Before you get a POS machine

Posted by Felix Okoli on Wednesday October 1, 2014 at 9:14:22:

Point of Sale(P.O.S.) machines are those machines we see at retail businesses that normally accept debit or credit cards just like an ATM does and it allows buyers to make payments directly to a seller's account without the need for using cash. With a P.O.S. machine, a business eliminates the need for taking cash to the bank since his revenue is directly paid into the bank. It does have some benefits.

If you run a business, it may be tempting to at least get a P.O.S. machine but before you do that, you should consider a lot of things with the ultimate goal of whether it would really be beneficial to your business.

Things to consider
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- Type of customers: What type of customers do you really have as a seller? Are they highly educated or not? Do they make use of card payments or understand it? Not everyone in Nigeria makes use of ATM cards or understands how card payments work and so if you are mostly dealing with customers who prefer using cash than cards, then it won't make sense getting a P.O.S. machine. You have to just go in the direction of your customers. If they are the type of ones that prefer using cards rather than cash, then get a P.O.S. machine for them since they'll be more likely to patronize it. If you are not sure, then you can provide both options on the table and see the results.

- Associated POS usage costs: e.g. P.O.S. charges. Using a P.O.S. machine for business does come with some costs which makes cash payments a bit more attractive. In Nigeria, merchants have to pay about 1.25% on the value of each successful transaction or payment they receive. So, if for instance a customer pays the seller about N50,000, then the seller would in turn pay his P.O.S. provider(i.e. bank) about N625. The charge is referred to as transaction cost. The merchant would also have to get trained and also train his staff on the usage of P.O.S. machines and the learning process may cost down time and mistakes which can all considered as associated P.O.S. usage costs.

- Revenue level: How much income do you really generate from your business? A P.O.S. machine may not really be necessary for a business or individual that receives less than N500,000($3000) a day and so it's mostly suitable for persons who generate more income that is better banked than cashed. I think anyone who really makes a lot of money is actually safer not receiving cash but rather make use of P.O.S. machines for security reasons. It also avoids the need for going to the bank all the time since a machine can do that for you. If you however generate small revenue a day, then it may not be necessary to still make use of a P.O.S. machine.

- Availability of Power: P.O.S. machines require electricity to keep running and they also make use of their own internal batteries. Although it can work with batteries for a long time, it would need recharging from time to time so your business premises should have access to reliable power to keep the batteries topped up. So, having a standby power generator for instance in Nigeria is a necessity.

- Network reliability: How reliable is the network of your proposed POS machine? There has been lots of situations which has left a lot of customers and merchants disappointed as a result of the unreliable network provided for POS services. At times they get errors like card declined or institution not available and the problems have mostly been linked to the major telecom network providers for these machines. It works a bit like GSM services and requires that the telecom companies provide a good service that would allow banks to connect to each other probably. A merchant in Nigeria for instance would have to provide an alternative means of getting paid e.g. by accepting cash payments.

So, a POS user in Nigeria would have to consider the fact that POS usage is not 100% totally reliable yet as a result of bad network services and so he has to provide alternatives when such service fails.

Summary
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In Nigeria, cash payments are still popular especially for people making payments for bills under N10,000($59) at once but card payments are growing. However, the unreliability of P.O.S. network providers is slowing the growth of card payments. I wouldn't recommend accepting card payments if you are a business still growing and generating less than N100,000($590) a day given the current poor service associated with using card payments.

Comments:

Re: Before you get a POS machine Reply by Oreoluwa Orebanjo on Wednesday December 17, 2014 at 23:14:52:

Thank you. This article has been very educative. I really thought getting a P.O.S. machine would be without a down side. Now i have to weigh the cons too.

Re: Before you get a POS machine Reply by Onyii on Tuesday January 6, 2015 at 23:26:23:

Hello, how about a small business owner, is it advisable to get a P.O.S? because people owe a lot and always claim to not want to go to the bank and all? don't u think it is smarter, cos the 1.25percent is not too much to be honest. Are there any other charges? Like monthly or yearly for instance?

Re: Before you get a POS machine Reply by Felix Okoli on Tuesday January 6, 2015 at 23:26:23:

I don't know of any other charges other than the transaction charge. If it's ok for you, then you should go for it. At least it will eliminate the need for looking for change.

