•A customer in a rural area performing a transaction at a POS centre
The increasing cost of commissions associated with Point-of-Sale (POS) banking is becoming a significant threat to the livelihood and small and medium-sized businesses.
These high costs have become not only burden merchants but also influence consumer behaviour, potentially driving them towards alternative payment methods, reports Sunday Tribune.
The decision of the federal government, through the Central Bank of Nigeria (CBN) to introduce the cashless policy in January, 2012, with Lagos serving as the pilot scheme, was no doubt, without the usual mixed feelings.
While many Nigerians were in bed with the apex bank’s position that the policy would go a long way in decongesting the banking halls, enhance bank customers’ experience and promote financial inclusion, some conservatives, were skeptical.
The skepticism was hinged on the likelihood, on the part of the policy makers, not seeing the policy through.
Interestingly, agency banking was another of such introductions, in the space, which many believed has gone a long way in redefining banking practice in Nigeria. The accessibility of Point of Sales (PoS) operators across the length and breadth of the country, has, without doubt, gone a long way in easing the burden, that hitherto accompanied banking activities, prior to their introductions.
“The gains were tremendous. It was a development that brought smiles to the faces of customers in this market segment, enhance the fortunes of those operating in that segment, and was, at the end of the day, able to create some set of financially independent Nigerians, since it required a minimal capital, or nothing at all, in some instances, to start the business,” observed Yemi Adebayo, a finance expert.
Are the gains being reversed?
But, unfortunately, Adebayo believed the gains, made over the past one decade in the sector, are, advertently or inadvertently, being gradually reversed.
For instance, the increasing cash crunch being witnessed in the sector has continued to whittle down the confidence of customers in that space. This, he warned, may spell doom for the nation’s financial sector since it is an industry that thrives on customers’ trust and confidence.
“When you begin to give the people the idea that what you have, as a bank, is limited, and may not go round, they are likely to recline into their ‘shell’, and find alternatives to the conventional banking, thus taking the country back to those dark times of banking,” he stated.
Interestingly, Adebayo’s submission may not be far-fetched. The cost and charges from transactions on PoS have become a huge challenge for many citizens to handle, and they’ve started looking for alternatives.
For instance, depending on where such operators are domiciled, the new charges range between 50 to 100 percent.
In the Ajah, Lekki and Ikeja areas of Lagos, operators charge as high as N200 on a N5,000 withdrawal, instead of the usual N100, while the costs of withdrawing the sum of N10,000 range between N300 and N400.
At Ojuore, in Ota, in Ado Do Ota Local Government Area of Ogun State, the situation is slightly different. Same transactions attract N150 and N300 for withdrawals of N5,000 and N10,000, respectively.
It’s frustrating, not our fault, customers are deserting us ―PoS operators
Giving reasons for the gradual turn of events, Mrs. Florence Amoo, a PoS operator, in Lagos, attributed the development to the continued cash crunch being experienced in the sector, and the recent decision of the apex bank to set withdrawal limits on PoS terminals.
The apex bank, at the beginning of the year, announced the commencement of POS Withdrawal Limits of N100,000 daily, and N500,000 weekly, a development, she stated, had informed the hike operators now charge for PoS transactions.
Another PoS operator, Yusuf Kareem, is also uncomfortable with the hike in PoS charges. If not well- handled, the development, he noted, could spell doom for the nation’s financial space.
“For instance, we can barely break even now. No sane PoS operator will wake up one day and increase their charges. But the reality of this time makes it almost impossible to continue at the old rates.
“You know we go as far as sourcing our funds from some of these traders in the market, whenever we discover that what we get from the banks cannot be enough to really meet the needs of our customers. But today, even those traders have become wiser. They also want to make money with such transactions. They therefore charge as much as you get at the regular banks,” he stated.
Yusuf stated that the decision to set minimum withdrawal for individuals at N100,000 daily and N500,000 weekly has negatively impacted the business.
“How much is N100,000 in a day or N500,000 weekly, considering the fact that the value of the naira has been badly impacted?” he queried.
