At 7 o’clock when the street inside the gated community known as Even Estate starts to wake up is when the nearby Point of Sale (PoS) shop, owned by Daniel Ishie, a mobile money agent, welcomes its first customers. They are mostly 9-5 workers attempting to beat the rush hour traffic that builds from the Jubilee Bridge at Ajah to VGC, Lagos. To do so they would need cash for a tricycle ride to the bridge where they will pay another money for a bus ride to their destination.
Ishie is the main plug for quick cash to these workers, not necessarily because he always seems to have it in bulk, but because his charges are much more stable than those of his competitors, five of which are one or two shops away.
He carries out his business using about six PoS terminals owned by operators like Moniepoint, Opay, Palmpay and banks. While he is well-trained to offer most cashless transactions like account opening, payment transfers and bill payments, his primary source of revenue comes from cash transfers.
But recently, the volume of cash he gives out to customers in a day is reducing because more of his customers are using cards or mobile devices to make transfers.
“Even Keke drivers are accepting transfers,” Ishie said.
He attributes this to the surging inflation that has made the cost of transport so unpredictable that some passengers are forced to demand transfers. It is a similar story for merchants. As prices of products rise, using cash to pay for products is no longer necessary. As cashless transactions grow, banking agents see demand for their business shrink. Mobile money operators are also seizing this opportunity to focus investments on attracting more merchants into the space.
“We want to include everyone from the regular Okada rider to the market woman in the financial services space. We have built our infrastructure in such a way that it is very elastic. As transactions grow, we can expand our infrastructure and this is because we have several monitoring tools that help us to monitor how transactions are growing. Also, in every nook and cranny of the nation, we have our business relationship reps. Even in localities where there is no physical bank or ATM presence, you’ll find our precious blue boxes there,” said Babatunde Olofin, acting managing director of Moniepoint Microfinance Bank.
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Experts say the future of banking agents lies in how relevant they are to the cashless economy because cash will not always be dominant even if it doesn’t disappear totally. The volume of electronic payment transactions is on a persistent upward trajectory. Data from the Nigerian Interbank Settlement System (NIBSS) showed that in the first five months in 2023, 4.1 billion payments valued at N211.1 trillion were made, representing a monthly average of 818.4 million transfers. TechCabal Insights predicts that NIBSS, even with a conservative growth rate, will report 9.7 billion transactions by the end of the year, almost double the figure from 2022.
Nonetheless, banking and mobile money agents have become an important part of the financial service industry. They are particularly seen as the last purveyors of banking services to those usually not reached by financial institutions due to limited resources and presence. It is not that these agents have more resources than banks, they are everywhere and all they need are mobile devices like phones and various forms of mobile PoS-enabled devices.
This is why the Central Bank of Nigeria (CBN) has, as part of its financial inclusion measures, taken various steps to encourage their proliferation by issuing different licences and guidelines that attract new operators into the market. The number of mobile money agents grew from 12 million in 2021 to around 17 million in 2022, representing a staggering 41 percent increase year-on-year, according to a report by the GSMA.
“The introduction of mobile telephony in Nigeria, its rapid growth and adoption, and the identification of person-to-person payments as a practical strategy for financial inclusion has made it imperative to adopt the mobile channel as a means of driving financial inclusion of the unbanked. These factors underscore the decision of the Central Bank of Nigeria to issue these guidelines, to create an enabling environment for the orderly introduction and management of mobile money services in Nigeria,” the CBN said in its Mobile Money guideline.
Mobile channels are also a means to achieve the cashless policy the CBN kicked off in 2013. Banking agents with their PoS terminals and other mobile devices, over time, have become the vehicle through which this policy can be achieved – or so the financial regulator believed at the time.
The low barrier to entry and high unemployment contributing to the increasing number of agents and demand for their services have seen the volume and value of PoS transactions surge. Data from Statista projects that the transaction value of the PoS payments market will reach $2.09 billion in 2023.
