- The Central Bank of Nigeria wants PSPs to route PoS transactions through PTSAs within 30 days
- The directive is also to diversify the Payment Terminal Service Aggregators (PTSA) structure previously managed solely by NIBSS
- The CBN’s directive aims to ensure transparency and curb PoS terminals-related fraud incidents
The Central Bank of Nigeria (CBN) has directed all Payment Service Providers (PSPs) to route all transactions from Point of Sale (PoS) terminals at merchant and agent locations, whether physical or electronic, through its licenced Payment Terminal Service Aggregators (PTSAs).
In a circular signed by Oladimeji Yisa Taiwo on behalf of the CBN’s Payment System Management Department and published on Thursday, September 12, the CBN said all PSPs must regularise their systems and inform the CBN of their compliance within 30 days from the date of the circular.
It added that the directive is to ensure transparency, strengthen the monitoring of electronic transactions and as part of efforts to decentralise PoS transaction routing due to concerns over the centralisation of such under a single aggregator.
The circular reads, “In order to achieve the objective of tracking electronic transactions in Nigeria, the Central Bank of Nigeria (CBN) in August 2011, granted a Payment Terminal Service Aggregator (PTSA) licence to Nigeria Interbank Settlement System Plc (NIBSS).
“As part of efforts to mitigate the concerns regarding channelling Point of Sale (PoS) transactions through a single aggregator, the CBN, on April 19, 2024, granted a second PTSA licence to Unified Payment Services Limited (UPSL).
“In furtherance of the above, the CBN hereby directs as follows: acquirers are henceforth required to route all transactions from PoS terminals at merchant and agent locations, whether on physical or electronic PoS terminals, through any CBN-licensed Payment Terminal Service Aggregator (PTSA).
“PTSAs are required to send PoS transactions to only processors certified by the relevant payment scheme, nominated by the acquirer and licensed by CBN.
“All licensed processors must be integrated with both PTSAS, thereby allowing acquirers the flexibility to choose which processor(s) and PTSA to utilise.
“All Payment Terminal Service Providers (PTSPs) must ensure that their PoS devices applications are configured to route transactions through any PTSA, as directed by the acquirer.
“All PTSPs shall submit monthly returns to the CBN, detailing the number of merchants and agents they manage, along with the PTSA services used to route the corresponding transactions.
“Each PTSA is required to submit monthly returns to the CBN, detailing all transactions processed through their platforms.”
CBN aims to diversify the PTSA structure
The CBN’s directive aims to diversify the PTSA structure, which was previously granted only to the Nigeria Interbank Settlement System Plc (NIBSS) in 2011.
On April 19, 2024, the CBN granted a second licence to the Unified Payment Services Limited (UPSL) to enhance electronic service delivery, promote competition and decentralise the dependence on NIBSS as the sole aggregator of PoS transactions.
Directive intensifies efforts to curb PoS-related fraud
The CBN and other stakeholders continue to tighten their grip on payment service providers through many policies to curb incidences of PoS-related fraud in the financial services sector.
The Corporate Affairs Commission (CAC) recently threatened to shut down PoS terminals that failed to register their businesses with the commission before the expiration of its September 5 deadline.
Amid the CBN’s plan to halt cryptocurrency or virtual currency trading, the CAC’s directive for registration of PoS businesses follows multiple and incessant cases of PoS terminals-related fraud with the commission arguing that those who didn’t comply with its directive were involved in “unwholesome activities.”
Though PoS operations make up 1.55 per cent market share of the electronic payment landscape in Nigeria, it accounts for 26.37 per cent of fraud incidents in the financial services sector in 2023, according to the NIBSS.
There is no gainsaying the place of the PoS business in driving financial inclusion, creating employment opportunities and providing financial services in underserved communities.
Since its introduction in 2013, the adoption of PoS as a payment option has not weaned. According to the NIBSS, the value of PoS transactions rose by 27.85 per cent from N8.39 trillion in 2022 to N10.73 trillion in 2023.
In January 2023, transactions via PoS stood at N807.16 billion but increased through the months to reach N862 billion in December 2023.
With growth of digital payment in Nigeria, is cash still king?
Meanwhile, TheRadar reported that the value of digital transactions increased 47.4 times between 2013 and 2023 to reach N657.8 trillion from N13.9 trillion, representing an average monthly figure of N54 trillion over the 10 years.
With the growth in digital transactions, driven by Nigeria’s young demographic, fintech innovations and the policies of the Central Bank of Nigeria, one wonders if cash is still king.
