In banking, convenience and security are crucial in securing customers’ trust and satisfaction. Therefore, when a bank cuts down key benefits through service deprivation, the consequences are grave. Banks are phasing out Automated Teller Machine (ATM) services by restricting customers’ access to cash.
Fintech-led Point of Sale (PoS) terminals are fast replacing ATMs. Reason-ATMs are either out of service, or programmed to dispense less cash than needed. The 22,600 ATMs, as against 26.54 million registered PoS terminals nationwide, clearly shows that cash services demand is swinging to PoS terminals.
As 35-year old lawyer Zainab Okosun pushed through the crowd at the popular Mile 12 market in Lagos, she headed straight to the food and beverages section.
It took her nearly two hours, to assemble yams, plantain bunches, pears, vegetables, tomatoes, pepper and other food items for the month.
In the midst of her struggles, one question kept agitating her mind. Where do I get cash to pay for these items?
Okosun quickly called one of the PoS operators, who had been following her asking if she needed cash. “Please, come. I need to make N80,000 withdrawal,” she beckoned. Should I add the charges? The PoS operator enquired. “Add the charges” Okosun replied.
Within five seconds, Okosun’s account was debited N82,400 through her debit card, and N80,000 cash was successfully handed over to her to pay the food vendors.
Okosun, who has now learnt “how not to look for cash” narrated how she spent nearly three hours in ATM queue during her previous visit to the market a year ago.
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She explained: “Before now, cardholders that needed cash always ask for the nearest ATM points. That has since changed. Cardholders’ first point of call when they are in need of cash is to ask for a PoS operator, usually available at nearly every one-minute drive across major cities nationwide.”
Findings showed that a growing number of ATMs across banks’ branches have been “temporarily unable to dispense cash” or “out of service” for months. At a number of bank branches, a few ATMs with cash are disabled late in the day and during weekends.
Unfortunately, the banks and financial sector regulators- the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC)- seem not to be doing much to reverse the trend.
Hard times for ATM users, PoS services surge
Overall, the ATM business in Nigeria is facing its most difficult times due to the high cost of maintenance, growing adoption of other banking channels, foreign exchange crisis, galloping inflation, insecurity, and uncertainty in the ATM policy environment, all of which are driving investors away from the market.
However, PoS terminal operators and Kiosks managers are taking over the market, stepping in to make cash available to customers at premium prices.
Data from the Nigeria Inter-Bank Settlement System (NIBSS) showed that the number of PoS terminals registered in Nigeria as at August 2024 reached 26.54 million, with transactions reaching N6.23 trillion in the first seven months of this year.
Daily earnings from a PoS business vary depending on the location, the number of customers, and the services provided. Potential earnings range from N5,000 to N50,000 or more, depending on one’s business strategy and execution. With a well-planned and executed business model, the PoS operator can achieve significant daily earnings.
Charges for the service is determined solely by PoS operators depending on the cost of cash, where and when the cash is needed, time of request and sometimes, mood of the operator.
Tinuke Adebola, a PoS Aggregator based in Lagos, said banks are no longer investing in ATMs because it is not only expensive but comes with a lot of stress.
She said: “PoS terminals are taking over the financial landscape. Banks are not ready to absorb rising costs of maintaining ATM terminals that require power, security, cash movement, cash handling charges and so on. Banking is profit-driven and ATM terminals are no longer meeting the profit needs of banks”.
She said: “We buy cash from business owners and then dispense to cardholders. This is one of reasons why some PoS operators charge higher fees than others. It all depends on charges from the Fintechs that supply the machines and access to cash,” she said.
Another PoS Aggregator, based in Central Lagos, Oloye Adigun, said, that network quality, availability of PoS machines and cost of the machines are crucial in the business.
He disclosed that: “Outright PoS machine (smart version) purchase costs N110,000 while the button version costs N65,000; lease costs N45,000 for smart version, while the button brand costs N25,000”.
He said bills payment, bank to bank transfer, cash receipts and payment to third parties, among others are key transactions carried out with PoS machines.
In the highly populated areas of Lagos, Ogun and Abuja, charges are usually moderate- usually N100 for N5,000 and N200 for N10,000 transactions given that operators rely on turnover for gains.
In areas like Olambe, Akute, area of Ogun State for instance, customers pay as much as N300 for a N5,000 withdrawal and N500 for N10,000. However, in high-brow areas like Ikoyi and Victoria Garden City, people pay up to N500 for N5,000 and N1,000 for N10,000.
This thriving business empire is dominated by top three Fintech players- Moniepoint, Palmpay and O’Pay.
