The use of Point of Sale (PoS) machines in Nigeria is growing and it is a major driver to Nigeria’s cashless economy. The POS business first came into Nigeria in 2013, after the CBN led by Sanusi Lamido Sanusi, introduced the agent banking system with plans for a cashless economy. The result paved the way for all financially related services to reach the public especially in unbanked regions of Nigeria. Since then, Commercial banks, microfinance banks and some fintechs have provided POS services for people interested in the business.
These people are called PoS Agents and can be found in various parts of the country. The banks equip these agents with a PoS device ( a card reader), mobile phone, barcode scanner, personal identification number (PIN) pads, personal computer, etc. POS business operators are third-party agents and can serve as many banks as possible.
While some have shops, and kiosks, others run this business in a mobile way – carrying bags with the PoS machine and money in the bag. Additionally, other vendors such as market women, fuel stations, supermarkets, etc also use PoS for their business as customers can pay for goods bought with their ATM cards. It is such an endless possibilities of how much the PoS business has been helpful to the Nigerian cashless policy.
Some of the banks involved are First Bank, Access Bank, GTCO, Ecobank, etc. Microfinance banks as well as Fintechs are also involved. Popular ones are Opay, Moniepoint, Palmpay, Bankly, etc.
Services offered by PoS businesses
The POS business is primarily known for aiding cash withdrawal. However, it offers many more services cutting across power, internet and other providers. Some services offered by POS businesses are mentioned below:
- Withdrawal of funds from a bank account
- Opening a bank account
- Funds deposit
- Funds transfer
- Payment of bills such as electricity, TV subscription, airtime and others
- Bank Verification Number (BVN) enrollment.
Solving the needs of the unbanked
Nigeria is home to some of the most unbanked people in the world, especially in the many rural parts of the country. In these areas, the absence of banks and ATMs has contributed to the number of unbanked people in the country. More than 42 million Nigerian adults live in rural areas that lack basic banking services. According to a 2021 EFInA study on trends in access to financial services in Nigeria, there are numerous gaps to fill in the rural areas populated by unbanked people excluded from the financial ecosystem.
The EFInA report shows that while 71% of urban adults have bank accounts, only 40% of those in rural areas have a formal account. In over 60 percent of rural communities across Nigeria, there are no bank branches, agents or ATMs.
More so, according to the World Bank’s 2021 Global Findex report, Nigeria is among the top 7 countries that are home to half of the World’s unbanked population. This is about 54% of the unbanked population, which represents 740 million people.
Despite this report, Nigeria has experienced significant improvement as the nation has achieved 64% of its inclusion target, according to a CBN report in 2022. A major reason for this is the introduction of the PoS machines in various neighbourhoods, thereby improving financial inclusion by bringing financial services to the unbanked and underbanked population in Nigeria especially in rural areas, and making cash available to people in every area.
Currently, Lagos accounts for about 70% of the total volume of PoS transactions in Nigeria. This is because a greater majority of POS users are concentrated in Lagos. Another reason for this is awareness and lack of financial education especially in the Northern regions of Nigeria, which has the lowest adoption of POS business.
Why PoS Business is so popular in Nigeria
The popularity and acceptance of PoS Business in Nigeria is due to the many problems it solves, especially for all parties involved – PoS Agents, financial institutions and customers.
- The low number of functioning ATMs in the country which causes long queues is eliminated.
- Poor network connections at ATM points and banking halls have made many customers find alternative ways to perform monetary transactions.
- There is a readily available market for the business due to the limitless number of people who perform numerous transactions every day in marketplaces, streets, motor parks, etc.
- The PoS business also helps consumers withdraw money easily when the closest ATMs in their area are far from them.
- For the PoS Agent, the cost of setting up the business is easy and not cost intensive. With just an umbrella, chair, and table, the business can be started.
- Other services provided by the PoS business such as airtime subscription, data subscription, electricity bill payment, amongst others, solves a lot of problems and this attracts more customers.
Viability of PoS Business in Nigeria
According to statistics garnered from various sources, the PoS business is a very lucrative one and relevant to the current Nigerian economy. Check the reports below:
According to the NIBSS 2022 report, there are about 986,252 registered PoS units in the nation. In 2020, the Nigeria Inter-Bank Settlement System, NIBSS reported that Nigerian merchandise and mobile money operators (MMOs), processed more than 655,000,000 POS transactions which were valued at ₦4.7 trillion ($13 billion), a 50% increase from 2019. In the following year 2021, POS transactions in Nigeria recorded N6.43 trillion. The figure is a sharp contrast to the N1.41 trillion received in 2017, N2.32 trillion in 2018, N3.2 trillion in 2019, and N4.73 trillion in 2020.
