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.

Introduction 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 Convenience Privacy Speed of transactions – fast Mobility 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 Regulation 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 worldwide 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

Brazil 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 industry 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.

Mexico Customers must be duly informed of fees and charges by banks. Credit card-based credit contracts must specify commissions and charges. 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.

Canada 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 protection

Implication for Payment Card System Nigeria 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

Conclusion 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.

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