Payment News

CBE Seeks Expansion of Real-time Payments

The Central Bank of Egypt (CBE) launched its national system for real-time payments in April 2022. The real-time payments system allows continuous remittance services.

CBE is cancelling all fees for activating electronic collection services via the internet for micro, small and medium companies that want to activate the real time service in 2023. It wants to expand the use of digital financial services.

CBE has also decided to exempt customers for transfer fees for the first transaction per month to transfer from any mobile phone wallet to any other wallet, and the value of one Egyptian pound as a maximum for the expenses incurred by the customer for transfer transactions that take place between mobile phone wallets belonging to the same service provider.

It has also capped transfers between mobile phone wallets not affiliated with the same service provider.

CBN Amends Cash Withdrawal Restrictions

At the beginning of September, the Central Bank of Nigeria (CBN) revised cash withdrawal limits as part of its campaign to increase the use of electronic payments. Feedback on the limits has led it to update its original Circular.

The main changes are an Increase in over the counter (OTC) cash withdrawals from N100,000 to N500,000 for individuals and from N500,000 to N5,000,000 for corporates per week.

For OTC cash withdrawals above the limit, the fees will reduce from 5% to 3% for individuals and from 10% to 5% for corporates. The limit on withdrawals on compelling circumstances is removed.

Third party cheque OTC payments and clearing limits increased from N50,000 to N100,000.

In the updated Circular, Mobile Money Operators (MMOs) and Agents are now included. There is a view that the original Circular would have stifled agent banking business and other cash-based enterprises, particularly where there are few banks, ATMs or internet access for mobile and electronic banking. The changes made should help CBN with its drive increase electronic payments.

Offline Payments Enabled by Paytm

Paytm now has 5.5 million merchants in India paying a subscription for payment devices used in offline payments. Paytm claims its services helped users avoid 1.6 billion trips to ATM. It says two thirds of new users are from smaller cities and towns. Paytm UPI allows fast and secure payments.

As an aside, the maximum number of payments take place at 7.23pm on a Wednesday, Wednesday being the busiest day of the month.

Diem is Dead

The thought of Facebook providing payments caused central banks severe concerns and was a major stimulus for the Central Bank Digital Currency (CBDC) work going on today. In February 2022, the intellectual property and other technology assets of Facebook’s private digital currency Diem were sold to Silvergate, a crypto-focused bank. Silvergate has now written off the $196 million it paid and announced plans to lay off 40% of its staff.

The decision appears to be part of the fallout from the collapse of FTX, causing Silvergate to review its expense base.

Silvergate is no longer planning to launch a blockchain-based payment solution.

Reducing Merchant Costs in Italy

The recent proposal, now withdrawn, to raise the Italian legal limit for cash transactions to €5,000 and to allow businesses to refuse electronic payments for transactions worth under €60 was a response to interchange and merchant acquirer fees.

GlobalData’s 2022 Financial Services Consumer Survey found that 76.4% of in- store transactions were made electronically in Italy, predominantly with credit, debit and charge cards (54.2%). While Visa and Mastercard interchange fees are between 1-2%, the leading merchant acquirer in Italy is Nexi, who charge 4.1% on credit card and 4.19% on debit card transactions, and a fixed fee dependent on the product being sold. These represent significant costs for merchants.

Cash is under pressure in Italy, as elsewhere. It has seen the number of ATMs fall from 47,678 in 2018 to 43,467 in 2022, partly due to branch closure programmes.

Cash holdings are outside of the control and influence of central bank monetary policy tools and, with inflation in Italy over 10%, holding cash does not earn interest for its owners.

One answer being promoted is the adoption of real-time payments since these usually do not incur interchange fees and they offer faster access to funds for merchants, which helps with cash flow.

The Case for Virtual Cards

Virtual cards are being promoted as avoiding the need for physical cards, thereby reducing costs and having a lower environmental impact.

A digital card is a copy of a user’s physical card that is stored on the mobile device.

A virtual card has its own unique card number, expiry date and cardholder verification code (CVC). The card number is secured by encryption. The CVC code has a limited lifespan in terms of the length of time and number of transactions for which it can be used. Typically, these CVC codes are single use, with a fresh code generated for each transaction. Proponents of virtual cards argue they are more secure than the alternatives.

The digital format of a virtual card means they can be linked with other products such as loyalty schemes.

One ‘benefit’ put forward is that issuers can change their pricing strategies, for example to promote sales or enter new markets. Presumably, prices can go up as well as down though.

The Logic of Contactless ATMs

A recent article in Retail Banker International focused on the increasing use of contactless ATMs. In Europe these are already popular but the UK lags behind. Currently 16% of the UK’s 52,258 ATMs support contactless withdrawals.

One driver for their use is that growth in the use of digital wallet apps on phones accompanied by the increasing use of virtual cards. As fewer people carry physical cards, and given that cash is still regularly used by large numbers of people, a contactless solution for ATMs is needed.

Although going contactless requires a physical upgrade of ATMs, this is something that can be done as part of existing maintenance schedules.

In terms of security the same process logic and security are used whether a card is inserted or a ‘conversation’ between a contactless card and the ATM takes place.