The Central Bank of Nigeria (CBN) has introduced new regulations for Payment Service Providers (PSPs) to improve the monitoring and routing of Point of Sale (PoS) transactions across Nigeria. This directive, issued on September 11, 2024, is part of the CBN’s broader efforts to strengthen Nigeria’s electronic payments system and diversify the Payment Terminal Service Aggregator (PTSA) structure.
Key Changes in PoS Transaction Routing
In the newly released circular, signed by Oladimeji Yisa Taiwo of the CBN’s Payments System Management Department, all PoS transactions from merchant and agent locations must now be routed through any CBN-licensed PTSA. This includes transactions from both physical and electronic PoS terminals. The change aims to decentralize PoS transaction routing and reduce the reliance on a single aggregator for managing such transactions, thereby promoting competition and improving operational efficiency.
PTSA Licensing and Its Impact
Historically, the CBN granted the Nigeria Interbank Settlement System Plc (NIBSS) a PTSA license in August 2011, giving it control over PoS transaction aggregation. However, to foster competition, the CBN issued a second PTSA license to Unified Payment Services Limited (UPSL) on April 19, 2024. The decision to license a second aggregator was made to enhance service delivery, increase transparency, and improve the overall efficiency of electronic payment systems in Nigeria.
New Compliance Guidelines for PSPs
The CBN’s directive outlines several critical steps that PSPs must follow:
- Mandatory PoS Transaction Routing: All PoS transactions, both physical and electronic, must be routed through any licensed PTSA to ensure that transaction data is captured and monitored appropriately.
- Certified Processors: PTSAs are required to work only with processors certified by relevant payment schemes and approved by the CBN. This ensures that the highest standards of security and integrity are maintained.
- Processor Flexibility: PSPs now have the freedom to choose which processors and PTSAs they work with, offering them greater control over transaction processing.
- Device Configuration: Payment Terminal Service Providers (PTSPs) must ensure that all PoS devices are properly configured to comply with the new routing guidelines.
- Monthly Reporting: Both PTSPs and PTSAs are mandated to submit monthly reports to the CBN detailing the number of merchants, agents, and transactions they manage. Reports must be submitted within seven days of the end of each month.
30-Day Compliance Window for PSPs
PSPs have been given a 30-day period to align their operations with the new guidelines. PTSPs and PTSAs are required to notify the CBN of their compliance in writing within this timeframe. Failure to do so may result in penalties or further regulatory actions.
Corporate Affairs Commission’s Stance on PoS Business Registration
The new CBN directive comes at a time when the Corporate Affairs Commission (CAC) is also tightening regulations on PoS businesses. The CAC recently initiated efforts to shut down PoS businesses that failed to meet the September 5, 2024 deadline for registration. According to the CAC, non-compliance may indicate involvement in “unwholesome activities.” The commission’s crackdown comes amid rising concerns about fraud in the PoS sector, which accounted for 26.37% of all reported fraud incidents in 2023, according to the Nigeria Inter-Bank Settlement System (NIBSS) Plc.
However, not all PoS operators agree with the CAC’s actions. The Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) has challenged the mandatory registration directive in court, arguing that it is illegal. This ongoing legal battle adds another layer of complexity to Nigeria’s rapidly evolving fintech landscape.
