As Nigeria continues to embrace digital financial mechanisms, Point of Sale (POS) systems have emerged as an essential tool for transactions.
However, the heavy reliance on POS systems, especially among the less privileged population, raises significant economic risks.
In this article, I will be discussing the landscape of POS dependence in Nigeria, highlighting its implications for lower-income citizens compared to Automated Teller Machines (ATMs).
Through case studies and statistical analysis, my finding is that while POS systems offer certain conveniences, they also lead to vulnerabilities that disproportionately affect marginalized groups.
In recent years, Nigeria has witnessed a shift towards cashless transactions, with the introduction of various digital payment platforms.
The Central Bank of Nigeria has championed this movement, promoting cashless transactions to increase efficiency and reduce cash-related crime. However, the proliferation of POS systems, often found in local businesses and small retailers has brought both opportunities and challenges.
Come with me to examine the economic risks associated with the dependencies on POS services rather than ATMs, particularly for Nigeria’s less privileged citizens.
The financial inclusion rate in Nigeria stands at approximately 63%, indicating that a significant portion of the population remains underserved by formal banking services. While POS systems have expanded access to electronic transactions, they are often concentrated in urban areas, limiting their availability for rural populations.
Conversely, ATM networks, specifically those operated by larger banks, provide somewhat broader access, albeit with challenges such as infrastructure and maintenance.
A study conducted in a rural community in Ekiti State revealed that residents depend heavily on POS transactions for daily expenses due to limited access to banks and ATMs. While some local vendors accept POS payments, the reliance on mobile networks has proven problematic.
Frequent network outages often prevent successful transactions, forcing individuals to revert to cash, which many do not have on hand. This situation exacerbates economic isolation and limits access to goods and services.
In Lagos, a city characterized by stark economic contrasts, low-income residents frequently rely on nearby POS equipped shops. However, high transaction fees can erode the already meager margins of the urban poor.
Studies show that while electronic payments may seem convenient, the cumulative effect of transaction charges can significantly impact household budgets.
A family dependent on POS for daily purchases may find that fees quickly add up, leading to deeper financial strain compared to ATM withdrawals, which typically involve lower fees.
Another critical issue concerning POS dependence is the risks associated with fraud. Research indicates that less privileged Nigerians are often more vulnerable to scams, as they may lack the financial literacy to identify fraudulent practices.
Many have reported unauthorized transactions after using POS systems, with limited recourse for recovering lost funds. In contrast, ATM transactions offer better protection measures, such as physical card security and bank-mediated dispute processes.
The reliance on POS systems not only poses individual risks but can also have broader economic implications. Increased transaction fees and fraudulent activities can deter consumer spending and investment in local economies, particularly among the less privileged.
Furthermore, financial dependency on unreliable POS services can lead to a lack of trust in the banking system, undermining broader efforts at financial inclusion.
To mitigate these risks, a multi-dimensional approach is necessary:
Expanding ATM networks, especially in underserved regions, can provide more stable and reliable access to cash withdrawals without the burdens of high POS fees.
Increasing financial literacy among less privileged populations can empower users to better navigate both POS and ATM usage, highlighting security practices and fee structures.
Establishing regulatory measures to cap transaction fees for POS services may alleviate some of the economic burdens faced by low-income consumers.
Encouraging the development of alternative digital payment solutions, such as mobile money or community banking, can diversify options and reduce monopolistic practices.
While the advent of POS systems in Nigeria heralds an exciting shift toward a cashless economy, the associated economic risks for less privileged communities cannot be overlooked.
By understanding these challenges through studies, stakeholders can develop targeted strategies to enhance financial inclusion and bridge the gap between technology and accessibility.
Ultimately, a balanced approach that fosters both POS and ATM utilization, alongside robust consumer protections, can empower Nigeria’s most vulnerable populations in their quest for economic stability.
I aim to spark conversations regarding the increasingly financial ecosystem in Nigeria and encourage further research into the implications of digital payment systems on economically marginalized communities.
Dr. Afolabi Olajuwon is a Fellow of the Nigerian Institute of Public Relations, Fellow of the Institute of Management Consultants, Fellow of the Chronicle Business School, Abuja, a Researcher and resource person at the International Institute of Journalism, Abuja.
