Nigeria is witnessing a significant shift in its financial landscape, with Point of Sale (POS) transactions experiencing an unprecedented surge. Data from the Central Bank of Nigeria (CBN) reveals a massive increase in the value and volume of POS transactions in 2024, signaling a growing preference for digital payments over traditional ATM withdrawals.
The Ascent of POS Transactions
In 2024, POS terminals facilitated transactions worth an astounding N223.27 trillion, more than doubling the N110.35 trillion recorded in 2023. This remarkable growth wasn't just in value; the total number of POS transactions also jumped by 32.7% year-on-year, from 9.85 billion in 2023 to 13.08 billion in 2024. This indicates a widespread adoption of POS platforms for everyday financial activities across the country.
The Decline of ATM Dominance
In stark contrast to the booming POS sector, Automated Teller Machine (ATM) transaction volumes remained largely stagnant, with a marginal increase from 1.012 billion to 1.022 billion transactions. The value of ATM withdrawals in 2024 was N29.12 trillion, a slight rise from N28.21 trillion in the previous year. These figures underscore a diminishing reliance on physical cash withdrawals from ATMs, highlighting a clear migration towards digital payment solutions.
Monthly Trends and the Digital Shift
Throughout 2024, monthly data from the CBN consistently showed a rise in POS transaction values. For instance, in January 2024, POS terminals processed N11.50 trillion, more than double the N5.28 trillion from January 2023. Conversely, ATM withdrawals saw a sharp decline in the same month. This trend continued across the year, with notable spikes in June, November, and December, where POS transaction values more than doubled their 2023 counterparts.
The consistent growth in POS usage, even amidst a slight month-on-month dip in volume occasionally, demonstrates the increasing preference for the convenience and speed offered by digital payments. While ATM usage remains relevant, its growth has considerably slowed down relative to the explosive rise of POS transactions.
Challenges and Concerns in the Wake of Growth
Despite the impressive growth, the rapid expansion of POS services has not been without its challenges. Issues such as arbitrary increases in transaction charges and a surge in fraudulent activities have come to the fore.
Towards the end of 2024, POS agents significantly hiked their charges, with some reportedly collecting up to N200 per N5,000 withdrawal. This surge in charges was attributed to severe cash scarcity, with many bank ATMs being empty and banks rationing withdrawals. The implementation of the N50 Electronic Money Transfer Levy by the Federal Inland Revenue Service (FIRS) on electronic inflows of N10,000 and above also contributed to the increased costs. This levy, enforced across fintech platforms that dominate a significant portion of the POS agent market, further impacted transaction costs for consumers.
Combating Fraud and Ensuring Accountability
The surge in POS transactions has unfortunately coincided with a rise in fraudulent activities. According to the Fraud and Forgeries Report in Nigerian Banks for Q1 2024 by FITC, POS fraud cases surged by 31.12%, accounting for a substantial portion of total fraud cases.
In response to these challenges, the CBN introduced new measures to advance its cashless policy and combat fraud. These include:
- Daily Cash-Out Transaction Limits: A daily limit of N100,000 per individual customer for POS agents, with agents restricted to a cumulative cash-out limit of N1.2 million per day. Customers face a maximum cash withdrawal limit of N500,000 per week.
- Accountability Measures: All agency banking transactions must be conducted exclusively through float accounts maintained with principal institutions, and all agent banking terminals must be connected to the Payments Terminal Service Aggregator.
- Monitoring and Sanctions: The CBN has mandated daily electronic submission of transaction reports to the Nigerian Inter-Bank Settlement System and emphasized that principals of agent banking operations will be held responsible for the actions and omissions of their agents. The apex bank plans periodic oversight and impromptu checks, with breaches attracting monetary fines and administrative sanctions.
Looking Ahead
The significant increase in POS transactions underscores Nigeria's accelerating adoption of digital payments. This shift promises greater financial inclusion and convenience. However, addressing the accompanying challenges of high transaction charges and combating fraud will be crucial for sustaining this growth and ensuring a secure and efficient digital payment ecosystem for all Nigerians.
What further steps do you think are necessary to ensure the security and affordability of digital payment systems in Nigeria?