The challenge has been that a significant portion of agents’ transactions are in cash.
According to Usoro Usoro, CEO of Mobile Money (MoMo), about 90 percent of all transactions are made with cash. It is data that is also corroborated by other payment operators and it does not flatter the future of “umbrella” agents, as the Association of Mobile Money and Bank Agents of Nigeria (AMMBAN) referred to them recently.
The CBN under Godwin Emefiele had envisaged that these agents would be the evangelists of its cashless drive, helping unbanked populations create bank accounts without stepping foot into a bank, check their bank balance, pay bills and transfer funds from one account to another. But that is hardly the case for many agents.
Victoria Olaniyi, who owns a PoS shop at Fadeyi, a busy road within Yaba Local Government, in Lagos, said she saw the most considerable demand for cash when the central bank attempted to implement a naira redesign policy, which led to scarcity of the naira notes in the first quarter of the year.
“I saw a lot of customers during that period. In a day, over 40 customers can come to withdraw and I have N300,000 to N500,000; the whole money will just finish,” Olaniyi said. She also made a lot of profit from the withdrawal fees, which climbed due to high demand.
“Many customers that come to my shop prefer cash transactions. Many people prefer to hold cash for all these minor expenses as everybody will still need cash to settle one or two expenses, and not everybody like to do transfers for all these small transactions,” she said.
Emefiele, who was suspended as CBN governor in June, had been insistent that banking agents did have a huge role to play in driving financial inclusion. Experts say that the persistent demand for cash in the market is because there are not enough businesses doing online payments.
“Online payments depend on businesses that are digital-enabled. If you do not have enough of them, the market is much smaller than we think,” said Osaretin Victor Asemota, growth partner at AnD Ventures and Africa partner for Alta Global Ventures. “The market for fintech in Nigeria is not the consumers; it is the merchants and billers. Without a place for you to spend digital money, there is not going to be adoption. Which is why I kept shouting that the PoS agent model was a temporary aberration. We need more PoS merchants.”
Business owners such as Bosede Kudirat, a stylist who has run a Pos business for five years at Fadeyi, Yaba, demand for mobile transfers is growing because of customers trying to avoid persistent transaction decline. According to her, customers are always complaining that their ATM cards don’t work once the network is bad and getting a reversal for debited transactions takes a lot of time.
Fintech companies like Moniepoint are intensifying their efforts to bring more merchants into the payment market. Moniepoint presently has over 1.6 million businesses on its platform to access payment, credit and business management tools.
PalmPay is also pushing to attract more businesses to its platform. The company told BusinessDay that it has over 400,000 merchants. The over 500,000 agents are also part of its cashless payment ecosystem. The company’s agent banking business involves clients who use PalmPay PoS or PalmPay business app. Recently, Palmpay commenced the PayShop cashback promo to encourage customers to pay with a transfer.
“With a network of over 500,000 merchants accepting ‘Pay with Transfer’ from PalmPay, users can earn up to N500 cashback every day when paying the merchants or agents with the Palmpay app,” said Enitan Tanimowo, public relations manager at Palmpay.
Many umbrella agents are crossing over to become merchants by adding other products that enable their consumers to pay for other products and services without needing to withdraw cash to pay somewhere else. But those yet to make the transition are not having it easy.
Ikenna Obasi, who has run only a PoS business for three years under an umbrella, says demand for his service is beginning to shrink because the market seems saturated and customers are now doing more transactions with merchants.
“This business has not been going well for me. Even during the cash scarcity period, I had to stop doing it because I couldn’t get money, and customers were not coming, except for those that wanted to do transfers,” Obasi said.
Despite low patronage, Obasi is beginning to do more transfers than cash. “If 20 customers come around, I get to see like 12 people doing transfers,” he said. To prevent being pushed out of business, he plans to get a shop where he can sell other products and encourage his customers to pay through transfers.