National President, Association of Mobile Money & Bank Agents in Nigeria, Fassai Atanda, said PoS is execution of financial sector’s agenda on financial inclusion.
He said that over 300 local governments in Nigeria are without bank branches, even as the largest transactions are happening in the informal sector. He said the PoS agents are meant to bridge the financial exclusion gap in the informal sector.
For Atanda, the mobile money industry has created over two million jobs, 40 per cent of that number being agent bankers- PoS merchants.
According to Executive Director of Inlaks, the largest ATM operator in the country, Tope Dare Nigeria requires about 60,000 ATMs to meet up with its growing population of 216 million people and a banking population of 106 million adults.
In a report, he explained that given that there are only 22,600 active ATMs, a deficit of about 37,400 ATMs still exists in the country.
Also, 17,200 ATMs representing 76 per cent of the total ATMs in Nigeria are deployed by eight banks. Access Bank has over 4,000 ATMs, First Bank has about 3,300, UBA has 2,150 ATMs, Zenith has 2,100 ATMs, GTBank has 1800 ATMs, FCMB has 1,350, Polaris has 1300, and Union has 1,200.
Further data from Inlaks showed that Nigeria had 7,100 ATMs in 2010 which grew to 11,000 ATMs in 2011 after the CBN directed the removal of the offsite ATMs by banks.
The offsite management role was given to independent ATM deployers. That move failed after ATM deployers complained about rising cost of running the business and declining profitability.
The CBN restrictions on offsite ATM deployment was eventually lifted, allowing banks to invest more in the business. That prompted the number of ATMs to grow from 11,000 in 2011 to 16,000 in 2016 and 21,000 in 2019. It further grew to 22,600 in 2021, with the figure remaining at same level till date.
According to Dare, the emergence of PoS terminals, mobile app transfers, Unstructured Supplementary Service Data (USSD), and other alternative e-payment channels has reduced investors’ interest in ATMs.
Understanding the PoS business
Many of the PoS operators gave insights on the mode of operation of the enterprise. Maureen Adike-Tajudeen, a PoS operator at Eleko Market, Ibeju-Lekki Lagos, said he gave one PoS machine to each of his three employees, with each employee delivering N14,000 on weekly basis. He described the PoS business as thriving.
“Each of the my three employees gets one PoS machine, N200,000 credit in the machine and N200,000 cash. Each of them delivers N14,000 weekly profit and retains the principal cash and credit, for the next week’s transactions,” she disclosed.
According to her, profitability in the business keeps getting higher as banks gradually abandon regular loading of cash in ATMs.
“For most cardholders, after frequent checks and no cash to withdraw from ATMs, their next option is to look for PoS terminals. Many cardholders don’t even bother to check the ATMs anymore and that means more business for us,” Adike-Tajudeen narrated.
According to her, many cardholders only go to the ATMs to make transfers, check account balances or rectify failed e-payment transactions, adding that one will hardly find cash in those machines.
Another PoS operator, Munsurat Abiodun, works at PGas petrol station, in Epe Lagos. Although Abiodun is not in a market environment like Adike-Tajudeen, she has turned petrol stations where she conducts the business, to a goldmine.
Abiodun said the business thrives better when there are long queues in filling stations, and the petrol attendants, working with her, usually refuse to accept bank transfers or use the official PoS machines.
“What I do is simply to move from one car to the other, and get the drivers to use the PoS machine. The feedback is always instant and positive. I debit their accounts with the cards and hand them the cash after taking my fees,” she stated.
The cash with the petrol attendants is later moved back to the PoS operator, to resume new round of transactions.
At the LIBRA Motor, God Is Good, Intercity Travels, motor parks in Ajah, Ibeju-lekki Lagos, PoS operators were seen at almost corner making cash available to travelers to pay for their trips.
Michael Obinna, who was traveling from Lagos to Port Harcourt, lamented his experience and how he was forced to patronise the PoS operators.
“Despite having major banks’ branches-FirstBank, Zenith Bank, FCMB, Access Bank, Fidelity Bank among others within the vicinity, none of the banks’ ATMs were dispensing cash. My only option was to use the PoS machine. I paid N700 for N35,000 cash needed for my trip from Lagos to Port Harcourt,” Obinna narrated.
Continuing, he said: “This same challenge is everywhere whether it is from Lagos to Port Harcourt, Lagos to Abuja, Enugu to Jos among others. I will still pay another N700 or even more to get cash for my return trip to Lagos.
Other bank customers who spoke with The Nation, said the practice of forcing customers to buy naira with naira was disturbing.
