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HomeFinancial LiteracyCBN Cash-Less Policy Key Terms and their Meanings

CBN Cash-Less Policy Key Terms and their Meanings

The Central Bank of Nigeria (CBN) in 2012 introduced the Cash-Less Policy with sole aim of achieving driving development and modernization of Nigeria’s payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. The policy started on January 1, 2012 in Lagos as pilot. Phase 2 went live in Abia, Anambra, Rivers, Ogun, Kano and the FCT on July 1, 2013, while the nationwide implementation took effect in 2015.

While this policy has thrived for years, there are couple of key terms which not all Nigerians are familiar with. These key terms are used on daily basis in the banking and finance industry and so the need to know them is of high importance.

In this article, we will be defining some of the cashless policy key terms to get you updated.

CBN Cash-Less Policy Key Terms and their Meanings

  • alternative cash payments” includes Point-of-sale (POS) terminals, Mobile payment systems, Internet banking, Multi-functional ATM, Electronic Funds Transfer Systems, and Direct debit
  • “ATM” is an abbreviation for Automated Teller Machine. It is a cash point that can be used to withdraw cash, do Transfers, . A debit card or credit card is used at the machine to withdraw cash. The personal identification number (PIN) has to be entered along with credit or debit card to access cash. Some ATMs will allow for cash deposits and bill payments.
  • “Bank account” is a record of financial transactions between a bank and the customer which is maintained by the bank. In addition to financial transactions, a bank account also shows the resultant financial position of the customer with the bank
  • “Card association” is a network of issuing banks and acquiring banks that process payment cards of a specific brand.
  • “Card holder” is a person who owns the credit card issued by appropriate credit card company or financial institution
  • “Card Schemes” define the rules of the card system (e.g. interchanges, licenses, fraud responsibilities), and choices of technical functionalities (e.g. standards, protocols, security requirements)
  • “Cash in Transit (CIT)” Money that is being physically transferred from a business to the bank
  • “Competent Authorities” include Courts, Economic and Financial Crime Commission (EFCC), Independent Corrupt Practices Commission (ICPC), Regulatory Authorities such as the CBN, Nigeria Deposit Insurance Corporation (NDIC) etc.
  • “Commission on Turnover (COT)” Commission charged to the account holder and calculated on the basis of the current account turnover
  • “Debit Card” is a card issued by a bank to the account holders so as to enable them to gain access to their funds in electronic form. Debit cards are used to withdraw cash from ATMs. They are also used for electronic transactions like purchases done using Point of Sale (PoS) systems. The customer’s account is immediately debited or credited.
  • “Deposit taking banks” means banks and other financial institutions that take cash deposits “Electronic Fund Transfer” is a system of money transfer from one account to another within same bank or different banks using electronic mode of transfer without any manual interference
  • “EMV” (Europay, MasterCard and Visa) is the global standard that is helping ensure smart (Chip-and- PIN) cards, terminals and other systems to interoperate
  • “financial inclusion” refers to the task of making financial services reach out to the under and unprivileged people of the society at affordable costs and means
  • “Fraudulent card transaction” is one in which the rules and regulations are not properly followed. Generally such transactions are unauthorized by credit card holders and involve a lost, stolen, fabricated, counterfeit and fraudulent processing of a credit card
  • “Hot list” means list of deactivated cards that were reported missing, stolen, lost or damaged by the card holders
  • “Interconnectivity” means ability for reciprocal exchange of transactions/messages between two or more switching networks
  • “Interoperability” means ability to issue cards and deploy devices in such a way that all customers (card holders, merchants and issuers) perceive operations, while obtaining service, as if the interconnected networks were one
  • “Know Your Customer (KYC)” refers to both the activities of customers that financial institutions and other regulated companies must perform to identify their clients, ascertain relevant information pertinent to doing financial business with them and the bank regulation that governs those activities.
  • “Micro Finance Bank” (MFB) is any company licensed by the Central Bank of Nigeria (CBN) to carry on business of providing microfinance services such as savings, loans, domestic funds transfer, and other financial services that are needed by the economically active poor, micro, small and medium enterprises to conduct or expand their businesses as defined in the guideline for MFB in Nigeria
  • “Merchant” means an organization or entity that contracts with a Merchant Acquirer for accepting payment by means of payment card or any other electronic payment instrument
  • “Merchant Acquirer” means a CBN licensed financial or non-financial institution that has agreement with the relevant card scheme to contract with merchants to accept payment cards as means of payment for goods and services
  • “Mobile Payment System” allows for point-of-sale payments to be made through a mobile device, such as a cellular phone or a smart phone or a personal digital assistant (PDA). Using mobile payment, a person with a wireless device can transfer money to another person in another city or another state without needing to go to the bank.
  • Nigeria Interbank Settlement Systems” (NIBSS) provides the infrastructure for automated processing, settlement of payments and fund transfer instructions between Banks, Discount Houses and Card Companies in Nigeria. NIBSS is owned equally by all licensed banks in Nigeria, and the Central Bank of Nigeria. Discount Houses operating in Nigeria also hold substantial shares.
  • “Ombudsman” an institution set up to receive and deal with disputes related to banking and financial services.
  • “Operations” include facilitation of funds transfer, effecting payment and such other transactions that may be determined from time to time by means of an electronic payment instrument
  • “Payment Terminal Services Aggregator” establishes the communication network for reliable POS data traffic that shall satisfy the service and availability standards and expectations of the industry on a cost effective basis. The role is being fulfilled by NIBSS
  • “Payment Terminal Services Providers” (PTSP) deploy, maintain and provide support for POS terminals in Nigeria. PTSPs shall offer services to acquirers covering all aspects relating to terminal management and support, including but not limited to purchase and replacement of spare parts, provision of connectivity, training, repairs, and development of value- added services
  • “PA-DSS” stands for Payment Application Data Security Standard. PA-DSS compliant applications help merchants and agents mitigate compromises, prevent storage of sensitive cardholder data, and support overall compliance with the PCI DSS
  • PCI DSS” stands for Payment Card Industry Data Security Standard. It was developed by the major credit card companies as a guideline to help organizations that process card payments prevent credit card fraud and various other security vulnerabilities and threats
  • “PCI PED” stands for Payment Card Industry Pin Entry Device. PCI PED security requirements are designed to secure personal identification number (PIN)-based transactions globally and apply to devices that accept PIN entry for all PIN based transactions
  • PIN” means Personal Identification Number
  • “Point of Sale” Point of Sale refers to the location at which a payment of a card transaction occurs, usually by way of a device such as a credit card terminal or cash register
  • “Processor” processes card transactions
  • “Service Level Agreement” an (SLA) is a part of a service contract where the level of service is formally defined. In practice, the term SLA is sometimes used to refer to the contracted delivery time (of the service) or performance. Service providers will commonly include service level agreements within the terms of their contracts with customers to define the level(s) of service being sold in plain language terms.
  • “Switch” means a system that switches card payments messages between acquirer (or acquirer processor) and issuer (or issuer processor)
  • “T+1, T + 2, T +3, etc. settlement cycle” is the period of time between the settlement date and the transaction date that is allotted to the parties of a transaction to satisfy the transaction’s obligations. The settlement period is often quoted as T+1, T+2 or T+3; which means the transaction date plus one, two or three days.

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