A new regulation from the Central Bank of Nigeria (CBN) aims to enhance the oversight and administration of Point of Sale (PoS) transactions throughout the nation. Payment Service Providers (PSPs) must comply with these new regulations by October 11, 2024, and have been given thirty days to do so.
This most recent advancement supports the CBN’s objective of decentralising PoS transaction routing, guaranteeing a more effective and transparent payment procedure.
The circular accessed by BrandSpur banking and finance news desk, dated September 11, 2024, bears the signature of Oladimeji Yisa Taiwo from the Payments System Management Department of the CBN. It requires that every Point of Sales (PoS) transaction, whether conducted in person or online, goes via a Payment Terminal Service Aggregator (PTSA) that has a CBN license.
This directive builds upon an earlier architecture that gave one aggregator authority over PoS routing. The goal of the new regulation is to promote decentralisation and competition in transaction management.
Continuing, the sole PTSA license was previously held by the Nigeria Interbank Settlement System Plc (NIBSS), which received permission from the CBN in 2011. However, in April 2024, the CBN granted Unified Payment Services Limited (UPSL) a second PTSA licence to increase competition and improve service delivery.
This move is anticipated to improve operational transparency and lessen reliance on a single organisation in Nigeria’s electronic payments sector.
One of the directive’s primary requirements is that all PoS transactions be routed through a PTSA licensed by the CBN, as stated by payment service providers (PSPs). The relevant payment systems must certify the processors handling these transactions, and the acquirers, who have the freedom to select the processors they want, must propose the processors.
Payment terminal service providers (PTSPs) also need to make sure that the configuration of their PoS terminals complies with the updated routing specifications.
Both PTSPs and PTSAs now have monthly reporting requirements under the CBN’s new regulations. Whereas PTSAs are obliged to submit data on all processed transactions, PTSPs are expected to submit reports that include information on the number of merchants and agents they service as well as the routing of transactions.
Within seven days of the end of each month, these reports must be delivered to the director of the Payments System Management Department. PSPs are required to formally notify the CBN of their compliance with the new standards within 30 days of taking effect.
This directive is being issued at the same time that point-of-sale operators who have not registered their firms are being targeted by the Corporate Affairs Commission (CAC). After the registration deadline of September 5th has passed, the Commission is getting ready to punish businesses that did not comply, citing possible involvement in illegal activity.
In court, fintech organizations—most notably the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN)—are challenging the CAC’s order, claiming that the registration requirement is illegal.
The CBN’s new PoS standards are intended to improve Nigeria’s electronic payment system’s security and effectiveness.
However, it also fits in with the increasing emphasis on lowering fraud in the payments industry, as evidenced by a report from the Nigeria Inter-Bank Settlement System Plc (NIBSS) that shows over 25% of fraud incidences in 2023 were caused by point-of-sale (PoS) terminals.
It is innocuous to know that CBN’s latest actions are intended to mitigate these risks and guarantee more secure and transparent electronic payment environments.
