bank Customer, especially
those who make electronic and cashless transfers through a unique set of digits (Daily Trust Newspaper, March 8 2016).
The initiative is part of the overall policy of the
Financial Sector Strategy, FSS, to ensure that Nigeria becomes one of the
twenty largest economies in the world by the year 2020 (Ehi 2015).
According to the apex bank, customers are expected to
walk into a selected bank fill and submit the BVN enrolment form. Following
this, such customer will present him or herself for facial and fingerprint
capturing. Thereafter, an acknowledgment slip with the transaction identification
will be issued to the customer whose enrolment will be confirmed and a unique BVN,
generated. The customer will immediately be notified via sms with the bank
verification number. This is in compliance with the directive from the Central
Bank of Nigeria (CBN) that by the 30th of June 2015, all bank
customers should have the BVN while as from march same year, transactions
valued at hundred million naira and above should only be allowed for customers
with bank verification number. (Tribune Newspaper October 29, 2015)
The Central Bank of Nigeria considered the exercise as a
key component of knows customer policy of banks. It is also a plan to eliminate
fear in banks and make the country to be in league with developed countries of
the world. As the Bank Verification Number enrolment closes tomorrow, it is
therefore imperative for all Nigerians to ensure that they are enrolled. It is
believed that if the BVN enrollment is properly managed, it
will not only enhance credit advancement to bank customers, but also reduce
reported cases of scam, fraud and account impersonation while at the same
time assist commercial banks in keeping authentic records of their
clients. (Ade, 2016)
Apart from these, the BVN will simplify banking
operations especially inter-bank transfer, improve services and reduce
unnecessary queues within banking halls.
At this junction, observers believe that there is need
for the apex bank to consider extending the enrolment period in view of the
large number of Nigerians who are yet to be registered.
Above all the Central Bank of Nigeria
should use the various platforms to publicize the intricacies of the policy.
This study therefore analyzes the effect of BVN
delivery of banking service in Enugu metropolise.
Statement of Problems
The role of BVN aimed at controlling hazards associated
with social security and credit risk cannot be underestimated. In recent times,
biometric technologies have been used to analyze human characteristics as an
enhanced form of authentication for real-time security processes. In the face
of increasing incidents of compromise on our conventional security systems
(password and PIN), the need for greater security on access to sensitive or
personal information in the Banking system becomes inevitable (Sarah, 2014).
In the same vein, the extent to which violation in the
credit policies and credit monitoring system weakens the financial intermediary
system continue to attract empirical and theoretical debate on how well Bank
Verification system would thwart those issues of default and scam.
In addressing existing challenges with identity
management, the Central Bank of Nigeria, through the banker’s committee in
collaboration with all Nigerian banks in February 14, 2014 launched a
centralized biometric identification system tagged “Bank Verification Number
The BVN gives each Bank customer a unique identity across
the Nigerian Banking industry that can be used for easy identification and
verification at Point of Banking operations. Biometrics refers to
identification of an individual based on physiological or behavioural
attributes- fingerprint, voice, signature, facial features etc (Ehi, 2015).
Bank Verification Number (BVN) is an initiative of the
Central Bank of Nigeria to give customers a unique number that can be verified
across the Nigerian banking industry. BVN helps to protect every bank customer’s
information by assigning to their account a unique identification number. The
Bank verification number uses bio-metrics. Which means, the BVN is unique to
every individual with respect to their physiological or behavioral attribute
with the use of fingerprint or thumbprint or electronic signature etc? This
helps to strengthen any banking security system so as to protect individual
account from fraudsters or against any fraudulent act from infringed third
BVNs are created through the use of biometric data
capture machines, which rely on data such as fingerprints and facial
recognition technology to establish for each customer “a unique identity across
the Nigerian Banking industry for easy identification and verification.” The
implementation of BVNs is a part of CBN’s Financial Sector Strategy (FSS) goal
of helping the country become “one of the top 20 largest economies in the world
The role through which the BVN enhances the operations of
the banking system in Nigeria is challenges that time will show it. This study therefore seeks to investigate the effect of CBN
policy on Bank Verification
Number in improving the banking services
in Nigeria using Enugu metropolise as a case study.
of the Study
The broad objective of this
study is to examine the effect
of CBN policy on Bank
Verification Number in improving the
banking services in Nigeria using Enugu metropolise as a case study. Specifies objectives are:
determine the significant effect of B.V.N on number of cheque clear in the
To determine the extent B.VN policy has effected
saving account in Nigeria.
1.4 Research Questions
The following research questions guided the study. The
research objectives were distilled into six research questions as stated below.
What is the significant effect of B.V.N on number
of cheque clear in the country?
