The Central Bank of Nigeria has released framework for quick response (QR) code payments, as well as framework for regulatory sandbox operations in the Nigerian payments system, which is targeted at promoting effective competition, embracing new technology, encouraging financial inclusion and improving customer experience, with a view to engendering public confidence in the financial system.
The regulatory sandbox framework is aimed at increasing the potential for innovative business models that advance financial inclusion as well as reduce time-to-market for innovative products, services, and business model whilst increasing competition, widening consumers’ choice and lowering costs.
According to the framework released yesterday, it is also to ensure appropriate consumer protection safeguards in innovative products and clearly define the roles and responsibilities of stakeholders and the operations of the sandbox for the Nigerian payments system industry.
The framework is also to ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers, the overall payments system and to provide an avenue for regulatory engagement with FinTech firms in the payment space, while contributing to economic growth.
CBN noted that in view of increasing consumer appetite for payment solutions and emerging disruptive technology in the financial services space, it had become pertinent to ensure new and more flexible ways of engaging with the industry.
“One of the options being the use of a regulatory sandbox, is a formal process for firms to conduct live tests of new, innovative products, services, delivery channels, or business models in a controlled environment, with regulatory oversight, subject to appropriate conditions and safeguards.
“This would enable the bank stay abreast with innovations while promoting a safe, reliable and efficient payments system to foster innovation without compromising on the delivery of its mandate. The Sandbox encourages innovation that can improve the design and delivery of payment services and is therefore, also suitable for proposed products, services or solutions that are either not contemplated under the prevailing laws and regulations, or do not precisely align with existing regulations.”
Meanwhile as QR codes become more popular and acceptable within the Nigerian financial space, the framework on QR codes aims to ensure the adoption of appropriate standards for safe and efficient payments services.
Quick response codes are a kind of matrix barcode representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by an imaging device, processed and transmitted by appropriate technology.
These codes can be used to present, capture and transmit payments information across payments infrastructure. The technology further enables the mobile channel to facilitate payments and presents another veritable avenue for promoting electronic payments for micro and small enterprises.
According to the framework, all issuers, acquirers, switches, processors and other participants in QR payments in Nigeria shall ensure full interoperability of QR code schemes in Nigeria. Issuers and acquirers shall ensure behavioural monitoring and fraud management systems, implemented to prevent, detect and mitigate fraud and money laundering.
“Issuers shall have the overall responsibilities for managing fraud risk and shall coordinate all participants towards managing fraud in its scheme. Issuers shall provide quarterly risk management assessment reports to the director, Payments System Management Department. The risk management assessment report shall include, among others, fraud report, vulnerabilities assessment, and risk-mitigating measures introduced.”