High PoS Transactions Failures Keep Merchants’ Cashless Apathy Alive - Sundiata Tech


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Friday, August 24, 2018

High PoS Transactions Failures Keep Merchants’ Cashless Apathy Alive

Persistent rise in failed transactions involving Point of Sales (PoS) has many merchants on the wrong side of the cashless project being championed by the Central Bank of Nigeria (CBN).
Data from the Nigeria Interbank Settlement System (NIBSS) found that PoS transactions carried out by retailers in the country recorded a high failure rate of 11.41 per cent representing about 278,966 failed electronic payment transactions on Tuesday, the first day of Eid-El-Kabir celebrations. The numbers did not change much on Wednesday, the second of the celebrations as failure rate dropped slightly to 10.53 per cent as at 2:20pm.
PoS transaction failures also hit 14.9 per cent in mid-December, 2017.
PoS should ordinarily be the preferred payment channel for many merchants in Nigeria. One major advantage it has is that unlike channels like ATM with withdrawal limit set at N100, 000, customers can pay more using PoS. Unlike ATMs also, it is portable and handy which means it can easily be moved around.
NIBSS had noted in a report in 2015 that PoS is the most popular non-cash payment channel, preferred among the non-cash payment options by 93.6 per cent of merchants, and 38.8 per cent of consumers usage.
The CBN introduced the Point of Sale system in 2012 to drive home its cashless policy. The volume of PoS transaction has grown since then at a compound annual growth rate (CAGR) of 123 per cent between 2012 and 2016, according to NIBSS. The PoS system was used 146 million times representing a 130 per cent increase from 64 million prior to 2016.
It is believed that PoS transactions peaked when small businesses that already use their PoS machines to accept bank cards for payments of goods and services began to use it to debit customers’ account in exchange for the equivalent cash and a fee.
However, at a July 2018 fintech conference in Lagos organised by Epayment Plus, stakeholders observed the speed with which most merchants were rejecting usage of point of sales for their daily transactions. The problem did not just begin in 2018; in 2016, NIBSS admitted that despite uptake in the adoption, barely half of the machines were in operation. Out of a total 120,000 PoS machines in Nigeria, only 62,000 were active, while a total of 100,000 terminals were registered with the company.
At the conference in July, top on the list of complaints was the high transaction failure rate, high cost of operation and the length of time it takes to effect settlement with payment providers.
There are several factors that could lead to a failed PoS transaction. One of the major culprits is poor network. Poor network could be a result of a bank having network issues, in which case the transaction will fail, or a malfunction on the NIBSS platform which will mean the platform will not function in all the banks. A NIBSS representative said the later part is very rare.
Transaction failures have led some proactive commercial banks such as the United Bank for Africa (UBA) to take measures aimed at reducing failure rates. The bank in 2017 collaborated with INETCO Insight to monitor multi-protocol payments and service transactions originating from mobile banking, online banking, ATM as well as PoS channels, and proactively identify transaction slowdowns and failures before they impact customers.


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