What is the effect of BVN on saving account
of the Study
1. H0: BVN do not have significance effect on
number of cheque clear.
H1: BVN have significance effect on number of
2. H0: BVN policy has positive effect on saving
account in Nigeria.
H1: BVN policy does not have a positive effect on saving account in
results from this study will be useful to various sector of the economy,
particularly the financial sector and government policy makers. It will broader
the literatures on economic implications of money laundering and future effect of
BVN on economy growth.
Also it will help to identify
advantages and disadvantages of BVN to the banks and customers. It will show the impact of BVN policy on
money launder and customer satisfaction.
Scope and limitation of the Study
The research topic is on the effect of BVN delivery of
banking services in Enugu metropolise.
of the study
among other things includes lack of data on BVN base on ground that it is new
policy in Nigeria. The behaviour of bank
officers is another problem the researcher face in sourcing data.
Definition of Terms
It is important to give a brief
definition of the following key terms, in order to know the meaning of the key
concept and some words in this research.
1. BVN: Bank Verification Number is a new policy
created by Central Bank of Nigeria to control and protect bank account holders
from unauthorized access.
2. Money Laundering: is the procedure by
which the proceeds f illegal acts are converted into apparently legal
activities thus concealing their criminal origin.
3. CBN: Central Bank of Nigeria, (CBN) is
the apex bank in Nigeria, their duty is
to regulate financial institution in the
4. Commercial Bank: An institution charged with the primary function of accepting deposits, granting business loans and advances, and offering other relatedservices like issuance of letter of credit, bank drafts and FOREX trading among
5. Deposits /Savings: A deposit held with a bank in which the
deposit is held for a fixed term or which requires notice for withdrawal, and
where interest is paid.
6. Microfinance: Microfinance is generally defined as
specialized financial tools, such as small loans, savings accounts and
insurance policies, available to poor households and small businesses that do
not typically have access to financial services.
Newspaper (March 12, 2015) Importance of
Bank Verification Number http://www.vanguardngr.com/2015/03/importance-of-bank-verification-number. March 12, 2015. Accessed on 20th March 2016.
Luo ( 2014) Central Bank of Nigeria (CBN) Implements Bank Verification Number
(BVN) Identification System for Customers in Lagos. . Tuesday, July 29, 2014. Accessed on 10th
Bank of Nigeria, ‘Bank Verification Number’ http://www.bvn.com.ng/ Accessed 10th
Eric E. (2015) A Critical Analysis of
The Bank Verification Number Project Introduced By The Central Bank Of Nigeria.
DSC Publications Ltd. Online www.researchgate.com. Accessed 10th May 2016
(2016) The Effect Of Bvn On Social Security And Credit Risk https://www.linkedin.com/pulse/effect-bvn-social-security-credit-risk-old-ogunleye-wale-?trk=prof-post&trkSplashRedir=true&forceNoSplash=true. Accessed 10th
Newspaper (October 29, 2015) 31 million bank accounts may be barred as BVN deadline
ends on Friday
by Nwokoji C. http://tribuneonlineng.com Accessed 10th
Trust Newspaper (March 8 2016) As
deadline for bank verification number draws near by Agabi C. http://www.dailytrust.com.ng/sunday/index.php/business/19835-as-deadline-for-bank-verification-number-draws-near. Accessed 10th May 2016
Premium Times Newspaper (November 15, 2014) 13 things bank customers
must know about Bank Verification Number http://www.premiumtimesng.com/ business/
171183-13- things-bank-customers-must-know-bank-verification-number.html Accessed 10th May 2016
Newspaper (March 20, 2016) Keeping your Bank Verification Number safe http://www.punchng.com/keeping-your-bank-verification-number-safe/s
Accessed 10th May 2016
Trust Newspaper (November 2015) BVN
registration continues- CBN, NIBSS by Hamisu Muhammad &
Sunday Michael Ogwu dailytrust.com.ng
section use pool of knowledge of other scholars to address the three
objectives of this study listed in previous chapter. It tends to
discuss the work materials and opinions expressed by various authoritative
authors, researchers and writers that relate to the objective of this study,
which is major on bank
verification number (BVN). The following subhead will be discussed on this chapter. They are:
Summary of Literature Review
The financial institution is a
vital institution responsible for regulating the financial activities of the
nation. The financial situation of an economy to a large extent depends on the
performance of the financial institution. It is therefore necessary for this institution
to regulate, control and promote the financial capability of the economy. This
can be done through the adoption of some technological innovations such as the Bank
Verification Number (BVN), cashless policy, electronic banking etc. The adoption
of these technological innovations also necessitates the desired to increase the
level of customer satisfaction and banking confidence in customers (Bamiduro, & Ibojo, 2015).