Eniola Daniel, an Abuja-based student, said: “I feel commercial banks in Nigeria intentionally refuse to load ATMs with cash so that people will go to PoS operators. The banks should close the ATMs if they don’t want to load them with cash.”
Taking to her X (formerly Twitter) handle, she lamented that, banks handing over cash transaction business to PoS operators is troubling. “No money in ATM machines but PoS operators around the banks have cash and no one is talking,” she said.
Another bank customer based in Onitsha main market, Anambra state, Ikenna Ahamefuna, corroborated Obinna’s experience.
He said: “At the Upper Iweka in Onitsha, PoS operators are in every corner of the market. These agents are able to provide various services from withdrawal, deposit, money transfer, electricity bill payments to checking of account balances at a fee”.
Ahamefuna disclosed that even business owners with large cash turnover also have banner showing they also provide PoS services.
More views from stakeholders
President, Bank Customers Association of Nigeria, Uju Ogubunka, said banking is fast becoming what one does and not where one goes to.
“Brick/mortar banking, is giving way to digital banking where transactions are completed in seconds, saving costs and providing convenience to bank customers. Consumers are looking for simple technology-driven solutions customised to meet their everyday needs,” he said.
Technical Adviser to the President on Economic & Financial Inclusion, Nurudeen Abubakar Zauro, acknowledged the role of players in the informal space.
“We can all remember during the Covid-19 lockdown and the recent currency changes, there were a lot of challenges and we saw mobile money agents come together and save the country at that point,” he said.
Managing Director, Moniepoint Microfinance Bank, Babatunde Olofin, said operators in informal businesses show high degree of flexibility and innovation exhibited in adapting quickly to changing market conditions.
Managing Director, PalmPay Nigeria, Chika Nwosu, emphasised the company’s commitment to financial inclusion “At PalmPay, we aim to bridge the gap in digital access. Our platform ensures seamless connectivity for our users. The company has been a key driver of financial inclusion in Nigeria, with a third of PalmPay users reporting that they opened their first-ever financial account through the platform,” he said.
Regulatory oversight/ recommendations for growth
An Executive of the Research and Policy Department, Nigeria Deposit Insurance Corporation (NDIC), Kabir Katata, said digitisation has changed financial services landscape.
To him, Fintechs are latching on clear evidence that consumer behaviour and expectations of service and experience are changing.
He said: “Multiple technologies poised to drive the next wave of financial services are converging in maturity. Fintech threatens to disrupt financial markets with the banks taking the threats like the loss of control, the emergence of a non-regulated environment, market fragmentation, and loss of revenue—very seriously.”
Katata said while many banks have been able to retain their customers through traditional channels and digital service offerings, recent shifts are threatening the customer base of banks yet to key into it. Even long-term banking relationship at traditional banks, he added, is susceptible to disruption.
But the CBN under its Governor, Olayemi Cardoso, says it has taken steps to increase the regulation of Fintechs and will not in any way, stifle innovation.
The apex bank says that digital innovations ranging from self-service technologies like cell phones, online and mobile banking, Artificial Intelligence, big data, blockchain technology, distributed ledgers, among others, have greatly challenged orthodox systems and helped improve the operational efficiency of financial institutions as they respond to customer demands for more innovative services.
Recognising the growing importance of consumer protection in an increasingly digital financial landscape, Cardoso embarked on a comprehensive review of consumer protection regulations in February 2024.
This review sought to upgrade the regulatory framework to address emerging risks posed by the rapid growth of Fintech and digital banking solutions.
The goal was to enhance customer service standards and increasing engagement with formal financial institutions, ensuring that consumers have access to reliable, efficient, and secure financial services.
For analysts, there was need to foster greater trust between the banking sector and the Nigerian public to ensure business and economic growth.
They believe that by strengthening the regulatory framework, the CBN is supposed to provide a more secure environment for consumers, while encouraging more Nigerians to engage with formal financial institutions, thereby promoting financial inclusion.
For instance, the Pilot Consumer Protection Risk-Based Examination, designed to proactively identify policy gaps and improve conduct among financial institutions (FIs) should be implemented to the letter.
This risk-based approach, unlike traditional compliance checks, will further help the CBN to highlight urgent risks that could compromise consumer protection.
It will also encourage financial institutions to adopt higher standards of conduct, thereby enhancing consumer confidence.
To reinforce these efforts, the CBN should rigorously enforce sanctions for regulatory breaches, ensuring that financial institutions adhere to ethical practices and uphold transparency.
By holding institutions accountable, the CBN would underscore its commitment to protecting consumer rights and fostering trust in the banking system.
