This article was contributed to TechCabal by Emmanuel Mogaji, who is a Senior Lecturer at Greenwich Business School, London, UK. You can reach him at email@example.com
Few months ago, my colleague and myself published our research on the dark side of mobile money in Nigeria in Technological Forecasting and Social Change journal. In this article, we developed a framework that recognised the customer-developer, developer-regulator, customer-agent and developer-operator relationship in managing the dark side of mobile money. Our framework however never envisaged the relationship between regulators and operators until the recent cash withdrawal limit policy announced by the Central Bank of Nigeria (CBN), which has put a limit on the amount of cash an individual can withdraw in a day.
Amidst the numerous options to access cash in Nigeria—over the bank counter, via automated teller machines (ATMs) and Points of Sale (PoS)—the impact of this policy on POS business has received considerable attention. This attention is very understandable considering the inherent challenges of the country which has made the POS business lucrative. POS vendors exist for a reason: to meet the growing needs of people who solely rely on cash payment, the large number of financially excluded consumers who do not have a bank account, the absence of physical bank branches in many communities across the country, and even the challenges with technology and access to smartphones.
The number of PoS terminals in Nigeria grew significantly from around 155,000 to 1.1 million, as of April 2022; and PoS agents have increased up to 1.9 million. Many of these agents will surely be affected by this policy because they will not have access to cash for their customers. It is not surprising to see that the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) has written to the apex bank requesting exclusion from the policy. No doubt this policy will affect many livelihoods, especially those who have relied on POS as a form of business, not to mention the unemployed youths in the country thinking of venturing into this business. But it is inevitable that policies will, by design, have both positive and negative impact on consumers and businesses.
So, while the negative impact may have been discussed as people evaluate this policy, it is imperative to look at the positive side of things and see how we can get the best from the policy. We would like to believe that the Central Bank has the best interest of Nigerians in mind, and therefore it is important to recognise significant implications for key stakeholders.
First, the banks must recognise that there is an emerging set of consumers who will be exploring alternative banking, and therefore the banks should be ready to deal with their request, educate them, and advise on how to make this transition seamless. There would be many people who will be looking at opening a bank account and we can only envisage the pressure on the infrastructures. Banks should improve on their effort to address network issues and look at reducing card maintenance and transfer charges in order to enhance the banking experiences of their consumers.
Second, fintech developers need to intensify their product development to support individuals who are thinking of exploring a different way of banking. This innovation may involve pivoting from traditional banking and allowing consumers to access their money through neo and app-only banks. Fintech developers should also strengthen their relationship within the B2B sector, developing products that can enhance cashless payments and transactions for businesses. Recently Paystack launched their POS Terminal, which allows businesses to create custom, enjoyable in-person payment experiences. More of these innovations will be needed, going forward.
Third, POS service providers like First Bank (First Monie), OPay, QuickTeller and MTN need to be aware of the impending changes and explore opportunities to improve their operations. With many people not finding the POS business lucrative because of the new CBN policy, there will be an impact on their sustainability; therefore these providers need to start thinking of diversifying their services. In our article, we argue that lobbying may become necessary to change regulations and create more opportunities for mobile money development and adoption by recognising the policymaking processes in many developing countries, which are often not straightforward, and that changes can happen overnight. Just like we had phone operators many years ago charging us to make calls per minute, the POS business is evolving and individuals need to recognise and adapt to this digital transformation.
Fourth, consumers need to start embracing digital technology and transformation in the financial industry. These changes are not just in Nigeria but an ongoing transformation across the world: in the UK, there are less visits to the banking hall and even HSBC is set to close more than one in four bank branches in the UK.
Business owners need to start exploring how to collect payment through cards and reduce cash transactions. Employers should encourage their staff to open bank accounts so they don’t keep paying them in cash but through transfers into their bank accounts.
Ultimately, the government needs to ensure that there is an enabling environment to support this digital transformation. There are many innovative ideas that this policy will spur—from hackathons to the development of more innovative ideas, fundings for fintechs and the education of consumers about available digital alternatives like the e-naira—and it is important that the government supports them. . Policymakers should also ensure that failed transactions and other issues with banking operations are addressed to build some trust in the system.
The CBN policy has been released, whether we think there is a political motive to this or not; there is a growing drive for digital transformation within the financial sector and it’s not surprising that the government is thinking we should go digital. It is therefore imperative for all stakeholders to recognise these changes, evaluate their business operators and how they engage with financial service provision, and start making effort to adjust accordingly.