New PoS charges seen boosting other payment channels usage

The new unified price list for Point of Sales (PoS) transactions in Lagos state may increase the use of other payment channels, according to experts.

The price list which comes with an upward review of prices creates an additional cost for cash-strapped Nigerians dealing with high inflationary pressures at the highest level in 17 years.

Some of the other payment channels are Automated Teller Machines (ATMs), mobile banking apps and USSD (Unstructured Supplementary Service Data).

“I see this price revision leading to increased use of digital payment platforms. Firstly, we should acknowledge that an average Lagos resident is faced with inflationary pressure on basic goods and services following recent government policies,” Israel Odubola, a Lagos- based research economist, said.

He said in Lagos, there are more banked individuals than the unbanked. “Apparently, this revision will propel people to embrace digital platforms more. Also, areas where there is a high banking presence, the impact of the revision will be muted.”

According to Odubola, the revision will be significant in remote areas of Lagos where there is lower banking presence, and PoS operators seem to be their lifeline.

Chinasa Collins-Ogbuo, head at Inclusion for all Initiative at Africa Practice added that Digital Financial Service is one of the key enablers and drivers of formal financial inclusion.

“The mobile agent is a digital channel that drives account usage, a key indicator for financial inclusion. As such, for the vulnerable groups that currently depend on it, a price increase threatens usage,” she said.

According to Collins-Ogbuo, the magnitude of the impact on Nigeria’s financial inclusion targets may not be significant because it is localised to Lagos where there are multiple channel options and the unbanked population is not as high as some other regions.

“Nonetheless, it still poses a threat to deepening financial inclusion as account usage for those that don’t have bank branches and ATMs in close proximity may decline, and those yet to be banked are disincentived to do so.”

Last Friday, Stephen Adeoye, the spokesman of the Lagos Chapter of the Association of Mobile Money and Bank Agents In Nigeria revealed the details of the price list on Channels Television.

The directive is in defiance to the guidelines given by the Central Bank of Nigeria (CBN) on PoS charges.

According to Adeoye, the association is increasing the price of PoS transactions both for withdrawals and deposits as a result of the economic downtime experienced in the economy.

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“Looking at the price of paper and fuel as well as the cost of maintenance, so people won’t just get to withdraw money anyhow,” he said.

Standing as the image maker of the association, he said the price should reflect on the location of the merchants, but shouldn’t be lower than the stipulated prices.

A breakdown of the unified price list show that for withdrawals, a charge of N100 is for N1,000 – N2,400, N3,500- N4000 (N200), N4,100-N6,400 (N300), N6,500-N7,900 (N400), N8,000-N10,900 (N500), N11,000- N14,000 (N600), N14,500-N17,900 (N700),N18,000-N20,000 (N800).

For deposits, N100 is for N1,000-N4,900, N5000-N10,900 (N200), N11,000-N20,900 (N300), N21,000-N30,900 (N400), N31,000-N40,000 (N500), N41,000-N50,000 (N600).

The charges may affect PoS businesses because they cannot afford to pass the extra cost to their customers to inform of additional charges, Temitope Omosuyi, investment strategy manager at Afrinvest Limited said.

“They are other competitive, cheaper and effective alternatives that consumers can rely on especially in an inflationary environment where they would want optimal value for every naira spent,” he added.

Nigerian banks have exposed NIP through their various channels i.e. internet banking, bank branch, Kiosks, mobile apps, USSD, PoS, ATMs, etc. to their customers.

Data from the Nigeria Inter-Bank settlement (NIBSS) scheme show that electronic payment transactions hit N123.8 trillion in the first quarter of 2023, a 44.6 percent increase from N85.6 trillion reported in the same period of 2022.

A breakdown of the data show that the volume of mobile transfers rose to 505.2 percent to 672 million from 111 million. In terms of value, N9.1 trillion was reported from January to March this year, compared to N3.5 trillion in 2022.

PoS volumes’ reported a 37.5 percent rise to 387 million in the first three months of the year, from 281 million in the corresponding period.

In terms of value, transactions performed using the PoS channel increased to N2.8 trillion from N1.8 trillion, accounting for a 52.2 percent increase in the period under review.

The surge of electronic transactions has caused the loss of transactions with Cheques, which has continued to maintain its downward trend in value to N7.6 billion in the first three months of 2023 from N7.9 billion in the same period of 2022.

In 2012, the CBN introduced the cashless policy, which was meant to curb the excessive handling of cash and curtail the volume of cash in circulation.

More importantly, the policy was introduced to drive the development and modernisation of payment systems capable of placing Nigeria among the top 20 economies in the world.

And mobile payment schemes and mobile phones are channels to which banking services will continue to gain traction, particularly in Sub-Saharan Africa.

According to the global body of mobile operators, there will be 100 million additional subscribers to mobile money in Sub-Saharan Africa between now and 2025.

In 2020, the country failed to meet its 80 percent financial inclusion target as it grew to 64.1 percent in 2020 from 63.2 percent in 2018, according to Enhancing Financial Innovation and Access, a financial sector development organization.

Although the inclusion rate dropped marginally from 36.8 percent in 2018 to 35.9 percent in 2020, the excluded adult population of 38.1 million in 2020 was higher than the 36.6 million in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020.