Our highlights of PSS (Payment Solution Services) connectivity to PSTA (Payment Service Terminal Aggregator) explain the compliance regime under the CBN’s September 2024 Guidelines to PSPs.
Although the CBN issued the Guidelines to PSPs, PSPs are non-existent licence categorization or operators in Nigeria’s payment system because Nigeria’s Central Bank’s reclassified licences in 2020 and 2021 ended the PSP regime when it introduced the PSS.
Background
We observed in our August 2023 commentary on POS Terminal Identification Configuration Certification and Deployment in Nigeria that Nigeria Inter-Bank Settlement System Plc (NIBSS) was the sole Payment Terminal Service Aggregator (“PTSA”) for Nigeria’s payment terminal services.
NIBSS is not a regulator in Nigeria. NIBSS is owned by all DMBs (Deposit Money Banks) and the CBN.
We submitted that NIBSS, as the sole PSTA, underscored the DMBs’ impact on Nigeria’s electronic banking, payment, and fintech infrastructure.
NIBSS’s dominant position is that of the sole PSTA in Nigeria’s POS (Point-of-Sale) transactions. The 2023 POS transaction was worth a staggering N10.73 trillion, representing a 27.85% increase.
Nigeria’s unprecedented growth in POS transactions signalled connectivity challenges for the expanding Payment Solution Services (PSSs).
PSSs comprise PSSP (Payment Solution Service Providers), PTSP (Payment Terminal Service Providers), and Super-Agency Banking.
Albeit excitedly, the CBN approved UPSL (Unified Payment Service Limited) in April 2024 as a PSTA, thereby ending NIBSS’ monopoly over the payment service terminal aggregator’s window in Nigeria.
However, our fintech lawyers believe that UPSL (Unified Payment Service Limited) and NIBSS occupy dominant positions that raise competition questions under the Federal Competition and Consumer Protection Act 2018.
In any case, the CBN in September 2024 rightly required all PSSs to route POS transactions through UPSL (Unified Payment Service Limited) or NIBSS.
A move aimed at effectively reducing or eliminating the operator’s concerns over NIBSS’ dominant position and as Nigeria’s second PTSA to track electronic transactions in Nigeria effectively, and reduce the operator’s concerns.
PSS’ Compliance Regime
Our fintech lawyers are still determining the validity of the Circular, which the CBN erroneously directed to all Payment Service Providers (PSPs) on Connectivity to Payment Terminal Service Aggregators.
For the preceding reason, PSPs are unknown in Nigeria’s payment system. Often, the stakeholders in the payment system are conspiratorially silent on major regulatory maladministration.
Compliance regimes under the Circular to all Payment Service Providers (PSPs) (sic) on Connectivity to Payment Terminal Service Aggregators include:
1. Acquirers must route POS transactions at merchant and agent locations through the PTSA. A POS terminal includes a physical or an electronic device.
2. PTSAs must send all POS transactions to all Processors nominated by the Acquirer and licenced by the CBN. All processors must be certified by the relevant Payment Scheme.
3. Licenced Processors must integrate with NIBSS and UPSL (Unified Payment Service Limited) to enable the Acquirer to choose which Processor and PTSA to utilize.
4. Based on the Acquirer’s instruction, PTSPs’ (Payment Terminal Service Providers) configured and deployed POS terminals must route transactions through the PTSA.
5. Every PTSP’s monthly compliance report to the CBN must show the number of merchants and agents under their network and the PTSA’s platform for each transaction.
6. PTSA submits monthly returns of details of processed transactions to CBN. All returns and reports to the CBN are directed to the Payment System Management Department within 7 days following the preceding month.
Consequently, compliance becomes effective 30 days from September 11th 2024.
Conclusion
The CBN’s guidelines for all PSSs underscore the effects of a monopoly because the CBN needed a guideline to demonopolize NIBSS’s dominant position as a sole PTSA.
In April 2024, the CBN ended NIBSS’ dominant position as the sole PTSA in Nigeria’s payment system when it licenced UPSL (Unified Payment Service Limited) as Nigeria’s 2nd PTSA.
Our fintech lawyer submits that Nigeria’s payment system needs more PTSAs because of the exponential POS transaction volume in Nigeria.
SRJ Legal is a fintech and online banking law firm. We complement our fintech and online banking practice with education law and commercial litigation (dispute). At the same time, we provide corporate counsel services to businesses and individuals, including families.