The key aim
of bank verification number in Nigeria is to control, check, minimize money
laundering and banking crime. Especially in the situation where an individual has more than 30 bank accounts with
different date of birth, state of origin and other information on different
account. This is the major difference between Bank Verification Number and
other e-banking policies. NEITI (2016) Nigeria, as Africa’s
biggest economy and most populous country, and as a country highly exposed to
the negative impacts of anonymous companies, Nigeria should seize the
opportunity to lead the charge in the growing campaign for full disclosure of
ownerships of companies and bank account across the country.
This is a situation whereby one
person bears two names e.g. Mr. Tunde Chukwu registers in bank A and has
account with bank B as Mr. Tunde Usman so charity the process of reconfirmation
of his BVN at the second bank his biometric will real his identity as dual. A
case where an individual collected 60
salaries from federal servant commission or NYSC wages can be checkmate and
reduce with the help of BVN policy. This
control by the policy will help create
job and improve Nigeria GDP because of usefulness of manpower.
rate of money laundering and bank crime is minimized, it will help to boost the
GDP of Nigeria economy. This is because a lot of money that go into individual
accounts will be utilized in Nigeria economy and used to the societal
development. The rate whereby politicians and contractors stole Nigeria
resources will be minimized and help in improving infrastructure and
development. This would also help in achieving improved and sincere
documentation of the country’s financial assets.
is in the best interest of Nigeria and Nigerians as full ownership disclosure
has practical implication for increasing government revenues, reassuring
investors interested in partnering with local companies, reducing the incidence
of corruption and money laundering, and cutting off funding for drug lords and
terrorists. Full ownership disclosure will facilitate the present thrust of the
Nigerian government to trace, recover and repatriate the country’s stolen
assets in foreign jurisdictions. At present the problematic process of recovery
of stolen assets in other jurisdictions is compounded by absence of relevant
information occasioned by secrecy and opaqueness of the real actors behind the
transactions (NEITI, 2016).
Reform and E-Banking
A vibrant banking industry in any
country is pivotal to achieving economic growth development through efficient
financial services as they provide a mechanical system to group savings and
convert them into investment. Thus, a bank serves as an intermediary between
savers or depositors and borrowers (Olanipekun, et al 2013). This is why the
government establishes bank regulating bodies like Central Bank of Nigeria
(CBN). These regulating bodies from time to time reform the sector to meet the
current economic standard.
Financial reforms and attendant policy
prescriptions are age-long phenomena.
They represent the various transformation and policy adjustments and
overhaul that are directed at the art, practice, and activities of financial
institutions and markets overtime in response to the nominal need for operation
improvement and growth of both the institutions and the general economy.
(Iganiga, B. O. 2010).
Electronic banking is the conduct
of banking business electronically which involves the use of information
communication technology to deliver banking business for immediate and future
goals. (Daniel 1999).
Alharji (2008) is of the view that
electronic banking is the provision of banking services to customers through
internet technology. The need to strengthened and empowered the banking system
calls for the introduction of technological innovation such as the electronic
banking where customers can request information and carry out banking services
without entering the banking hall.
The issue of electronic banking has
not only positively affected the performance of the banking system but has also
positively affected the entire economy because of the introduction of
electronic payment system, electronic transaction system, transaction alert and
mobile banking. All these variables of electronic banking have projected the
positive image of the banking system as well as promoting the banking and
non-banking activities of the economy.
Simpson (2002) is of the opinion
that what motivate investment in electronic banking are largely the prospects
of minimizing operating cost and maximizing operating revenue.
According to Obadeyi (2014) financial
reforms is a possible change made to a household, system, firm, government,
economies etc. in order to perform and operates in a more effective and
efficient way within the context of stipulated regulatory policies. The reform
of financial markets and banks remain a persistent force in the growth and
development of financial sector in developed economies, developing economies
and emerging markets (Nigeria inclusive). The reform of the financial sector
could easily be traced to banks’ competitive actions, assisted with continuous
rise in government regulations over the soundness of banks’ strong financial
These reforms in banking sector have creating
room for advancement in technology which gives birth to e-banking sector. The
banking industry no doubt has witnessed advancement in technology just like any
other sector; the adoption of e-banking is one of these as it affects banking
operations entirely. With the adoption of Self Service Technology by the banks,
e-banking system has continued to service the populace, e-banking is one of
them (Adewoye, J. 2013).
