What is a Payment POS?
A Payment POS (Point of Sale) refers to the process of completing a financial transaction at the point where a customer purchases goods or services. It involves using a POS system to facilitate payment processing, record purchase data, and generate receipts.
POS systems are essential for businesses seeking modern, efficient, and customer-friendly transaction solutions. They automate the entire payment process, from recording sales data to processing payments and updating inventory in real time.
Beyond handling transactions, modern POS systems offer advanced features such as sales tracking, inventory management, and enhanced security. They also support a wide range of payment methods, making them a versatile tool for businesses of all sizes.
Gone are the days when traders and small business owners would close their shops, count their daily earnings, and rush to the bank to deposit their cash. That once-common routine is fading fast, replaced by a new trend: traders are now doubling as mobile money operators, using their cash flow to run Point-of-Sale (PoS) businesses.
This shift is visible across Lagos markets, from the bustling Balogun Market to the sprawling Alaba International Market, and even in smaller neighborhood shops. Traders who once relied on banks are now financial intermediaries, offering cash withdrawal and transfer services to customers who prefer the convenience of roadside PoS points over long bank queues.
PoS: The New Neighborhood Bank
For numerous traders, transitioning to Point of Sale (PoS) operations is not merely supplemental income; it's a critical business strategy for survival. Kazeem Abdullah, a trader at Owode-Onirin Market in Lagos, elaborates: "Previously, I deposited funds in a bank, but I grew frustrated with extensive wait times and subpar service. Currently, I utilize my capital for PoS transactions, generating additional daily revenue. Essentially, I'm operating my own financial services business here."
The 2023 cash crunch exposed the inefficiencies of Nigeria’s banking system, leaving many Nigerians struggling to access their money. Even today, banks often run short of cash, and ATMs remain unreliable. This has driven more people to rely on PoS operators for quick and easy access to cash.
Owode-Onirin merchant Sumbo Olaniyan exemplifies this trend: "My last bank visit was in late 2022 to address a problem with debts card, not for a transaction. I find Point of Sale (PoS) operators more reliable than ATMs or bank branches for cash access."
A Lifeline for Unemployed Youth
The PoS boom isn’t just benefiting traders—it’s creating opportunities for thousands of unemployed youths. With low startup costs—a terminal, some cash, and a strategic location—anyone can enter the business. For many, it’s a lifeline in a challenging economy.
Tolu, a Point of Sale (PoS) agent operating in Owode-Onirin Market, Lagos, reports that prior to establishing his business, he experienced a period of unemployment and associated depression stemming from a perceived disparity in professional achievement relative to his peers. He attributes his recovery from this period to the establishment of his PoS business, which he initiated with personal savings and the financial support of family and friends. He currently generates an average daily revenue of N7,000.
Financial Inclusion and Challenges
The rise of PoS operators is deepening financial inclusion, particularly in rural areas and underserved communities. Many Nigerians now rely on PoS operators to access money instead of traveling long distances to bank branches.
However, this informal banking system comes with risks. Cases of fraud, network failures, and security breaches are on the rise. Some operators exploit customers by charging exorbitant fees, while others have been linked to scams.
For traditional banks, the dominance of PoS transactions poses a significant challenge. With fewer people visiting bank branches or using ATMs, banks must adapt or risk losing relevance. The rise of fintech companies like Opay and Moniepoint, coupled with the proliferation of PoS operators, is reshaping Nigeria’s financial landscape.
Economist’s Perspective: A Mixed Blessing
Samson Simon, Chief Economist at ARKK Economics & Data Limited, sees the rise of PoS operators as both a positive development and a reflection of deeper economic issues.
The more widespread PoS and other financial agents become, the deeper financial inclusion will be,” Simon explains. This strengthens the hands of monetary authorities to achieve desired results, leading to a more stable and predictable economy.
However, he notes that the rapid growth of PoS businesses highlights the lack of formal employment opportunities. Those operating PoS businesses would most likely not have done so if there were better options in the formal sector, he adds.
The Future of Nigeria’s Cash Economy
As PoS operators become the backbone of Nigeria’s cash economy, questions remain about the long-term sustainability of this trend. Will traditional banks step up to improve their services, or will they continue to lose ground to informal financial players?
One thing is clear: the way Nigerians handle money has changed, and there may be no going back. Whether this shift leads to greater financial inclusion or deeper systemic challenges, the rise of PoS operators is a testament to the resilience and adaptability of Nigeria’s informal economy.
Role of PoS Operators and Regulatory Requirements
PoS operators, often called "agents," play a crucial role in expanding access to financial services, particularly in underserved and unbanked areas. However, running a PoS business comes with specific regulatory requirements set by the Central Bank of Nigeria (CBN) and other authorities.
To operate legally as a PoS agent, you must:
1. Register Your Business
- Register with the Corporate Affairs Commission (CAC) to obtain a unique and approved business name.
- Ensure your business meets regulatory requirements for taxation and compliance.
2. Tax Compliance
- Register with the Federal Inland Revenue Service (FIRS) or State Inland Revenue Service for a Tax Identification Number (TIN).
- File and remit applicable taxes, including Value Added Tax (VAT) and income tax.
By adhering to these regulations, PoS operators can operate legally while contributing to financial inclusion and economic growth.