Merchants flood PoS market as bank agents take back seat

Banking agents who have defined the emerging Point-of-Sale (PoS) market and the entire payment landscape are facing an existential threat. Merchants are flooding into the territory that used to be dominated by agents, reducing profits and increasing concerns about redundancy in the market.

The banking agents are facing backlash following a decision to increase the fees they charge per PoS transaction. The Federal Competition and Consumer Protection Commission (FCCPC) is leading the charge, demanding a reversal of fee hike and threatening to fine operators as much as N1 million for violation of its cease-and-desist order. Violators of the order also have an option of a three-month prison sentence.

But leaders of agents’ associations such as the Association of Mobile Money and Banking Agents of Nigeria (AMMBAN) said the harsh economic realities that agents face require consideration by the government, its agencies and the consumers. Victor Olojo, president of AMMBAN, said while it has received the letter from the FCCPC, it has also communicated to the commission that it is not in the business of fixing prices for agents. The communique first brought to the public by the Lagos State chapter of AMMBAN was only a guide advising its members on the cap to set on fees in view of the current economic realities, he said.

“FCCPC cannot force an enterprise to sell at a loss. That is not possible. I think their interest is whether we are fixing the price and it is very clear: AMMBAN is not fixing the price. We are only advising our members to be competitive and not to charge beyond a certain price limit, which is a price cap. That is our position,” Olojo said. AMMBAN has over 1.6 million agent locations across the country.

Many agents say they not only grapple with inflation but there is also growing competition eating away at the little they make.

Merchants and agents share similarities in that they are both in business. The difference is in the products they sell. Experts define agents in the industry as cash-in-cash-out merchants that sell cash. Merchants are used for businesses that sell goods and services, for example, petrol filling stations, schools, hospitals, market traders and supermarkets.

Operators such as Moniepoint, PalmPay, Parkway, and Opay have admitted to seeing a spike in merchants taking up spaces in the market. Moniepoint, in particular, said before 2023, banking agents were dominant, accounting for 80 percent of PoS issuance on its platform. However, the reverse is the case so far in 2023, with merchants controlling by 80 percent.

Moniepoint now has over 1.3 million businesses, whereas the banking agents have now grown to about 611,000, with about 200,000 of these agents coming from January, when the Central Bank of Nigeria (CBN) attempted to issue new naira notes, causing severe scarcity in the country. The company says it does about 400 million transaction volume per month.

Merchants embracing PoS became ubiquitous when the naira redesign kicked off and caused widespread scarcity of banknotes. Many bank agents were unable to access cash to meet the growing demand of their customers.

Chidi Dire, team lead at Parkway Projects, recalled that as a result of the cash crunch, many bank agents increased their transaction fees, forcing consumers to look for alternatives for accessing cash. As a result of this development, businesses that have more access to cash began to dispense their cash to people that needed it.

Glory Amanda, a 29-year-old civil servant at the Lagos State Secretariat Alausa, was one of the customers whose cash needs were met this way. When the agents around were unable to provide cash for her daily commuting to the office, she resorted to collecting and depositing cash with a food vendor on her street who owned a PoS terminal.

“I summoned the courage to ask my neighbours how they were dealing with the cash situation and they introduced me to the woman. There was no PoS agent giving cash in our area, except for these small businesses. So what I did was to transfer N20,000 to her at the beginning of the week, which would run through the week and maybe days after a week. Out of the money, almost N4,000 went to her because I had to bribe her too,” Amanda said.

For Nichola Onyema, a fish seller in Port Harcourt, who got into the PoS business during the naira scarcity, giving cash to people has a mutual benefit.

“Most of us always patronise wholesalers who collect transfers from us; that is the main reason you get cash from us while you pay with interest,” Onyema said.

Dire said the cash crunch increased the awareness of many merchants about the need to go cashless. Hence, many of them who got trained on how to operate PoS terminals and cashless payment would not let go, even when normalcy was restored.

“Every merchant wants to have options that can allow their customers to pay seamlessly without any limitations. It is mostly driven by the customers and it is driven by the availability of PoS by the operators. During the cash crunch period, you would see customers go to merchants and say they want to pay with their cards and that has become normal with them. Operators used that opportunity to provide other payment services for the customers,” Dire said.

The surge in merchant adoption also spurred many operators to get involved in the distribution of PoS terminals.

PalmPay said in June that it recorded 300,000 merchants on its platform, representing about 30 percent of the total number of agents it has so far. The number is expected to surpass that of agents before the end of the year.

Augustina Alabare, an agent with OPay, suggested that the merchants’ growth was also being fuelled by agents converting into merchants. According to her, merchants with PoS terminals are able to not only sell cash but also sell other products and services and make far more money than what the PoS fees deliver to agents. This attraction is causing more agents to do more than sell cash alone. Although OPay says it has over 300,000 merchants, the number of users on its platform has grown to 40 million.

Tosin Eniolurnda, CEO of Moniepoint, told BusinessDay that merchants may not bring about the death of agents but it is unlikely that merchants will be yielding the market any time soon.

“Prior to now, what people would do is they will go to an agent location to withdraw cash and go spend at the merchant location. But during the whole cash crunch, people learnt to pay directly at merchant locations and merchants also learnt to accept digital payments. I think this is a trend that we can expect to continue,” Eniolorunda said.

(Business Day)