In 2021, in a survey taken in different parts of the country by TechPoint, 21 out of 33 participants said they prefer to use banks. 23 people said they use a PoS agent often. 19 reported that they hadn’t visited their bank in over two to five months.
Furthermore, in a report carried out by Statista, PoS business in Nigeria saw a remarkable growth between 2017 and 2022. While there were 155,000 terminals in 2017, there was a significant growth as at April 2022, with 1.1 million PoS terminals. With the recent cash problems in the country, it won’t come as a surprise if that number has increased beyond 20%.
Benefits of PoS business in Nigeria
The POS business is very beneficial to both the business owner, PoS service providers and customers. Some of these benefits are highlighted below
- It promotes financial inclusion in the country, as the banked and unbanked have access to financial services.
- It reduces the number of queues at the bank, helping to save time and resources.
- It contributes to the GDP of the country as it helps reduce unemployment and provide small business owners with another stream of income.
- It provides ease and convenience for people as they don’t have to go to the bank
- It reduces exposure to theft, as people don’t have to carry so much cash around.
- It increases sales for merchants as they can cater to both cash and card-carrying customers.
Advantages of PoS Business to PoS Agents
Ease of Setting up
The PoS business offers low barrier entry for individuals. This is because the startup capital requirement is not as much as that required by other businesses. There is no need for a fancy structure, at least while starting. This eliminates the cost of getting a shop as with a space and an umbrella, a person can start the business.
Customer Traffic
Large financial transaction volume pass-through PoS agency banking business in Nigeria and means significant business turnover for operators.
Employment Opportunity
For unemployed people, the PoS business is a good business to start with instead of remaining jobless. The low barrier entry means a person can easily start up the business and with consistency scale because of how viable the business is.
Multiple Streams of Income
For people with active employment or other businesses, the PoS business is a good way of expanding their income. The business offers a sustainable means of income and may even transition to a primary source of income if adequate attention is paid.
Challenges of PoS Business
Every business has its risk sides, and although not much, it’s important to look at these challenges faced by the PoS business.
Insecurity
Since money is involved, the PoS business is high-risk as operators can be a target for robbery attacks and theft. Therefore it is important PoS Agents are security conscious at all times.
Fraud
Some individuals with criminal intentions sometimes patronise PoS business operators intending to carry out fraudulent transactions. Fraudulent activities such as giving fake notes for money transfer, false alerts, etc can take place. PoS Agents should be wary of these activities.
Lack of Access to Cash
PoS Agents may find it difficult to run their business when there is availability of cash. Despite the fact that there are other services provided, the major service PoS Agents provide is the cash dispensing.
Poor Network Service
Poor network connectivity is a significant threat to the smooth operations of your PoS business. It is important to be in a location with a reliable network connection, as well as the network for the PoS device. One of the most common complaints is customers having to wait for sometime to receive their cash after they have been debited but PoS agents not receiving a credit alert on their own device. This can be very awkward at times.
Hidden Charges
Another challenge faced by PoS business is that some merchants have continued to collect legal fees from cardholders who want to use their cards on PoS. According to reports, some petrol stations, supermarkets and other business owners that deploy PoS machines for payment are still collecting an illegal stamp duty, which in some cases could be N50 or N100. This has made some customers shun PoS transactions due to these charges.
Poor Electricity Supply
Unstable electricity supply is another critical challenge confronting business in Nigeria, the PoS business inclusive. This Is because the PoS machines need to be charged as they run on rechargeable batteries. In areas with poor electricity supplies, PoS agents would need to incur costs of getting a generator to charge and power other PoS devices.
Conclusion
Nigeria is far from the finished product as far as going cashless is concerned. However, the success achieved by PoS agents in Nigeria in less than a decade is a testament to the great potential of the business in helping the country achieve its financial dream. Remote places are having access to banking services which means that more people are becoming less unbanked. The dream of going cashless is very much possible as long as the PoS services are improved through technological advancement, and more people become PoS Agents.
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