Yusuf believes the implications are grave for the operators, the operation and the larger economy.
Activities in that space have declined significantly, since customers are beginning to explore other means, besides PoS, to do their banking transactions, a development that has led to a sharp drop in revenue for the operators.
“When you tell them the new charges, some will just demand for their cards and walk away. And this is a huge blow to the business,” he added.
Interestingly, many of such operators are already looking beyond the business, which had been their mainstay for years. They claim, unlike before, when they could solely rely on the business for survival, it has become imperative for anybody in that business to look for other sources of income to complement whatever is coming out of the business.
Mrs. Joan, who runs a cosmetics shop along with the PoS business, expressed regrets that the business, which provided the money with which she established the cosmetics business could no longer sustain her. Instead, it is the other way round.
“It is the provision shop that sustains the business now. Despite complementing what I get from the bank with the cash I get from sales here, it is still not business as usual,” Joan stated.
Rates getting too exorbitant for us ― Customers
Rauf Kehinde, a frequent PoS user, is of late considering other options that are cost-efficient.
“What I do nowadays is to go back to the use of my bank’s app to transact most of this business. I know this is not without its attendant risks, but one is left with no other options than to begin to explore all these means,” he added.
Kehinde queried the rationale of being charged double the amount he was being charged before for using PoS, noting that the technology which had been a source of joy to stakeholders in the sector is fast turning to a source of nightmare, and huge disincentive to customers.
Another customer, Alaba Robert, would not mind going to queue at the banks’ ATMs, describing the latest development as a grand conspiracy to short-change customers in that sector.
“I just realised all these charges are getting too high. I withdraw huge sums of money on daily basis from PoS because I have a site that I supervise, and can’t afford wasting all the time in this world at bank premises. But, with this development now, that position of mine would have to change, otherwise, one will just go bankrupt,” he stated
Implications for the economy
A financial analyst and CEO, Wealthgate Advisors, Mr. Biyi Adesuyi believed the development may see marginal PoS players being forced to close shops, and those employed by such players thrown into the labour market.
“In this type of situation, when profits begin to thin out, what we are likely to see is the gradual decimation of the small players. It is only the big ones that will survive, and this is not without its implications for economy, since many attached to those marginal PoS operators will lose their jobs, and be thrown into the labour market,” he stated.
But the Wealthgate Advisors’ boss was quick to see the proliferation of PoS operations in Nigeria as typifying the failure of the country’s banking system.
“A situation where PoS banking has become the new normal, and banks’ ATMs now serve as a backup cannot be said to be right for the economy. It is like using money to buy your money, when needed, instead of having the opportunity as a bank customer to stroll into any bank premises to use their ATMs for your transaction, without being charged.
“Let’s agree that the idea was to reach out to the unbanked, especially those living in communities where there are no banks, but how do we justify the presence of such a huge number of operators in the city, where there are banks?” he asked rhetorically.
Adesuyi also wondered how funds are readily available at PoS joints, but not always in banks’ ATMs.
“It only shows the grand plan to fleece the nation’s banking customers, because some of these PoS operators are either bankers or have relatives that are bankers,” he added.
Way Forward
For Adesuyi, some of those policies of the apex bank must be reviewed. He also suggested that the idea of charging other banks’ ATM card after transactions should be discarded.
“If I used my Bank A card on Bank B ATM, the simple truth is that another of Bank B customers will also use his card on my Bank A machine. So, in what way is that a problem? I see it as pure extortion, which I believe the apex bank must correct,” he stated.
Adesuyi would also want banks to always make cash available at their ATMs so as to ease the pains usually encountered by Nigerians at ATM points.
It is, however, the fervent wish of Adesuyi that those that nursed their reservations about the ability of the relevant authorities, in the sector, to walk the talk of financial inclusion, will not be proved right at the end of the day. And, the only way of doing that, he noted, is by coming up with policies that will better serve all interests in that sector, and not that of a very negligible few.
