CBN, PTSP remove infrastructure bottleneck hindering cashless project

Ben Uzor Jr

Newly licensed Payment Terminal Service Providers (PTSPs) and the Central Bank of Nigeria (CBN) are working assiduously to mitigate the infrastructure bottlenecks that threaten the smooth take-off of government’s proposed ‘Cashless Nigeria Project’. This is even as the CBN steps us engagements sessions with stakeholders to create buy-in and ensure maximum public awareness. Firstly, PTSPs have disclosed plans to deploy 150, 000 Point of Sale (PoS) terminal in Nigeria by the end of 2012. This, they say would enable Nigerians conduct cashless transactions in the country and around the world.

In a clear indication of the CBN’s optimism about the prospects and advantages of moving the economy into cashless mode, the apex bank licensed six PTSPs with the singular mandate to deploy and manage PoS terminals in Nigeria. The six successful firms are ITEX, Paymaster, Etop, Citiserve, ValuCard and EasyFuel. CBN licensed only these firms, to enable the PTSPs build scale and maximise efficiency. These six firms, according to industry watchers are tested and trusted e-payment firms that provide e-business infrastructure with the objective of establishing and running a secure, reliable and scalable network.

Having shown strong pedigree in the e-business sector especially in the area of deploying and maintaining independent multiplication and functional PoS terminals network which accepts cards from all payment schemes in Nigeria, PTSPs have said that they are working closely with the financial regulator to ensure infrastructure challenges bordering on power, connectivity, and security are properly addressed. Ernest Nduje of ITEX, a PTSP confirmed that 150, 000 PoS terminal would be deployed by 2012, adding that 53, 000 PoS terminals would be deployed by the end of December 2011.

“The CBN’s cashless initiative is very commendable. Some of us have been in this business for over six years without the backing of the CBN. The fact that the CBN has come forward to back us is indeed positive. The cost of managing cash is expensive. Infact, direct cost of cash is estimated to reach N192 billion in 2012. In terms of connectivity issues, the networks need to be committed to this initiative. This is a national project and we expect them to come on board, give us their full commitment to ensure that this initiative is a success. We want them to guarantee 100 percent availability on the network.

“We have ordered terminals that have dual SIM card to ensure high availability. We have also tested the platform to ensure that it can handle the huge traffic expected. The cooperation from the banks is positive. In terms of negotiations and pricing, they have been very cooperative. The ‘Cashless Nigeria Project’ will open up a huge industry that will bring a lot of benefits to the nation. It will create employment opportunities for young Nigerians. We have already started hiring engineers, setting up support teams to handle the deployment and maintenance of these devices.

“We expect the government to create the enabling environment for this initiative to fly. We expect the government to provide tax holidays for PoS importation. In terms of timelines, by 15th of October 2011, the first batch of PoS will go live from NIBSS. We expect that 53, 000 PoS terminals will be deployed by the end of December 2011”, Nduje told BusinessDay. The Bankers Committee had earlier disclosed plans to deploy 40, 000 PoS by the end of December. At one of the engagement session in Lagos at the weekend, Tunde Lemo, deputy governor, operation, CBN said that the apex bank was closely with the Nigerian Communications Commission (NCC) to ensure that connectivity issues are addressed.

“For example, dedicated connectivity will be provided by MTN and Globacom for all point of sale traffic going forward. This should greatly increase the terminal uptime. Also, most terminals will be dual-SIM or roaming SIM, which will ensure fail over options and guarantee a higher uptime. Power issues are also being addressed with relevant stakeholders. For example, in recent manufacturer selection form, PoS terminals specifications were defined to take into account Nigeria's current power challenges. All PoS terminals will have a minimum battery life span of 24hours, while many will do 48 hours with no charge.

“They also come with backup batteries and car chargers as appropriate to address the power challenge”, Lemo added. Alluding to consumer reservations around card security, Lemo noted that the challenge has been addressed with the introduction of chip and pin cards. He said Chip and PIN card are more secure than the previous magnetic strip cards that were in use last year. “CBN is also working with the banks and NIBSS to put in place a comprehensive fraud monitoring tool, which will enable the industry to identify trends and be proactive in mitigating electronic fraud”, he concluded.

Highlighting the various drawbacks of a cash-based economy, Tayo Olajide, managing director, EasyFuel, one of the licensed PTSP firms noted that the huge cost of cash management, security risk, among others, make the proposed cashless economy an ideal one. He added that the CBN through the PTSP license has shown its intent to transform payment system in the country. The apex bank also recently reversed its directive on off-site ATMs and mandated banks to deploy 75,000 ATMs before 2015. This, according to industry analysts is an attempt to encourage the adoption of electronic channels.