The financial landscape in Nigeria has undergone significant shifts post-COVID, with Point-of-Sale (POS) operators emerging as dominant players in financial transactions. While Automated Teller Machines (ATMs) remain essential, they have been overshadowed by the growing influence of POS services. This shift has led to increased competition for cash, and this has left many Nigerians struggling to access their funds conveniently.
The battle for cash: ATMs vs. POS operators
There is no doubt that POS agents have evolved from mere alternatives to traditional banking services into crucial intermediaries as well as first-choice service centres for many Nigerians. However, the high fees they impose, unchallenged, have incentivised them to source cash through desperate and unethical means, such as withdrawing cash straight off ATMs to fulfil their demand for cash, defeating the purpose of the ATMs. This dynamic has left regular bank customers at a disadvantage due to the resulting congestion at ATMs and higher transaction costs for everyday users.
Bank officials acknowledge that several ATMs in Nigeria remain underutilised and almost redundant, leading to what many describe as a “cold war” between traditional banks and POS agents who have come to be recognised as Reliable Human ATMs. While we must acknowledge that these agents bridge the gap left by banking institutions, they often do so at a steep price for consumers. The dissatisfaction of these users is palpable across the country, and something must be done before the situation devolves further.
How POS agents source cash
The Central Bank of Nigeria (CBN) introduced agent banking and POS systems in 2013 as part of its efforts to promote financial inclusion and drive a cashless economy. While this policy improved banking accessibility and empowered thousands of Nigerians to become POS operators, it also created an unintended consequence: “a parallel market for cash.’’
Many POS operators now obtain cash through two major avenues:
Purchasing cash from businesses: They collect physical cash from local businesses in exchange for digital transfers with a fee, creating an informal economy of cash distribution.
Withdrawing directly from ATMs: POS agents often drain ATMs by making multiple withdrawals with different debit cards issued by their numerous banks, further limiting access for regular bank customers.
A survey conducted on street users revealed a preference for POS withdrawals despite the high fees. Respondents cited factors such as proximity, speed, customer service, and cash availability as reasons for their choice. Many also noted that POS agents are more personable and relatable than traditional bank staff despite their lack of formal customer care training.
Read also: One PoS for 38 Nigerians fills ATM’s cash crunch
Challenges in the Nigerian ATM ecosystem
As of March 2024, Nigeria had approximately 2.7 million deployed POS terminals, compared to less than 21,500 ATMs. With over 63 million unique bank clients, this disparity highlights the growing reliance on POS machines. However, the ATM network in Nigeria faces several issues, such as:
● Low withdrawal limits: Customers often cannot withdraw more than N5,000–N10,000 per transaction, leading to multiple withdrawals.
● Scarcity of cash: Many ATMs frequently run out of cash, forcing users to seek alternative options.
● Long queue at the ATM: The people who still use the ATMs complain about the long queues and the time it wastes, especially as some banks would often have as little as one out of five machines working at a time.
● Infrastructure challenges: High cost of running and maintaining constant power supply with alternate power source via solar energy or inverter solution
This system disproportionately affects individuals who rely on cash, such as traders, transport workers, and elderly citizens who struggle with digital banking platforms.
Bankers’ perspective and CBN’s response
Bankers have largely placed the blame on the CBN’s cashless policy, arguing that cash shortages stem from regulatory policies rather than banking inefficiencies. A bank official explained in an interview:
“The CBN’s cashless policy has created persistent cash shortages. People now prefer to hoard cash instead of depositing it in banks. The ATM withdrawal limits are there to ensure wider cash distribution.”
Corporate account holders, such as POS operators, often have higher withdrawal limits of up to N500,000 daily, while regular customers face strict limitations. This imbalance fuels frustrations among ordinary Nigerians who rely on ATMs for cash access.
To address these concerns, the CBN announced measures in September 2024, including:
● Injecting N1.4 trillion into circulation over three months.
● Penalising banks that fail to ensure adequate cash availability.
●Encouraging customers to report ATM cash shortages for prompt action.
● Increasing oversight and imposing fines on underperforming financial institutions.
Additionally, the CBN set limits on POS transactions:
● N100,000 daily limit per customer.
● N1.2 million daily total limit for POS agents.
● N500,000 weekly withdrawal cap for customers.
● Fines of N150 million were imposed recently on nine banks for failing to dispense cash during peak periods.
These measures aim to regulate cash availability and curb illegal cash sales while pushing for wider adoption of digital payments.
A fintech leader’s perspective
One of the major super-agent operators with a wide presence across the country noted that the cash availability problem affects both POS and ATM users. He stated, “There is generally no cash in circulation, and all aspects of the financial system are feeling it.” When asked what could be done, he explained that the issue is not just that POS operators demand high fees but that ATMs are not profitable enough. In his words: “ATMs need to be made more profitable so banks can deploy more, and people can have a trusted alternative to PoS.”
The way forward: Balancing convenience and affordability
Despite the push towards a cashless society, cash remains a crucial part of Nigeria’s economy. Many Nigerians depend on physical cash for their daily transactions, and this necessitates a balanced approach to financial inclusion.
Several key questions remain, however:
● Are POS services making financial transactions more inclusive, or are they exploiting customers?
● How can we ensure ATMs provide better service without being drained by POS agents?
● What policies can help strike a balance between accessibility, affordability, and fairness?
The CBN’s regulatory measures are a step in the right direction, but their effectiveness will depend on proper enforcement and the adaptability of banks, POS operators, and customers. While ATMs continue to serve as lifelines for millions of Nigerians, POS services remain indispensable in bridging financial gaps, albeit at a cost.
As Nigeria navigates this evolving financial ecosystem, stakeholders must collaborate to create a system that prioritises both convenience and fairness for all users. And perhaps more importantly, we must redefine inclusivity. Because if the purpose of introducing PoS agents into Nigeria’s financial system is to promote inclusivity for people in rural areas and lower economic access, how do we factor in the idea of paying up to N500 for a N5,000 withdrawal?
About the writer:
Tope Dare is a leading fintech executive and Techpreneur and Africa’s most successful ATM salesman, having driven the deployment of over 70% of Nigeria’s 21,000 ATMs. With 25+ years of experience, he transformed Hyosung ATMs into a market leader, selling over 12,500 units and advancing digital banking, financial inclusion and banking automation across Africa.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
