CBN Mandates POS Transactions Through Licensed Aggregators

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In a significant move aimed at enhancing the oversight and management of electronic transactions in Nigeria, the Central Bank of Nigeria (CBN) has mandated that all Point of Sale (POS) operators must route their transactions through licensed payment terminal service aggregators (PTSAs). This directive, outlined in a circular issued on Thursday, is part of the CBN’s broader efforts to ensure transparency and accountability in the country’s payment ecosystem.

The CBN’s decision comes on the heels of concerns raised about the potential for fraud and other illicit activities within the POS market. By requiring transactions to pass through licensed aggregators, the CBN aims to introduce a layer of oversight and control, making it easier to track and monitor electronic payments.

The circular specifies that acquirers, the institutions responsible for processing payments from POS terminals, must channel all transactions through one of the two licensed PTSAs: Nigeria Interbank Settlement System Plc (NIBSS) and Unified Payment Services Limited (UPS). This requirement is aimed at ensuring that all transactions are processed through a regulated and supervised channel.

Furthermore, the CBN has instructed licensed processors to integrate with both PTSAs, granting acquirers the flexibility to choose their preferred service provider. This move is expected to foster competition and innovation among PTSAs, leading to improved services and lower costs for merchants and consumers.

To ensure compliance with the new directive, the CBN has mandated that payment terminal service providers (PTSPs) must configure their devices and applications to work with any PTSA chosen by the acquirers. PTSPs are also required to submit monthly reports to the CBN, detailing the number of merchants and agents they manage, as well as the PTSA services they utilize.

Similarly, the PTSAs themselves are obligated to submit monthly reports of all transactions processed through their platforms to the CBN. These reports must be submitted within seven days of the end of each month to the director of the Payments System Management Department.

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The CBN has urged all payment service providers (PSPs) to regularize their operations with the PTSAs within 30 days of the issuance of the circular. Failure to comply with this directive may result in appropriate sanctions.

Background

The CBN’s decision to mandate the use of PTSAs for POS transactions is a continuation of its efforts to modernize and regulate the country’s payment system. In 2011, the CBN granted a PTSA license to NIBSS, making it the sole aggregator for POS transactions. However, concerns about the concentration of power with a single aggregator led the CBN to grant a second PTSA license to UPS earlier this year.

The introduction of multiple PTSAs is expected to enhance competition and innovation in the payment industry, ultimately benefiting consumers and businesses. By ensuring that all POS transactions pass through licensed aggregators, the CBN aims to create a more secure, efficient, and transparent payment ecosystem.

Implications of the CBN’s Directive

The CBN’s directive has significant implications for various stakeholders in the Nigerian payment ecosystem. For POS operators, the requirement to route transactions through licensed PTSAs may involve additional costs and operational complexities. However, it also offers the potential for increased security and protection against fraud.

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For acquirers, the directive provides greater flexibility in choosing their preferred PTSA service provider. This could lead to more competitive pricing and improved services.

For PTSPs, the requirement to integrate with both PTSAs may necessitate technical adjustments and investments. However, it also opens up new opportunities for business growth and partnerships.

If You Ask Me

The CBN’s decision to mandate the use of PTSAs for POS transactions is a significant step towards enhancing the oversight and management of electronic payments in Nigeria. By introducing a layer of regulation and control, the CBN aims to create a more secure, efficient, and transparent payment ecosystem. While the directive may present challenges for some stakeholders, the long-term benefits are expected to outweigh the costs.