The Central Bank of Nigeria (CBN) has released a new directive to Payment Service Providers (PSPs), requiring them to comply with enhanced routing guidelines for Point of Sale (PoS) transactions.
This move is aimed at strengthening the monitoring of electronic transactions across Nigeria.
The directive, issued on September 11, 2024, follows CBN’s initiative to diversify the Payment Terminal Service Aggregator (PTSA) structure, which previously operated through a single aggregator.
In a circular, signed by Oladimeji Yisa Taiwo on behalf of the CBN’s Payments System Management Department, the apex bank mandates that all PoS transactions from merchant and agent locations—whether physical or electronic—must now be routed through any CBN-licensed PTSA.
The directive is part of efforts to decentralize PoS transaction routing and address concerns over the centralization of such transactions under a single entity.
Background on the PTSA License System
In August 2011, the CBN initially granted a PTSA license to the Nigeria Interbank Settlement System Plc (NIBSS) to serve as the sole aggregator of PoS transactions.
However, to promote competition and enhance service delivery, the CBN awarded a second PTSA license to Unified Payment Services Limited (UPSL) on April 19, 2024.
This development aims to reduce the dependence on a single aggregator for the management of PoS transactions, promoting transparency and operational efficiency in Nigeria’s growing electronic payments landscape.
Key Directives in the Circular
The CBN has outlined several steps PSPs must adhere to under the new directive:
Mandatory Routing of PoS Transactions: Acquirers are now required to route all transactions from PoS terminals through any of the CBN-licensed PTSAs. This applies to both physical and electronic PoS terminals, ensuring that all transaction data is captured and monitored by the appropriate authorities.
Certification of Processors: PTSAs must only send PoS transactions to processors certified by relevant payment schemes, which must also be nominated by the acquirer and licensed by the CBN. This measure is designed to maintain the integrity and security of payment processes.
Processor Flexibility for Acquirers: Acquirers are given the flexibility to choose which processors and PTSA they want to work with, providing greater autonomy in transaction processing and management.
Device Configuration: All Payment Terminal Service Providers (PTSPs) are instructed to ensure that their PoS devices and applications are correctly configured to comply with the new directive, routing transactions through any of the licensed PTSAs as directed by the acquirers.
Monthly Reporting Requirements: Both PTSPs and PTSAs are required to submit detailed monthly reports to the CBN. PTSPs must report on the number of merchants and agents they manage, as well as the services used to route transactions, while PTSAs must submit reports detailing all transactions processed through their platforms. These are expected “to be submitted to the Director, Payments System Management Department, not later than seven (7) days after the end of each month.”
The CBN has given PSPs a 30-day window to regularize their operations in line with the new requirements. Both PTSPs and PTSAs must notify the CBN in writing of their compliance within this period.
The circular noted: “Consequently, you are hereby directed to commence regularization with the PTSAs and notify the CBN in writing to confirm compliance, within 30 days from the date of this Circular.”
What you should know
The Corporate Affairs Commission (CAC) recently said it has commenced the process of taking drastic actions including shutting down Point of Sales (PoS) businesses that have failed to register their businesses as its September 5 deadline lapsed.
While noting there was inadequate compliance with its directive, the Commission said those who decided not to register may be engaging in “unwholesome activities.”
This development comes as the fintech business owners under the aegis of the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) have challenged the CAC’s registration directive in court even as they insist the mandatory registration was illegal.
The directive on registration of PoS business came against the backdrop of frequent fraud incidents involving POS terminals and plans to stop trading in cryptocurrency or any virtual currency by the Central Bank of Nigeria (CBN).
According to a report by the Nigeria Inter-Bank Settlement System (NIBSS) Plc, POS terminals accounted for 26.37% of fraud incidents in 2023.
