Poor broadband connectivity stalls PoS transaction uptake

As Nigeria gradually migrates from cash to an electronic based economy in line with the government’s financial inclusion strategy, poor data connectivity delivered by Mobile Network Operators (MNOs) across the nation continues to constitutes a significant drawback to the adoption of Point of Sale (PoS) transactions. While this challenge persist, it has also been discovered that there is still huge preference for cash among consumers and a low level of awareness of the benefit of using PoS especially among non-users. As at December 2014, Nigeria deployed about 350, 000 PoS terminals across the country – a significant increase from the about 120, 191 in the preceding year. A report by the Nigeria Inter-Bank Settlement System (NIBSS) however shows that 72.5 per cent of non-users claim to be unaware of the benefits of using PoS. The report, however, put PoS adoption rate in Lagos at 62 percent. The report also noted that 62 per cent of merchants provided PoS payment option and 63 per cent of individuals owned and used debit/credit cards that is 70.4 per cent ownership among 90.2 per cent banked adults in the state. NIBSS observed 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 35.8 per cent of consumers usage.

The report also stressed that usage of card/PoS is fair with an average of three to four out of every 10 customers requesting to pay for transactions by card/PoS. However, the report said only 3.1 percent of consumers cite card/PoS as their preferred payment option attesting the low usage of PoS. As it relates to connectivity challenges, it was learnt, through some interactions with representatives of popular electronic commerce firm in Nigeria, at different occasions, that when customers use their credit/debit cards on the PoS terminals, which are run by commercial banks, customers account are debited without the fund getting to the e-commerce platform. This has led to disputes between customers and merchants. In some cases where the customers is fortunate, the fund are returned to his or her account immediately, but should the network challenge persist, it could take between seven or 14 workings days before the fund is returned to the customer’s account. Meanwhile, to improve the challenge of connectivity, the report recommended global SIMs (subscriber Identity Module) along with Local Area Network (LAN) and more intelligent PoS terminals. Besides, the Central Bank of Nigeria (CBN) should implement service standards for the industry, as well as enforce disciplinary measures for erring operators. The report also wanted NIBSS to improve consistency of PoS data reports to banks to aid the reconciliation process, and also enhance the support framework to processors.

In terms of adoption, the report said greater effort must also be made to communicate the improved security features of PoS to consumers in order to allay concerns about fraud and encourage confidence in the PoS system. In addition to continuing efforts to make cash unattractive, the CBN should encourage banks to deploy more PoS terminals to lower value or more informal businesses; as well as review PTSP operations to solve problems of inadequate service currently being reported by banks and merchants, Card processors, which contributed to the report, noted that there are too many stakeholders involved in the end-to-end processing of PoS transactions and that this accounted for inefficiencies and a lengthening of the timeframe for resolving issues. To deepen usage across the country, the report advised that technical features that are connectivity base must be improved; focus must be on deploying PoS terminals to informal/open-air or unstructured markets where adoption and use are extremely low and improvements must be made to the timeframe for resolving PoS complaints.

 

Ben Uzor