Junior: Uncle, what is all this I’m reading about CBN issuing cards?
Tunde: The CBN launched a domestic card payment scheme termed AfriGo on the 26th of January, 2023.
Junior: Which one is Card Payment Scheme (CPS), and why is CBN going into it?
Tunde: A CPS is basically the mechanism that makes ATM cards work. It processes payments using debit and credit cards. Banks usually pay the CPS to use its system to create cards. You might know a few CPS like Verve, Mastercard and Visa.
The CBN is going into the CPS business for at least 3 reasons. First off, it will be able to provide the cards to local banks at a cheaper cost. Secondly, it will help conserve foreign exchange (FX) since the arrangements with international players typically require FX.
Lastly, there’s also the general sovereignty and independence risk to consider. Many countries started to think about this more critically after some international companies stopped services in Russia due to the war.
Junior: Doesn’t this mean CBN will be competing with private sector players?
Tunde: Yes, it will. However, this shouldn’t be a problem if the CBN doesn’t hinder any company from competitively offering services. Usually, competition even makes an industry better because everyone works hard to provide more efficient services for the customer.
Junior: Nigeria na wa sha. Why is it only our CBN competing with private companies?
Tunde: That’s not true Junior. Several countries like India, Brazil, China, etc have state-owned domestic CPS. So it’s not true that this is something peculiar to Nigeria.
Junior: But doesn’t being domestic mean that it can’t be used outside the country? I don’t want to be stranded when next I’m in the UK abeg
Tunde: No jare. The fact that it starts domestically, doesn’t mean it can’t eventually scale beyond Nigeria if that’s the intention. For example, India’s Rupay and China’s UnionPay both started as domestic schemes but now have a global reach. UnionPay is even accepted in over 170 countries and competes quite well with popular international brands.
Junior: Thanks as usual Uncle. Speaking of ATM cards, I would have used yours to shop online. My only problem is that it always says insufficient funds.
Written by: Babatunde Akin-Moses