Banks, Merchants Invest $80m on PoS Terminals

Money deposit banks and merchants in the country have invested some $80 million in the acquisition of Point of Sale (PoS) terminals in their effort to facilitate electronic payment, Nigeria CommunicationsWeek can report.

PoS terminal are electronic device that accept cards and are used by banks and merchants to receive payment of goods and services as well as for transfer of money from one account to another.

A typical PoS with features cost between $350 and $400.

Central Bank of Nigeria (CBN) said that there are 200,000 point of sale terminals (POS), over 100 million mobile phones available to serve customers, while there are less than 6,000 bank branches, 10,000 Automated Teller Machines (ATMs) as well as less than 20 million bank accounts in the country.

Nigeria CommunicationsWeek gathered that a typical PoS is built to work in any environment with little infrastructure and that operators of the devices pay some token on each  single device as operating fee to telecommunications operator that provides connectivity for the device to work.

Tuned Ogungbade, managing director, Global Accelerex, said that connectivity issues has a significant impact on the ecosystem but merchants are now realizing that these issues are very similar to what they experience with quality of service for telephone calls through mobile telecommunication services, especially when their POS Terminal services are provisioned through mobile telecommunication infrastructure.  Payment Terminal Service Providers are ultimately responsible for providing technology solutions that address gaps in service delivery. 

“At Global Accelerex, we intentionally ensured that our K370 POS Terminals are certified by NIBSS to support CDMA and 3G/GRPS services throughout Nigeria.  In addition, we work with telecom service providers used by our acquiring banks to understand their quality of service delivered by region and make recommendations to the merchants or our acquiring bank on the best standard for terminal communication with each merchant terminal deployment.  These require that we understand which service provider has the best service by region and sometimes by city. We have begun to see fierce competition take place between mobile telecommunication service providers; more providers are now entering the market to focus on underserved segments with LTE Mobile services for data etc.; we believe this will lead to improved quality of service in the medium term and eliminate connectivity issues on the long run,” he said.

Ogungbade however noted that education on the part of the merchants on the transaction fees charged for POS transaction is one such challenge.  “We believe that as banks continue to educate merchants with metrics to explain why the cost of 1.25% is less than costs merchant currently incurs for cash management, merchant POS presentment for use barriers will be removed.  For example, aside from the 3% penalty on deposits, there are other factors that most merchants have not been educated about which hinders their buy in to use the POS Terminal. 

Most merchants are not aware of the cost of they incur managing cash. Now that banks have started engaging merchant more, helping them understand the costs inherent in cash management and demonstrating empirically that such cost are much higher than the 1.25% transaction fees. 

In addition, consumers must have a good customer experience dealing with their issuing bank when dispute resolution occurs, because these issues will happen.  Banks has also started to incentivize card usage, which will help bring awareness amongst consumers and create consumer driven demand for POS usage in the industry,” he stated.

It was gathered that the process of deploying a point of sale terminal requires the PTSPs to first register such terminal with Payments Terminal Service Aggregator for the industry which is Nigeria Inter-Bank Settlement System (NIBSS) before such terminal will be deployed.

The essence of registration of terminal before deployment in the present arrangement is to ensure that the terminal commences transaction immediately it is deployed.