There are only 3, 000 functioning Point of Sales (PoS) terminals out of the 13, 000 existing terminals in Nigeria, a telecom consultant told Business Day at the weekend. A PoS device is an electronic device used for verification and processing of financial transactions through electronic cards, including debit and credit cards. Industry analysts told Business Day at the weekend that Nigeria’s low PoS density constitutes a significant drawback to the success of Central Bank of Nigeria’s (CBN) cashless Nigeria project which is scheduled to go live by June 2012. In comparison with other nations of the world, Nigeria is lagging behind in the global transition to a cashless society.
Spain , for instance has 1.6 million active PoS terminals with a population of 14 million people, while India has deployed about 500, 000 PoS terminals , conducts 360 million transactions per annum. The financial regulator and banks are upbeat about the prospects and benefits of moving the economy into cashless mode. Only recently, deposit money banks agreed to deploy 40,000 PoS terminals in Lagos, before December. The CBN is poised to license five independent Payment Terminal Service (PTS) providers with the singular mandate to deploy and manage PoS terminals in Nigeria.
Besides, banks are excluded from the licensing regime, as the regulator rules that banks can only own the terminals through the PTS. The process for the PTS licensing will take a period of two weeks as the CBN has committed to announcing the names of the providers in September 2011.“The vision of CBN over the next two to three years is that Nigeria has 500, 000 PoS terminals. Are banks ready for the move? Yes, they are. Do banks have the expertise to deploy PoS terminals? That is subjective.
Another challenge is the prohibitive cost of deploying PoS. it is very expensive because people buy, based on silos. “The industry is looking at it from a shared service perspective, which would ensure that the cost goes down”, Luqman Balogun, divisional head, e-Banking, UBA told BusinessDay. Juliet Anammah, director, real sector, Accenture Nigeria, confirmed that 3, 000 PoS were operational, adding that connectivity issues resulting in frequent downtime in communications, merchant apathy, and lack of awareness, were some of the factors responsible for Nigeria’s low PoS density.
She said that the CBN was working with telecoms firms to ensure 95 percent bandwidth availability to boost user confidence in the systems. “As you know, the PoS transactions doesn’t actually carry much capacity, maximum is 4 kilobytes so, it is just a question of ensuring that there bandwidth for that and CBN has said that they are working with telecoms providers to ensure 95 per cent availability and to develop that further until they have 100 per cent availability”, Anammah posited.
Balogun believes that another imperative challenge was the prohibitive cost of deploying PoS. “It is very expensive because people buy based on silos. The industry is looking at it from a shared service perspective which would ensure that the cost goes down.
“We are partnering with the telcos to ensure connectivity is addressed. As an industry, we are working to improve customer education and awareness. From a CBN perspective, we are looking at making the cost of processing ATM more than using the PoS. When you combine all these factors together, what we would see is an aggressive growth of PoS usage. PoS have come to stay in Nigeria and the first window that we got is the directive that by June 1 all PoS in Nigeria will be card neutral”, he stated. Valentine Obi, managing director, eTranzact, attributed low patronage of PoS by Nigerians to lack of awareness.
Obi said the use and availability of PoS at merchant locations need to be brought to the consciousness of Nigerians just as banks did with ATM. He further pointed out that presently, PoS are deployed mostly in areas most people see as reserved for the rich and not at places that will drive volumes such as Idumota market, Aspanda and so on. Over the years, the e-payment system in the country has undergone significant transformation. Firstly, the apex bank directed all banks to migrate from the traditional magnetic stripe cards to Europay, MasterCard and Visa standard chip and Pin cards.
Thereafter, financial institutions were directed to relocate their offsite ATMs, which led to licensing of additional ATM Consortiums that will deploy and manage such offsite ATMs. Besides, the CBN has reversed that directive and banks to deploy 75,000 ATMs before 2015. The e-payment industry also witnessed the commencement of National Central Switch that will address the problem of interoperability especially with transactions on Point of Sale terminals (PoS).