• Friday, March 29, 2024
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Nigeria risks losing cashless growth over rising PoS transaction declines

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Nigeria could lose the strides it has made in terms of driving cashless economy if authorities continue to ignore consumers’ growing frustration over persistent transaction declines involving Point of Sales (PoS) machines and money reversals that are taking too long.

Data from the Nigeria Interbank Settlement System (NIBSS) found that volume of PoS transactions in the first two months of 2019 have outpaced that of 2018 and 2017, an indication that more people are preferring to carry out their day to day transactions using their cards. The volume in January 2019 rose to 28,162 compared with 16,102 and 7,946 for the same in 2018 and 2017 respectively. Value for January 2019 stood at N222 billion compared with N152 billion and N91 billion for the same period in 2018 and 2017 respectively.

The agency also reported that PoS terminals deployment nearly doubled in the months of January and February. As at February 225,924 terminals, the highest of any month, have been deployed across the country.

Despite the growth in PoS adoption, transaction failures continue to be the order of the day. To add salt to injury, when the transactions fail, the process of reversing debited money takes as much as eight days to two weeks.

“Is anyone in the banks or higher up in authority addressing this recent surge in failed PoS transactions? Not so many can afford to wait 8 days to use cash as most banks require and it is utterly bad for our market” KingsThrones Limited, an investment advisory firm tweeted at BusinessDay on Tuesday.

Omoniyi Elegbeleye, another bank customer tweeted from his handle that his PoS transaction of January 19, 2019 was just reversed on Tuesday, March 12 – nearly three months after he was debited.

Olukoya Oluwaseun also tweeted that he was debited the sum of N5,000 after a failed PoS transaction “two weeks ago” and is yet to receive the sum back from his bank.

“I carried out a PoS transaction on February 25, I was debited N4,250 but the transaction was declined,” Love Afinni tweeted from his handle @loveafinni, “I issued a compliant at the branch in Ijebu Ode on March 25, I was assured of a manual reversal within 8 days. I have been following up but I am yet to receive a reversal.”

The PoS history in Nigeria

The CBN introduced the Point of Sale system in 2012 to drive home its cashless policy. The volume of PoS transaction has grown since then at a compound annual growth rate (CAGR) of 123 per cent between 2012 and 2016, according to NIBSS. The PoS system was used 146 million times representing a 130 per cent increase from 64 million prior to 2016.

It is believed that PoS transactions peaked when small businesses that already use their PoS machines to accept bank cards for payments of goods and services began to use it to debit customers’ account in exchange for the equivalent cash and a fee.

NIBSS had noted in a report in 2015 that PoS is the most popular non-cash payment channel, preferred among the non-cash payment options by 93.6 per cent of merchants, and 38.8 per cent of consumers usage.

However, at a July 2018 fintech conference in Lagos organised by Epayment Plus, stakeholders observed the speed with which most merchants were rejecting usage of point of sales for their daily transactions. The problem did not just begin in 2018; in 2016, NIBSS admitted that despite uptake in the adoption, barely half of the machines were in operation. Out of a total 120,000 PoS machines in Nigeria, only 62,000 were active, while a total of 100,000 terminals were registered with the company.

At the conference in July, top on the list of complaints was the high transaction failure rate, high cost of operation and the length of time it takes to effect settlement with payment providers.

Why do transactions fail?

There are several factors that could lead to a failed PoS transaction. One of the major culprits is poor network. Poor network could be a result of a bank having network issues, in which case the transaction will fail, or a malfunction on the NIBSS platform which will mean the platform will not function in all the banks. A NIBSS representative said the later part is very rare.

 

Transaction failures have seen some proactive commercial banks such as the United Bank for Africa (UBA) to take measures aimed at reducing failure rates. The bank in 2017 collaborated with INETCO Insight to monitor multi-protocol payments and service transactions originating from mobile banking, online banking, ATM as well as PoS channels, and proactively identify transaction slowdowns and failures before they impact customers.

Why nothing is done about transaction reversal

The CBN had in September 2018 directed banks to pay N10,000 for each failed transaction based on customers’ complaints not reversed within 24 hours. The fine however was only to be applied to the Nigerian Interbank Settlement System Instant Payment (NIP). Transactions involving individuals and their banks were not specified.

However, over the years, Nigerian banks have exposed NIP through their various channels i.e. internet banking, bank branch, Kiosks, mobile apps, Unstructured Supplementary Service Data (USSD), POS, ATM, etc. to their customers. In other words, the CBN directive should naturally capture PoS failures.

“It’s a total mess out there between banks, NIBSS, other payment solution or problem providers and the merchants,” tweeted Boason Omofaye, journalist with Channels Television.

There is also the lack of clarity on when the CBN hopes to start enforcing the N10,000 fine. Perhaps, a little clarity on guideline implementation could go a long way to force a change.