A DOMESTIC CARD SCHEME AMIDST INTERNATIONAL PAYMENT WOES
Nigeria launches a domestic card scheme but is it what Nigerians care for at the moment?
If you have been following our series on card payment schemes, you should have a pretty rough idea of how the finances that power international payments are structured. To summarize, a business decides to register its presence in various countries, then they convince people to make and receive payments for goods and services through them in all these countries. You can check out how the arrangement for card payments work if you need to catch up on that.
Sometime last year, the Nigerian banking regulator and something called the Nigeria Inter-Bank Settlement System Plc (NIBSS) made an announcement that a Domestic Card Scheme would become operational by January 16, 2023. Well, that date has now gone by and it is unclear how to get the card, if at all it is even ready for use.
However, people have asked a very pertinent question; “would the domestic card scheme work for international spending?”. I never thought of it until the questions started to pop up, I just immediately assumed it would not work. Does the “domestic” in the “Domestic Card Scheme” mean that the scheme is meant only for local settlements of payments, or does it simply mean that it is operated by local owners?
It also seems that the fact that the Central Bank of Nigeria was a party to the announcement has created the impression that this is owned by the CBN and that the CBN would at least have dollars for this endeavour. Firstly, the CBN does not have dollars for this endeavour because Nigeria generally does not have dollars. Secondly, as a matter of fairness, regulators generally do not involve themselves in providing consumer services. It would be unfair for the referee to kick the ball in a match, wouldn’t it?
What is happening is the Nigeria Inter-Bank Settlement System Plc (NIBSS) is owned jointly by the licensed commercial banks in Nigeria and the CBN, and generally provides ancillary services that all banks would jointly need such as “switching” (which is fancy word for allowing all banks have a central place to send and move funds between each other). So now NIBSS is providing another service that the banks jointly need, which is the provision of a card scheme. The NIBSS is independently operated by its staff and management, it is just owned by the banks and the CBN but its operations are independent. I know it is a little confusing, but it is a thing in Company Law where the owners of an entity (shareholders) are not always the ones operating it daily (directors).
Anyway, what matters is if this card can work for international payments. Unfortunately, we do not have an official answer, so we need to make informed guesses.
So let’s play a game of deduction. What is required for a card payment scheme to work internationally? Our previous episodes already examined this. Basically, you would need;
That the card scheme is registered in multiple countries to operate a card scheme
That the card scheme has partnerships with banks in those countries to onboard merchants and to issue cards to consumers
Okay, it is not unreasonable to guess that these are most likely not the case for the Domestic Card Scheme. The sheer logistics required to establish sufficient relationships for this would take years to establish.
So, in legal speak, we would say something along these lines; “given the limited facts available to us, and our understanding of the legal clime for international payments, there is no reason to assume that the Domestic Card Scheme would work for international payments“.
However, there is another possibility, one that is strictly based on the roadmap of the Domestic Card Scheme. If the Domestic Card Scheme intends to support international payments, then they could enter into a partnership agreement with any of Mastercard, Visa etc.
Anyways, until we get official information from the NIBSS, it is safer to assume that the Domestic Card is not targeted at international transactions.
I really hope that we get a solution to the international card spending problem, but I am doubtful that any fix outside getting the Nigerian foreign exchange reserves back up would last long.