The Central Bank of Nigeria (CBN) has issued a new directive mandating Payment Service Providers (PSPs) to adhere to improved routing protocols for Point of Sale (PoS) transactions. This directive, announced on September 11, 2024, is part of the CBN’s broader strategy to decentralize and diversify the Payment Terminal Service Aggregator (PTSA) structure, which previously relied on a single aggregator.
The new regulations stipulate that all PoS transactions from merchant and agent locations—whether physical or digital—must be processed through a CBN-licensed PTSA. This measure is designed to bolster the monitoring of electronic transactions and address concerns regarding the concentration of transaction routing under a single entity.
According to the circular issued by Oladimeji Yisa Taiwo on behalf of the CBN’s Payments System Management Department, Payment Terminal Service Providers (PTSPs) are now required to ensure that their PoS terminals are correctly configured to route transactions through any CBN-licensed PTSA. Furthermore, PTSA must direct PoS transactions only to processors certified by relevant payment schemes and nominated by the acquirer, in order to safeguard the integrity and security of payment processes.
Additionally, the new directive includes monthly reporting obligations. PTSPs must provide detailed reports on the number of merchants and agents under their management, as well as the transaction routing services used. PTSA are required to submit comprehensive reports outlining all transactions processed through their systems.
The CBN has granted a 30-day period for PSPs to align their operations with these new requirements. Both PTSPs and PTSAs are instructed to confirm their compliance with the CBN in writing within this timeframe.
This directive coincides with recent enforcement actions by the Corporate Affairs Commission (CAC), which has begun shutting down PoS businesses that failed to meet registration requirements by the September 5 deadline. The CAC’s measures are part of broader efforts to curb fraudulent activities and ensure compliance within the sector. In response, the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) has challenged the CAC’s registration mandate in court, arguing that the requirement is unlawful.
The backdrop to these regulatory developments includes a rise in fraud incidents involving PoS terminals, as noted in a report by the Nigeria Inter-Bank Settlement System (NIBSS) Plc, which indicated that PoS terminals were involved in 26.37% of fraud cases in 2023. Additionally, the CBN’s ongoing efforts to ban cryptocurrency transactions further underscore the need for stringent monitoring and regulatory oversight in the financial sector.