Re: Before you get a POS machine Reply by FRANCIS HELLEN on Monday January 19, 2015 at 11:34:40:

different between p o s mechine and orange box

Re: Before you get a POS machine Reply by Collins Bloom on Tuesday January 27, 2015 at 7:46:26:

I have been in a tug of war with Diamond Bank for 3wks for a POS machine. Simply no luck. Other banks seem prepared to toss one my way for an account, so I am convinced it's not a problem the whole banking sector is having . I like my bank on account of the services I get, besides my account officer is great. Is it possible to get a POS machine from the open market and perhaps give it to the bank to configure. Who sells it and for how much. Is there a preferred brand? And no, I don't usually make 500k per day but I realize clients are more disposed to spending more with cards than cash. Thank you.

Re: Before you get a POS machine Reply by Felix Okoli on Tuesday January 27, 2015 at 7:46:26:

I'm sure you can get a POS machine from the market but I don't know about banks helping to configure it for you. Also, the reason why I mentioned N500,000 was in order for businesses to avoid paying a 2%(i.e. N10k) fee they are likely going to be charged if they were to deposit that N500k at their bank on a daily basis. However, any business owner can get a POS if he wants even if he makes just N5,000 a day.

Re: Before you get a POS machine Reply by Collins Bloom on Wednesday January 28, 2015 at 7:17:7:

Article was lucid and very educative. I gained a lot. I figure in the weeks and perhaps months ahead prospective users of POS who have been told by their banks that acquisition is now subject to 'POS dormancy' by other users will find their way to this article through Internet searches. A practical approach on how to circumvent this limitation would have been helpful considering there can be no POS benefit without POS.

Re: Before you get a POS machine Reply by Lil on Monday May 25, 2015 at 9:35:30:

The transaction charge has been reviewed downwards to 0.75% for all transactions of value less (N 266,666.67)

However, if the amount involved in a transaction is more than (N 266,666.67), the transaction charge is a flat N 2,000.

what is means is that the transaction fee of 0.75% has a maximum of two thousand naira (N 2,000)

Re: Before you get a POS machine Reply by Robertson usoroh on Sunday July 19, 2015 at 11:49:12:

I want to get a POSsystem, put it close to banks that have long queues. Some people cant wait in a queue for a long time. So they may come to my kiosk and use my POS system. I debit their atm card into my bank account. I charge them like this, Example, if someone wants to withdraw N1,ooo my charge will be N1oo. N1o,ooo will be N1k. N2o,ooo...N2k...and so forth. I pay them cash.....isnt it a good idea..?

Re: Before you get a POS machine Reply by Felix Okoli on Sunday July 19, 2015 at 11:49:12:

It's a good idea but will it be a profitable business? How many customers will patronize you?

Re: Before you get a POS machine Reply by Ohwojene michael on Tuesday August 4, 2015 at 7:45:34:

I really like this, but how con i get this pos machine. Pls i need this pos machine.

Re: Before you get a POS machine Reply by Felix Okoli on Tuesday August 4, 2015 at 7:45:34:

Meet your bank..

Re: Before you get a POS machine Reply by Titusolufemi on Monday August 10, 2015 at 20:6:57:

There Is No Bank In My Area,we Have To Travel A Long Distance To The Nearest Bank And The Transportation Fare Cost At Least 300 Naira.I Am Planning To Start Up A Withdrawal/transfer Business Using P.O.S With Charges Of 150 Naira Per Transaction.With This 1.25% Charges Per Transaction,will It Favor Me.

Re: Before you get a POS machine Reply by michelle on Wednesday August 31, 2016 at 18:46:55:

please i will like to get one pos for my business but I was told I av to register my company name nd also open a company account with my bank before applying for it,is it true

Re: Before you get a POS machine Reply by Felix Okoli on Wednesday August 31, 2016 at 18:46:55:

Yes, I think it's true. It has to be a business account since you'll be using it for business.

Re: Before you get a POS machine Reply by sidney on Wednesday March 29, 2017 at 8:50:0:

must one be highly educated before doing pos business?

Re: Before you get a POS machine Reply by Felix Okoli on Wednesday March 29, 2017 at 8:50:0:

No, it's so easy to use just like a mobile phone.

Before you get a POS machine

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