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POS transaction volumes rise amid economic challenges

The volume of Point of Sale (POS) transactions keeps rising amid challenging political and economic environment. Over the past 5 years, the volume of POS transactions has grown at a compound annual growth rate (CAGR) of 69 per cent while the global POS terminal market is projected to grow at 8 per cent CAGR over the next 5 years.  The growth in the volume of POS transaction makes the payment channel one of the active contributors to Central Bank of Nigeria’s (CBN) bid to drive a cashless economy.

pos transactions
Source: NIBSS, BRIU
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Global Point of Sale (POS) Market

The explosion of payments in the global financial services system has unquestionably risen over time. The market is expected to cross $9.8 billion (N352.8 trillion) which is projected to grow significantly with a CAGR of about 12 per cent during the period of 2017 to 2023; thus, the market is expected to grow in volume and value of transactions respectively.

 

Source: NIBSS, BRIU

 

Similarly, POS transactions in Nigeria rose steeply in 2018 according to the Nigeria Inter-Bank Settlement System (NIBSS) data. Interestingly, POS transaction was valued at N2.3 trillion in 2018 which was a 65 per cent increase over the preceding year of 2017. In 2017, the total POS transactions were up by 75 per cent to N1.4 trillion from N0.8 trillion in 2016. It is expected to rise to N4.69 trillion in 2019 (FY) and further increases by 104 per cent to N9.55 trillion in 2020.

The volume of transaction in the period under review also improved impressively as more adoptions of the payment channel were utilized for the settlement of bills and other business obligations. Excitingly, the volume of POS transaction significantly rose by 95 per cent from N146.3 million in 2017 to N285.9 million in 2018.

This implies that N139.6 million worth of successful transactions were added in 2018 over those recorded in 2017. This is the highest addition when compared with preceding years: N20.8 million in 2014; N33.7 million in 2015 and N63.7 million in 2016.

From the data compiled and analysed by the BusinessDay Research and Intelligence Unit (BRIU), results indicate that over the period of 5 years, the volume of POS transaction has grown in a geometrical progression. This is evidence that the figure grew from double-digit in 2015 to a triple-digit in 2017.

Source: NIBSS, BRIU

 

Based on the 2019 monthly data on the volume of POS transactions as released by the NIBSS, the volume of transactions dropped by 8 per cent from N28 .16 million in January to N25.78 million in February 2019.  This decline in the transactions could be attributed to a number of factors which include – political environment, economic environment among others. The consumers became more rationale or rather conservative in their spending patterns due to the electioneering period, fear of security, instability and policies change that might impede their businesses.

In March, after the electioneering period, the POS volume increased by 16 per to N29.82 million; it further increased by 12 per cent in April to N33.36 million compared to the previous month; the figure also increased but in a declining rate of 6 per cent from N33.37 million in April to N35.47 million in May. In addition, the figure is expected to rise to N37.72 million at the end of June; N40.11 million in July and N42.66 million in August 2019.

Sectoral adoption of the POS

Among the sectors that adopted the usage of POS, the retail sector continues to lead in terms of usage. Other sectors with high POS usage include– wholesale, fuel station, fast food, unclassified, hotels, pharmacies, financial institutions, telecom services and telecom equipment.

The foremost sector of the economy in POS usage remains retail with 86 per cent growth rate which resulted in transactions worth N73.9 million when compared to N39.56 million in 2017. But the data did not specify how much of the retail sale are e-commerce. Wholesale recorded an increase of 134 per cent from N28.73 million in 2017 to N67.4 million in 2019. The fuel stations also recorded an impressive growth of 159 per cent from N5.23 million in 2017 to N36.6 million in 2019 as adoption continues to grow among fuel station nationwide.

Fast food POS transactions were up by 67 per cent from N17.63 million in 2017 to N29.6 million; hotels usage rate increased by 31 per cent from N7.01 million in 2017 to N9.2 million; pharmacies rose by 77 per cent from N3.22 million in 2017 to N5.7 million 2018; financial institutions increased by 194 per cent in terms of usage from N1.19 million to N3.5 million in 2018.

POS adoption by location

Lagos, the 5th largest economy in Africa continues to represent the biggest POS market across the federation. In 2018, 53 per cent of the transactions occurred although declined by 15 per cent when compared to 68 per cent growth in the previous year. Others include Abuja, Ogun, Rivers and Delta which collectively accounted for 25 per cent of adoption.

Despite these impressive feats recorded in the POS payment channel in term of volume and value, as the usage grew so also the failed transactions.

In 2018, POS transactions recorded 15 per cent transaction failure which was as a result of the regulatory requirements while 63 per cent of the transaction failure could be directly or indirectly attributed to customers’ errors – errors like insufficient fund and wrong selection of account options.  However, without these errors, the industry failure rate would have been dropped drastically to 5 per cent based on the POS transactions.

Notwithstanding, there has been a massive fundamental shift taking place across all the payments platforms which are driven by partly public and private sector efforts to integrate the banking public into the formal economic fold. Also, it could be attributed to a high level of mobile phone penetration which is connecting the bankable public to vital information and application-based service.

 

 

 

 

 

 

 

 

 

 

 

 

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