E-banking was adopted by banks so as to improve
their service delivery, decongest queues in the banking hall, enable customers
withdraw cash 24/7, aid international payment and remittance, track personal
banking transaction, request for online statement, even transfer deposit to a third party account (Ogunlowore &
According to Okoro (2014) quoted Omotayo
(2007) which define electronic banking as a system in which funds are moved
between accounts using computerized online or real time system without the use
of written cheques. Okoro (2014) define e-banking to include the provision of retail and small
value banking products and services through electronic channels as well as
large value electronic payments and other whole sale banking services delivered
Abaenewe et al (2013) view
electronic banking as the conduct of banking business electronically which
involves the use of information communication technology to drive banking
business for immediate and future goals.
Alhajri (2008) views e-banking as
the provision of banking services to customers through internet technology.
However, Basel committee on banking supervision (2003) views electronic banking
to include the provision of retail and small value banking products and
services through electronic channels as well as a large value electronic
payment and other wholesale banking services delivered electronically.
Timothy (2012) is of the fact that
electronic banking refers to the use of the internet as a remote delivery channel
for providing services, such as opening a deposit account, transferring funds among
different accounts and electronic bill presentment and payment. Ahasanu (2009)
Electronic banking is the newest delivery channel of banking services.
To prove this e-banking payment system the
need for biometric tool was created to verification bodies and password of
individuals. Adewale et al (2014) biometrics as categorized can be from
physical body regions, medico-chemical body features or behvioural traits,
defining high (for individuals) to low (for group) levels of distinction.
Examples of biometrics from body regions include the occurs hand (fingerprint,
palm-print, finger knuckle print, hand geometry, hand veins) and facial (face,
ear shape, teeth); medico-chemical body features include body odor, DNA and heart
sound; while behavioural trait include voice, gait, signature.
A biometric recognition system is a pattern
recognition system recognition system that acquires biometric data from an
individual, extracts a feature set from the acquired data, and compares this
feature set with the template set in the database to decide whether to accept
(genuine) or reject (impostor) the the individual.
However, the e-banking and biometric has
created a room for more problems. It is one of the reasons why many people now
have many account numbers which they use to carry out different financial fraud
that has affect the economy growth of Nigeria. To handle this issues the
Central Bank of Nigeria created a policy called bank verification number (BVN).
According to Okoro A. S. (2014) before the emergence of modern
banking system banking operations was manually done and this may have led to a
slowdown in the settlement of transactions. This system involved posting
transactions from one ledger to another manually. Counting of money was done
manually which were sometimes not accurate and these may have resulted to
errors. E-banking is the use of
computers and telecommunications to enable banking transactions to be done by
computer or telephone instead of human interaction. Most developed and some
undeveloped countries has witnessed success stories in this century in banking
technology. He said that the use of
various forms of e-payments has grown significantly within and after the past
decade. Okoro A. S. (2014) uses Durbin Watson Statistics (DW) to analysis it
Ogbodo and Mieseigha (2013) the origin of
this ‘devil’ (money laundering) could not be ascertained by anyone, but there
are several opinions that it started several thousand years ago with Chinese
merchants. In the words of Silkscreen (1994) and Steel (2006) they claimed that
it all started from Mafia Ownership of Laundromats, in the United States where
they needed to prove the genuine source for their monies, as they earned their
cash from extortion, prostitution, gambling and bootleg liquor. Ogbodo and Mieseigha (2013) concluded that
government has to control loss of revenue, reputation risk, and economic
distortion. Their conclusion may be one of the reasons for creating BVN.
According to Olanipekun et al (2013) e-banking enhances the development of banking
system and it is considered as a strategic weapon even as its emergence has
made banks rethink their IT strategies in a competitive market. They opined
that a vibrant banking industry in any country is pivotal to achieving economic
growth development through efficient financial services as they provide a
mechanical system to group savings and convert them into investment. They use
chi-squares analysis to test their data. Their study revealed that e-banking
has improved efficiency and effectiveness of service delivery.
Many newspapers in Nigeria carry out a column
on BVN and some of their articles will be use to carry out this research. For
instance the Vanguard Newspaper on March 12, 2015 has a column titled
‘Importance of Bank Verification Number’ which educated the public about the
2.1.2 Verification and Authentication
is the most common method used by financial institutions and their merchant
clients to authenticate an individual’s identity. However, signature
verification is a technique that requires practice and diligence. It also
requires a valid signature for comparison. As such signature verification at
the merchant’s site is neither practical nor effective. The back offices of
financial institutions are the best places to verify signatures; however, those
back offices are beset by two challenges:
the volume of checks being presented for payment is too large for a bank to
consider validating signatures on every item presented for payment; and,
the proliferation of inexpensive optical scanning devices makes unauthorized
signature replication a very easy method for creating counterfeit items.
The presentation of
such identification cards as drivers’ licenses, social security cards, etc. are
not an effective means of customer authentication. Websites are available on
the Internet that provide counterfeit identity cards to any requestor without
demanding any proof of that person’s true identity.