Point of sale boom: the new bank that pushed Union Bank to close branches and Standard Bank to stop building Nigeria news
- POS transactions are the new banking format in the financial sector in Nigeria as banks shift investments towards the least costly enterprise
- Commercial lenders like Union Bank have closed some branches in Nigeria, while Standard Bank of Nigeria has stopped building more physical theaters.
- Tech startups have also benefited from the agent banking system introduced by the Central Bank of Nigeria to increase financial inclusion
The first time Adejoke Oluwatobi came into contact with a point of sale (POS) trader was in the second half of 2012, six months after the Central Bank of Nigeria (CBN) launched the bank agent.
Oluwatobi had just arrived in Lagos, Nigeria’s commercial hub, where Operation POS was launched. He initially thought it was a merchant kiosk for a telecommunications company, as network providers were the first to roll out such an idea on the streets and highways.
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As she glimpsed the kiosk from afar, Oluwatobi walked over to buy some airtime, but as the undergraduate got closer, reality began to draw over her and the words inscribed on her. the board store have become clearer – POS available.
The agent told Oluwatobi after investigation:
“We don’t sell a card here.”
It was a shock to her to learn that she can withdraw and deposit money outside of the bank’s premises without having to use the automated teller machine (ATM).
POS: The new banking system
The discovery of Oluwatobi has become a staple of Nigeria’s banking system, and is getting nowhere, if one relies on the numbers agents have recorded in recent years.
While merchant activity is slowly dying out in the telecom industry where it started due to technological advancements that now allow telecom operators to digitally sell airtime to customers, Legit.ng’s findings showed that the idea that is currently fading among telecommunications has become a gold mine in the banking sector.
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Point of sale terminals are now being used as an alternative to bank rooms, and as banks double their penetration rate, they have slowed the establishment of branches and instead positioned bank agents in over-served and underserved areas in Nigeria.
The goal is to ensure that there is a mobile banking agent, owned directly or through a third party, in every nook and cranny of the country.
Data from the Nigeria Inter-Bank Settlement System (NIBSS) shows that approximately 307,000 PoS machines are in circulation across the country as of March 2021, with 167,000 declared active.
As the number of point-of-sale terminals falls below the CBN’s 2015 target of 440,000, banks are increasingly focusing on the agent bank to get the most out of it.
In August 2019, Union Bank said it had received regulatory approval to close some branches, in order to focus on agent banking and other digital channels.
“These more convenient banking channels will result in less reliance on some of our physical bank branches. In accordance with this, we have received regulatory approvals to close some of our branches as we continue to expand our digital. “
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The following month, Standard Chartered announced that it would no longer be opening branches across Nigeria, despite the limited number of physical meeting rooms in the country; 22 branches in Lagos, Abuja and Port Harcourt.
Standard Chartered Bank of Nigeria and West Africa CEO Lamin Manjang said investments will now, from 2019, be directed to digital banking.
Part of Manjang’s statement reads:
“We think the future of retail banking would hinge largely on digital channels. Quite frankly, if you look back 30 to 40 years ago and the role of the traditional bank branch, then look at the role of the traditional bank branch. ‘a branch today, you will realize that it is quite different.
“So the things that would usually take you to a bank branch are things that you can now do without visiting a branch. “
This new investment by banks will further hamper the growth of the bank-to-customer ratio in Nigeria, which is estimated at 4.3 branches per 100,000 customers.
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POS is the new cash cow for banks
As the CBN limits the charge rate for ATM withdrawals, banks looked for other revenue opportunities and found it in the point of sale business.
In December 2019, apex bank stated that for every wire transfer less than N 5,000, bank customers will pay N 10, while wire transfer of N 5,000 to N50,000 will incur a fee of N 25.
This implementation of fees was not sufficient for banks as the CBN reduced the fees for ATMs to N35 after the third withdrawal in a month.
Now most ATMs in banks are either cashless or have a network service to process withdrawals or other transactions – Gabriel Alabi, social media manager and web designer, thinks he is. This is an attempt by banks to force their customers to use point-of-sale terminals, as users pay N100 for each N5000 withdrawal, compared to ATM’s N35 for the third transaction.
At the height of the COVID-19 pandemic and lockdown in Nigeria, PoS transactions jumped 859%, according to Shared Agent Network Expansion Facilities (SANEF).
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Here’s the shock, according to Statista, between 2015 and 2019 there was a boom in point-of-sale payments, which rose from 34 million to 438.6 million, between the five-year period.
In addition, more than 655 million point-of-sale transactions, valued at 4.7 trillion naira, were completed in 2020 by Nigerian merchants and mobile money operators (MMOs), according to the NIBSS.
Tech startups are also getting milked from afar
While banks have reaped the benefits of point-of-sale, tech startups have also taken their part, as a mobile money operator.
Interswitch, Quickteller, and TeamApt are some of the tech companies that are playing the field with banks. The most recent is OPay, which focused entirely on payment in 2020 after the Lagos state government banned rental bicycle services.
OPay’s entry into the system was revolutionary, as the company’s growth in two years pushed its market valuation to over $ 2 billion.
The Nigeria-based startup partnered with a point-of-sale operator to access the market, which enabled it to process wire transfers to 80% of mobile money operators in Nigeria.
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The Chinese company is also said to process 20% of Nigeria’s non-market point-of-sale transactions. OPay has been found to have monthly transaction volumes in excess of $ 3 billion.
The first to enter this space is Paga. Co-founder Tayo Oviosu once said that every minute 12 Nigerians solve their payment issues using Paga.
The company has more than 27,273 agent accounts, with more than 17.91 million euros – Paga is also heading for more than $ 1 billion in market valuation.
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Ecobank Nigeria Managing Director Patrick Akinwuntan once said the company was able to employ 6,000 agents, an act it cannot do for its banking hall.
This employment campaign has brought banking services closer to underbanked Nigerian communities, as the country has 4.3 branches per 100,000 customers, which has transformed rural areas deprived of banking services.
The profit of the POS business between traders and banks is N 99.25 for the operator and N 0.75 for the financial institution.
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Legit.ng understands that profit is made when clients make lower withdrawals like 2,000 N in five trades, than 10,000 N in one – this means for the latter 500 N will be made, while the big deal will only attract 200 NOT.
A point-of-sale operator, who identifies him simply as Chukwuebube, said that the smallest transactions earn him more. Chukwuebube said location is also important because more customers means more transactions – He said the business was profitable for him which is why he has more than three outlets.
Another point of sale trader, who identified himself as Adejumo Atunrase, being a bank agent has its advantage. While she was discreet about the volume of daily transactions, Atunrase confirmed the profitability of the company.
Atunrase said that with ATMs constantly down in her area in Ogba, residents of that area have no choice but to withdraw from her, and with limited competition around her, she is winning. a lot of money.
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Easy access to banking services
Point of sale operators or bank agents were able to decentralize the banking system, increasing the rate of financial inclusion of the regulator, CBN, while paying a commission.
This is why banks no longer have to spend heavily on physical structures in rural areas, when they can simply station one or two agents in a community, and earn more on transactions than they will on walk-in services or ATMs.
The increase in the operation of points of sale has also put an end to the adventure of banks which install their ATM terminals in places far from their premises just to connect with their customers.
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