Since the Central Bank of Nigeria (CBN) announced restrictions on cash withdrawals for businesses and individuals in December 2022, POS agents feel targeted.

To limit the use of cash by Nigerians, the CBN has ordered commercial banks to limit weekly cash withdrawals to £100,000 for individuals and £500,000 for businesses . The decision was reversed two weeks later and withdrawal limits were raised to £500,000 for individuals and £5,000,000 for businesses.

The currency redesign process, announced in November 2022, came into effect in February 2023, putting more strain on individuals and businesses. Virtually every industry in the country was affected, but the situation for POS agents looked worse. When CBN introduced its guidelines for operating payment services banks in 2011, there was hope that agency banking services would boost adoption of financial services and deepen financial inclusion in the country.

While traditional financial institutions have done an excellent job of expanding the benefits of financial inclusion, the costs associated with setting up bank branches prioritize areas where investment can be recovered, creating opportunities for POS agents to succeed. means

According to Shared Agent Network Expansion Facilities (SANEF), there are over 1 million agents in Nigeria. These agents offer services from opening an account to paying bills and withdrawing cash. However, these agents are commonly known for cash withdrawals.

According to the World Bank, there will be 4.3 commercial bank branches per 100,000 population in Nigeria in 2021, with more than half in urban areas. As a result, POS agents have become a channel for bringing financial services closer to people. But even these agents are mostly in Lagos, where he has over 160,000 (15%) agents in the state.

While they may seem to have benefited greatly from the change, many POS agents have had to close their stores due to lack of access to cash.

According to Hussein Olanrewaju, National Chief Accounting Officer of the Mobile Money and Banking Agents Association of Nigeria (AMMBAN), more than 50% of his POS agents in the country have been shut down. There is no official data on who makes up this number, but it is safe to assume that agents, for whom it was their only source of income, were hit hardest. Those who remain in business have to settle for lower trading volumes because they are shunned.

He couldn’t pay for a motorbike, and a bus ride using a bank transfer failed because neither the bus rider nor the commercial bike rider liked the idea, citing lost SIM cards, difficulty withdrawing the money, and the possibility of a reversed transaction.

A different set of business owners — food vendors and petty traders — sell products that Nigerians use daily. This group has appeared more willing to embrace alternative payment channels.

A few weeks ago, though I paid for most of my purchases at the local market using bank transfers, many sellers were reluctant. But as it becomes obvious that Nigerians cannot access cash, many have softened their stance. What has been interesting has been their approach. When I tried paying for my purchases, I was directed to a POS agent to whom I made the transfer while he took down the amount transferred. In the end, I paid for items bought from two different vendors to him.

That seems to have been adopted in other markets across Lagos, as this tweet shows.

What lessons could we learn here? While it’s not yet clear whether there’s an effort by the financial institutions that power agency banking services, how these traders are changing the role of PoS agents could be instructive.

Where they previously facilitated withdrawals and the odd deposits, it now appears that a shift to payments could be the future. But how would this work?

From my experience and the tweet above, PoS agents could serve as payment terminals for businesses, enabling them to receive payments. This is important because while fintech founders frequently tout growing smartphone usage in the country, many traders do not use smartphones or even own bank accounts.

Still, this throws up the problem of reconciliation, as mobile banking agents would have to handle numerous payments for the venture to be worthwhile, and manual reconciliation could be tedious. Fintech startups can step in here and build features that enable POS agents to facilitate transactions for multiple parties while handling reconciliation seamlessly.

Businesses, on the other hand, should also be willing to wait for next-day reconciliation, as same-day reconciliation might take some time to be implemented. However, that brings up the question of fund security for businesses, as they may have a hard time trusting that agents would not run off with their monies under the guise of reconciliation.

Is this the end of POS agents as we know them?

That’s a tricky question to answer. In under a decade, POS agents have become a huge part of the financial system. As earlier stated, POS agents would need to handle high transaction volumes for it to make sense financially.

On the other hand, entrepreneurs with smartphones or those willing and able to buy POS machines would not need them. This could open up new opportunities for startups that can enable businesses to receive payments with a smartphone. Even then, this change might only occur in urban areas as it would take some time for rural dwellers to embrace digital payments. Until then, we just may be witnessing a great re-calibration.

Source: Techpoint