PoS wars: Banks battle fintechs for market share

Deposit money banks are stepping up efforts to cut a slice of Nigeria’s Point of Sale (PoS) market, which fintechs have dominated in recent years.

This is as the relevance of Automated Teller Machines (ATMs) continues to dwindle, with PoS terminals becoming the go-to channel for financial transactions.

In February, GTB removed processing fees on all its GTBank PoS terminals in a bid to woo small businesses.

Miriam Olusanya, managing director, Guaranty Trust Bank Nigeria, said, “By implementing the zero processing fees on POS transactions, we are empowering businesses to get the full value of every payment they receive, whilst also ensuring a more seamless and efficient payment experience.”

The initiative targets qualifying SME merchants, helping them to reduce operational expenses.

In April, UBA launched an upgraded PoS terminal to strengthen its push into retail and agency banking.

Shamsideen Fashola, UBA’s Group head, retail and digital banking, stated, “It is designed to empower merchants and agency banking with instant settlements, real-time transaction tracking, and unmatched reliability.”

According to Victor Asemota, growth partner, AnD Ventures, “The banks are waking up. Banks have everything and can launch anything.”

POS’ expansion, ATMs’ contraction

Nigeria currently has one PoS terminal for every 38 citizens, compared to just one ATM for 12,923 people. The United Bank for Africa (UBA) and Guaranty Trust Holding Company (GTCO) are taking notice, especially as ATM usage continues to decline.

Between January and June 2024, ATM transactions dropped 19.87 percent year-on-year to N12.21 trillion from N14.63 trillion in the same period of 2023. In contrast, PoS transactions, including merchant payments and withdrawals, surged by 77.35 percent to N85.92 trillion over the period.

As of the first half of 2024, Nigeria had 16,714 active ATMs and 5.56 million deployed PoS terminals, a shift driven by fintech players like OPay, Palmpay, and Moniepoint.

According to the International Monetary Fund (IMF), Nigeria has about 1,600 PoS operators per square kilometer. These fintechs are responsible for about 1.6 million of the over two million PoS operators nationwide.

Moniepoint alone has over one million active terminals and processes about N10 trillion monthly. Palmpay reports more than 1.1 million onboarded businesses and over 600,000 merchants. OPay had over 500,000 mobile agents as of June 2023.

These agents, equipped with PoS devices, are now the primary source for cash and financial services for many Nigerians because of their ease of use, accessibility, and convenience.

The growth of non-MNO-led mobile money providers like OPay and Palmpay in Nigeria has driven financial inclusion,” said GSMA, the global body for telcos.

While banks initially pioneered the PoS rollout in Nigeria, led by First Bank with 100,000 terminals by June 2012, GTBank, and Zenith Bank, they have lost ground. This was because their initial deployment had limited access outside of major urban centers like Lagos, Abuja, and Port Harcourt, wrote Light Frank and Adeoye Adedemeji in a study entitled, ‘Evolution of POS Technology in Nigeria’s Banking Sector.’

“Banks focused on large retailers, shopping malls, and high-end merchants as early adopters, gradually expanding the reach of POS technology,” they wrote.

In contrast, fintechs aggressively targeted Nigeria’s over 42 million small business owners, building vast agency banking networks in urban and rural communities. For instance, Moniepoint says over 33 million people use its POS terminals monthly.

“Our journey into agency banking resulted from the challenges we noticed in account settlement and around the reconciliation process among merchants,” stated Edidiong Uwemakpan, Moniepoint’s vice president of brand communications and PR.

Victor Olojo, former national president of the Association of Mobile Money and Banking Agents of Nigeria (AMMBAN), added, “These fintechs had very aggressive business models that can make the system work by itself. It was different from the traditional banking model, where you would wait for people to come into the banking hall. These fintechs were very aggressive with their approach to penetrating the market.”

POS’ financial inclusion role

POS technology has played a central role in deepening financial inclusion in the country, especially in underserved and rural communities.

Oluwatomi Eromosele, general manager and research manager at EFInA, noted that PoS agents are “extending formal financial services to about 11 million Nigerians who are not banked but are actively engaged in financial offerings. This tells us the power of technology to reach the excluded, underserved.”

While fintechs continue to lead, researchers, Frank and Adedemeji, pointed out that banks remain essential players in the PoS ecosystem.

They provide the financial backbone for POS transactions by processing payments between merchants and consumers. Banks often partner with fintech companies and payment processors to provide POS terminals to businesses and consumers. Some of the largest banks in Nigeria, including Access Bank, Zenith Bank, and First Bank, have been instrumental in rolling out POS terminals, supporting the adoption of cashless payments,” they added.