experiences of other countries in regulation of payment cards system

• This section reviews the regulatory experiences
of other countries with respect to payment card
industry. The rationale for this section is to
examine what their experiences were and
incorporate them into the planned payment card
system in Nigeria. The lessons from the
experiences of those countries can serve as a
guide in implementing the system and also help
to assess the feasibility or otherwise of the
initiative in Nigeria.
• The advancement in information technology has found
expression in the banking industry in recent times. In fact,
e-transactions have increased considerably in virtually
every part of the world. Banks and other financial
institutions world over are increasingly seeing the need for
improvement in e-payments and towards a more cashless
economy. This development has however introduced some
new challenges for financial regulation.
Benefits of e-payments
Reduce costs associated with paper-based system
Speed of transactions – fast
Security – avoid the risks associated with handling cash
Facilitate business transactions
Grey Areas
Enhance illegitimate transactions and money laundering
Insecurity- possibility of transactions being hacked
Technology malfunctioning
Protection of payment card users
The Need for Payment Card
•Experts have argued that the extensive
use of payment cards, coupled with the
convergence of the global financial
system and e-payment technologies
could create some problems if
appropriate and effective regulations
are not put in place.
Experiences of Some Countries with
respect to Payment Cards Regulation
• The payment card market and system differs
from country to country
• The US is the dominant player in the payment
card industry in the world, followed closely by
UK and Canada in terms of card prevalence
• Australia has also experienced significant card
usage and regulation in recent times
• The experiences of these countries and some
others would be considered briefly
Australia - Issues
• Australia is one of the countries that have experienced
substantial regulation of the payment card industry
• Payment card system is strongly linked to the problem of
money laundering
• Drastic reduction in interchange fees
• The RBA argued that competition would lead to higher
interchange fees and inefficiency
• Honor all card rules
• Provide adequate information on payment card rules to
the public
• Evidence shows that regulation of interchange fee favors
merchants at the expense of consumers
• The Brazilian payment card industry is regulated by
several authorities
• Suspension of no-surcharge rules
• “Honor all card” rules
• Priority to security at the expense of competition
• Interchange fees are set by scheme owners and in line
with international level
• Time lag of 30 days for payment of merchants for
credit card transactions
• Card users pay annual fees- only applicable to credit
card users
United State
Regulation is determined by consumer behaviors and market trend
in recent times, American legislators are directly involved in card
regulations by crafting a new set of legislation governing the
The main objective of this legislation is to protect credit card users
and encourage transparency
Legislation includes ensuring advance notice in rates increases and
disclosure requirements
The Financial Stability Act of 2010 subjects debit card interchange
fees to regulation
Conclusively, payment card regulation in the US was focused
majorly on the prohibition of the honor-all-cards rule, restriction on
the no-surcharge rule and the regulation of interchange fee.
• Customers must be duly informed of fees and charges by banks.
• Credit card-based credit contracts must specify commissions and
• Banks must report their fees and commissions and inform the
Banco de Mexico of any change in them. The Banco de Mexico
makes the fees and commissions available to the public through the
internet so that they can compare charges.
• The Banco de Mexico compelled all banks to allow credit payment
through e-transfers.
• The honour-all-cards rule has been reviewed to allow merchants
accept either only credit, only debit of both types of cards.
• Reduction of interchange fees
• Introduction of several categories of interchange fees to
discriminate type of business.
• Fewer regulatory bodies and regulators often consult
with industry operators before issuing new laws,
thereby catering for the interest of card users and
operators simultaneously
• Standard pricing procedures; and as a result
consumers are protected
• Information disclosure
• Increased transparency
• Reduction in interchange fees
• The main objective of regulation is consumer
Implication for Payment Card System
Tackling the menace of fraud, money laundering and illicit transactions
Stability and security of the system
Lack of confidence in e-payment system
Illiteracy and need for consumer education
Legal issues arising from liability with respect to commercial theft
Privacy and traceability
Inadequate telecommunication infrastructures, including power supply
Apathy on the part of merchants to accept e-payments
Difficulties in allocation of risk and responsibilities among parties
Modalities for taxing e-payment transactions
The need for an effective consumer protection plans
System malfunctioning, downtime and interruption
Modalities for determining fees, charges and commission on transactions
A review of regulation in the payment card
industry in the some countries has been
conducted. It is expected that this serves as a
foundation for Nigeria in her efforts to
develop its e-payment systems. The salient
points that have been raised from the
experiences of the countries should be taken
into consideration in formulating a payment
card guideline for Nigeria.
Thank you for listening!

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