CBN orders payment service providers to comply with new PoS routing guidelines

The Central Bank of Nigeria (CBN) has issued a directive requiring all Payment Service Providers (PSPs) to route point-of-sale (PoS) transactions through an approved Payment Terminal Service Aggregator (PTSA).

This new mandate, announced on Thursday, is aimed at enhancing the security and monitoring of electronic transactions across the country.

The directive, outlined in a circular issued by Oladimeji Yisa Taiwo on behalf of the CBN’s Payments System Management Department, requires PSPs to comply within 30 days.

The CBN stated that all PoS transactions from both merchant and agent locations, whether on physical or electronic PoS terminals, must be routed through any CBN-licensed PTSA.

The circular emphasized the importance of this move in decentralizing PoS transaction routing, addressing concerns about the concentration of such transactions under a single entity. By broadening the routing options, the CBN aims to strengthen its ability to track electronic transactions and improve oversight of the payment ecosystem.

“To achieve the objective of tracking electronic transactions in Nigeria, the Central Bank of Nigeria, in August 2011, granted a Payment Terminal Service Aggregator licence to Nigeria Interbank Settlement System Plc. In furtherance of the above, the CBN hereby directs acquirers 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,” the circular read.

It further stipulated that PTSAs must ensure PoS transactions are routed only to processors certified by relevant Payment Schemes and licensed by the CBN.

This directive comes shortly after the expiration of the 5th September deadline for PoS agents to formally register their businesses with the Corporate Affairs Commission (CAC).

While the directive was initially challenged in court, the CAC has commenced a crackdown on non-compliant businesses, including shutting down unregistered PoS operators.

The CBN’s move follows growing concerns over fraud incidents involving PoS terminals, which accounted for 26.37% of fraud cases in 2023, according to a report by the Nigeria Inter-Bank Settlement System Plc.

It also aligns with the bank’s broader efforts to curb fraudulent activities and prevent the use of PoS systems for cryptocurrency trading or other illicit transactions.