BACKGROUND.
Traditionally, customers had to physically go to the bank and pick up a withdrawal or deposit slip to move monies. Subsequently, Automated Teller Machines (ATM), as well as mobile and internet banking services were introduced and this caused a reduction in the footfall to banking halls. In 2013 the Central Bank of Nigeria (CBN) instituted its Cashless Policy to achieve financial inclusion and a cashless economy. Cash withdrawal limits were also introduced and the use of further alternative channels such as Unstructured Supplementary Service Data (USSD) was encouraged. Relatively, this policy has been a success as demonstrated by the widespread display of the ‘POS AVAILABLE’ signage all over the country by outlets of CBN-licensed agency baking operatives which include conventional banks, FinTechs and even mobile network operators, and the very high level of patronage these outlets enjoy. This is confirmed by data from the Nigerian Interbank Settlement (NIBSS) which shows that the volume of point of sale (POS) transactions rose from N573.72bn in 2022 to N807.16bn in January 2023.
POS services drive transaction volumes and profitability for banks, job creation generally and ultimately economic growth. It also offers a more convenient and time-saving banking experience. POS services also facilitate digital inclusion and so will be discussed in that context to educate on the usage benefits and risks as well as safe practices.
WHAT IS A POS DEVICE?
A POS is a system of integrated hardware and software in the form of a computer, tablet or other devise that facilitates business transactions. It is used mainly in the withdrawal and transfer of funds and for payment for virtually all kinds of goods, bills and services.
MAJOR CONCERNS AROUND POS USE.
POS services are software, hardware and technology-driven and so are subject to attendant challenges around integrity and security which can compromise effectiveness and uptake of service. The evident concerns are discussed below:
- Skimming.
Bank card skimming is one of the most effective forms of card-based fraud where scammers install a hidden recording device that reads cards’ magnetic stripe and a fake keypad overlay to mimic a real keypad. Once the unwary customers swipe or insert their card into a compromised POS, the skimming gadgets are uninstalled and all the stolen data such as customers card number, card expiration date and card verification value (CVV) are transferred to a computer to facilitate fraudulent purchases, bypassing the OTP code sent by banks.
- Contrived Technical Hitches.
The vendor/merchant inserts the user’s card then simulates technical complications such as unstable network, card malfunction, bank platform failure, etc. to delay the user in order to sneakily obtain or extract their sensitive personal or banking information which will subsequently used to commit fraud.
- Charge-back Deceit.
Charge-back fraud also known as “first-party fraud” is also perpetrated through the POS where a customer uses their card on a POS to make a legitimate payment but later contacts their bank to deny the payment. If the vendor/merchant is unable to furnish proof of the conclusion or delivery of that transaction legitimate, he might be exposed to the prospect of having to refund any monies involved.
OTHER CONCERNS.
There are a number of other concerns around POS services which are non-system induced but derive from organizational process lapses. The most significant of these concerns are highlighted below:
- Arbitrary, High Charges.
Unlike similar traditional banking services such as ATM which are regulated by the CBN and attract aggregated relatively minimal fees (monthly inter-bank ATM withdrawal charges are fixed at N35.00 for four transactions and above), POS charges are transaction-based and are randomly determined by the vendor/merchants, supposedly influenced by factors such as location footfall and demand, based on scope and volume of socio-economic activity; as much as N100 is charged on a transaction of N1000 to N4000 and above. Naturally, this would impact adoption uptake, in spite of the convenience offered by the service.
- Multiple Debits.
This occurs upon the repeat of an initially declined POS transaction. The second result could be ‘accepted’ or another ‘declined’ transaction but the customer would be debited twice for both trials. The vendor/merchant usually refers the customer to their bank for resolution but this requirement is a very slow process which may not necessarily bring about a redress and leaves customers dissatisfied.
- Inefficient Customer Service.
The itinerant POS vendor/merchant typically carries out a one-off business transaction with customer and has to structure or capacity for customer complaint log-in and resolution. While more established vendor/merchant outlets may provide for customer complains, they generally do not engage in sustained customer relationship management. The result of these is that the costumer does not enjoy a 360-degree service from the POS industry, a development which would discourage further service uptake.
- Ill-trained Merchants.
In most cases, persons who operate POS devise transactions are barely trained on the basic requirements for that task and due to this, there are constantly recurring instances of inputting wrong transaction details, inability to operate device effectively, etc. which do not bode well for the customer and the industry generally.
- Issuance of Counterfeit Notes.
There have been a lot of instances where itinerant POS vendor/merchants with no definite trade location issue counterfeit Naira notes to unwary customers who only discover the anomaly after the said vendor/merchants have moved on.
RECOMMENDATIONS.
The risks in the use of POS services outlined above may not be totally eliminated but they can be managed through the measures proposed below:
- Education and Awareness.
It is important for customers to be aware of the risks associated with the use of POS along with the mitigation options. Such information can be very easily found through personal research online, or at alternatively through professional advise. Knowledge of these POS concerns is the first practical step towards the alleviation of the said risks. Customers should also be vigilant while engaging in POS transactions to avoid being taken advantage of.
Also, POS vendor/merchants should be trained and retained by their principals on the highest ethical, procedural and operational standards for efficient service delivery.
- Constant Device Maintenance.
Technology is constantly evolving and it is important for the POS system software to be upgraded regularly to eliminate bugs and other related security concerns. POS devises should be serviced regularly and faulty ones replaced or taken for repairs.
- Effective Regulation of Processes.
Agency banking operatives owe the duty of best service to their customers by very closely supervising their vendor/merchants. The CBN can manage the concerns around POS use by instituting regulations that introduce robust standards around controls and liabilities of the service providers which will be cascaded down to the vendor/merchants.
4. Responsive Regulation of Technology Standards.
There are current technologies that have been introduced to arrest card and POS fraud and protect customer data, for example EuroPay, MasterCard and Visa (EMV) Chip and Near Field Communication (NFC). The EMV chip terminals (POS) is able to read the encrypted data stored on the card microchip as well as detect and decline counterfeit cards. The NFC terminals operate on a tokenization technology that accepts and authorizes payment over-the-air from tokenized payment data stored on a smartphone. This protects card data from being stored in a merchant system but the randomly generated token values which cannot be replicated by fraudsters. The CBN can consider directing the introduction of such or similar technologies by the banking industry and the cashless economy ecosystem.
CONCLUSION.
The advent of POS service resulted in a significant boost for the banking sector by way of more employment opportunities, growth in revenues and others highlighted above. This has also enhanced the cashless economy and by extension, digital inclusion. However, the challenges around the usage of POS could discourage some persons, leading to a less-than-optimal uptake of the service and therefore compromise the sustained development of the cashless, digital economy. This article offers some recommendations for addressing these challenges for the enhancement of financial inclusion and the continued growth of the cashless digital economy.