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Nigeria’s PoS compliance battle
🍔Quick Bite: The Nigerian government has mandated PoS operators to register with the CAC to curb fraud, sparking a legal challenge from the Association of Mobile Money and Bank Agents, who argue it burdens small operators.
🧠 The Breakdown
In 2013, the Central Bank of Nigeria (CBN) introduced agent banking and point-of-sale systems to boost financial inclusion across the country. Due to the ease of starting a PoS business and its popularity as a side income stream, the number of PoS agents has grown to nearly 1.9 million.
The surge in PoS terminals across Nigeria has also led to a rise in fraud cases involving these systems. Per a report by the Nigeria Inter-Bank Settlement System Plc (NIBSS), PoS terminals were responsible for 26.37% of fraud incidents in 2023.
In response, the Federal Government mandated all PoS operators to register with the Corporate Affairs Commission (CAC) to help combat fraud and promote transparency. The directive, first issued in May 2024, gave operators a 60-day deadline ending on July 7, 2024, which was later extended to September 5, 2024. With the deadline now passed, the CAC has warned non-compliant operators of potential shutdowns and legal action.
The Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) has now taken the government to court, claiming the registration requirement is unfair. Their argument? Many PoS operators are individuals running small businesses under their own names, and according to the Companies and Allied Matters Act (CAMA), CAC has no jurisdiction over them. AMMBAN says the regulation could cripple many small operators.
The real cost of compliance
In an interview with The Punch, one of Nigeria’s top newspapers, AMMBAN’s National General Secretary, Oluwasegun Elegbede, highlighted that CAC registration costs at least ₦35,000 ($22). This is notably higher than the former minimum wage of ₦30,000 ($19). Although a new minimum wage of ₦90,000 ($56) has been signed into law, many states have yet to implement it.
“While we understand the need for regulation, it is essential that such measures do not stifle the growth of the sector or place undue burdens on small business owners. We are confident that the court will recognise the merit in our case,” he said.
While the government argues that registration is essential to combat fraud, AMMBAN counters that there are already mechanisms in place to trace operators, like BVN (Bank Verification Number) and NIN (National Identification Number) requirements. Every PoS operator is traceable through the NIBSS and their SIM cards, so the extra registration step feels like overkill to many in the industry.
The problem of PoS fraud
Despite its many benefits, the PoS industry has been plagued by fraud. One of the most high-profile cases involved Flutterwave. In October 2023, Flutterwave lost $24 million (₦19 billion) after discovering that several PoS device merchants had abused a technical glitch, leading to unauthorized transfers on its platforms.
A report by the Financial Institutions Training Center (FITC) shows that PoS fraud cases made up 30.67% of the total fraud cases reported in Q1 2024.
Prior to the CAC registration directive, the CBN issued a circular to banks, other financial institutions, and payment service providers in March 2024 to regulate agent banking and protect customers’ funds.
In January this year, it was reported that the CBN, through the Nigerian Electronic Fraud Forum (NeFF), was collaborating with AMMBAN to launch a new feature on PoS terminals to flag fraudulent transactions by asking for specific KYC details.
Fintech leaders in the PoS space have also demonstrated a commitment to curbing fraud through collaboration. In February, Moniepoint teamed up with the CAC to streamline the registration process for its users, enabling over 2 million small businesses to register with the CAC directly via the Moniepoint app. Similarly, PalmPay partnered with the CAC to assist in the registration of 219,000 small businesses.
What’s next for PoS businesses?
As the legal battle between AMMBAN and the CAC unfolds, all eyes will be on the court’s decision. Will it side with the operators, offering relief to thousands of small businesses? Or will the government’s push for tighter regulation prevail?
Whatever happens, one thing is clear: PoS is here to stay. Between the end of Q1 2023 and the end of Q1 2024, the number of registered PoS terminals had increased from 2,537,422 to 3,730,441, marking a 47.02% increase, according to Nairametrics.
With fintechs like OPay, Moniepoint, and PalmPay continuing to expand their reach, the future of PoS services looks bright. However, the industry will need to tackle fraud head-on and find a balance between regulation and growth.
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