Contactless payments have become increasingly popular as they allow financial transactions to be completed without any physical contact between the payer and the recipient. One such method in Nigeria is the Tap-to-Pay service, where users simply tap their smart devices on enabled payment terminals to settle transactions. This technology can be embedded in various forms, such as stickers, fobs, wearables, tokens, and mobile devices.
On June 27, 2023, the Central Bank of Nigeria (CBN) introduced new limits on contactless payments in the country. The previous individual transaction limit of N5,000 and the daily cumulative limit of N30,000 were raised to N15,000 and N50,000, respectively, as per the latest CBN circular.
Potential impact and current stakeholders
This revision follows the release of the Guidelines for Contactless Payments in Nigeria, which set the previous limits. By increasing these limits, we can expect a surge in the number of financial transactions conducted through contactless means. This will likely lead to an accelerated adoption and wider availability of contactless services from both new and existing financial institutions. For instance, NowNow, a Nigerian fintech company, secured USD 13 million in seed funding for its contactless payment solution last year, prompting other financial institutions to join the contactless payment movement.
Leading the charge, FCMB partnered with Mastercard and launched EasyPay, a contactless payment system in May 2023. Verve also entered the contactless payment market in April 2023, enabling financial institutions that issue Verve cards to offer contactless payments. The Lagos Blue Rail Line, as well as the Lagos State Bus Rapid Transit Scheme, now accept contactless payments via Touch and Pay (TAP) Technologies, the issuers of the Cowry card.
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Duties of stakeholders
The successful implementation of contactless payments requires close collaboration between various stakeholders, each playing a specific role as defined by the CBN Guidelines for Contactless Payments in Nigeria. These stakeholders include acquirers, issuers, payment schemes, card schemes, switching companies, payment terminal service providers, payment terminal service aggregators, merchants, terminal owners, customers, and other designated participants.
It is important to note that the CBN Guidelines do not introduce a licensing process specifically for contactless payments
Acquirers facilitate contactless payments, while issuers offer the payment instruments used in these transactions. Payment schemes and card schemes process the contactless transactions, and switching companies act as intermediaries between acquirers and issuers to ensure smooth transactions within Nigeria. Payment terminal service providers deploy terminals capable of accepting contactless payments, and payment terminal service aggregators regularly certify Point of Sale (POS) terminals for this purpose. Merchants, like the Lagos Blue Line, are responsible for ensuring devices that accept contactless payments are available for customers.
Terminal owners can be issuers, acquirers, merchants, or payment terminal service providers. Their duty is to ensure that the terminals and devices used for contactless payments meet the minimum specifications. Customers have the option to opt-in or out of using contactless payments for products and services.
It is important to note that the CBN Guidelines do not introduce a licensing process specifically for contactless payments. Entities already licensed by the CBN to offer relevant services can provide contactless payments as long as they fulfill the associated obligations. For example, Verve, already licensed as a card scheme, can process contactless transactions provided it adheres to the related requirements. Card schemes are expected to implement a documented risk management process to identify and mitigate risks associated with contactless payments.
Conclusion
Despite the specified transaction limits, higher-value transactions can still be settled by additional customer verification, such as a PIN, mobile code, or biometric identifier. The CBN reserves the right to review these limits periodically.
The global contactless payments market is projected to reach a transaction value of USD 10 trillion by 2027, up from USD 4.6 trillion in 2022. With a solid regulatory framework for contactless payments in place, Nigeria is well-positioned to embrace this payment option and reap its manifold benefits. We can anticipate the mainstreaming of contactless payments and its positive impact on the financial landscape.
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