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NIGERIA INTER-BANK SETTLEMENT SYSTEM (NIBSS) PLC. December 04, 2012 Financial Derivatives Company Limited PROJECT REPORT LAGOS PoS ADOPTION SURVEY for.

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Presentation on theme: "NIGERIA INTER-BANK SETTLEMENT SYSTEM (NIBSS) PLC. December 04, 2012 Financial Derivatives Company Limited PROJECT REPORT LAGOS PoS ADOPTION SURVEY for."— Presentation transcript:

1 NIGERIA INTER-BANK SETTLEMENT SYSTEM (NIBSS) PLC. December 04, 2012 Financial Derivatives Company Limited PROJECT REPORT LAGOS PoS ADOPTION SURVEY for Conducted by: Commissioned by: 1

2 Outline  Executive Summary  Background  Methodology  Survey Findings  Summary and Conclusion  Recommendations and Next Steps 2

3 Executive Summary 3

4  NIBSS commissioned FDC in October 2012 to conduct a PoS adoption survey in Lagos (Project NIBSS)  The project goal is to ascertain the level of adoption and/or inhibitions to the widespread adoption of PoS terminals in Lagos  The project scope entails a market survey of both merchants and end-users (cardholders) of PoS terminals in Lagos  Market survey conducted via administration of questionnaires in four categories of market areas across Lagos 4

5 PoS Adoption Rate In Context  Deductions from available data on total number of PoS terminals deployed and volume of transactions conducted indicates that PoS terminals deployed recorded an average of 46 transactions and a maximum of 56 transactions per PoS terminal monthly over the period under consideration 5 Source: NIBSS

6 Research Objectives  Active profiles  Understand the profiles of merchants and end-users  Service attractiveness  Investigate the attractiveness of the PoS Terminals  Compare with other means of payment  Service weakness  Identify perceived obstacles with the use of the PoS Terminals  Identify solutions that will enhance the adoption, subscription and effective utilisation of the card payment system  Geographical Dynamics  Understanding the dynamics and challenges in the use of PoS Terminals, geographically 6

7 Results and Findings 7

8 Merchants with PoS 8

9 Merchants with PoS Terminals According to the survey results, of the 3,562 merchants with PoS terminals 47% are general merchants 22.4% operate supermarkets 10.9% are pharmaceutical stores/hospitals 7.3% are restaurants/eateries 12.4% are other forms of businesses These business types are mostly located in open markets (39.5%) Neighborhood shops constitute 29.5% 29.5% are in shopping malls and 1.5% are kiosk locations Business Location 9

10 Merchants with PoS Terminals  In spite of having PoS Terminals, avenue to EFT and Cheques payment most Merchants still accept cash above PoS  Cash payment was selected as the most accepted mode of payment (93.9%)  73.2% of the merchants surveyed accepted card payments  61.7% of these respondents accepted cheques  25.5% accepted electronic fund transfers (EFT) for payment, and 0.9% accept other means of payment  Investigation on why they accept cash over card payment while they have the PoS Terminals show that:  PoS deployment was involuntary as they were deployed by banks unsolicited  PoS deployment is not PoS availability for usage as some keep it under their lockers  Delays associated with access to funds after sales from the PoS Accepted Payment Methods 10

11 Merchants with PoS Terminals  By preference  75.5% of merchants prefer cash as the method of payment  9.1% rating for cheques  11.5% for cards  2.5% for EFTs  1.3% for other means of payments Accepted Payment Methods 11

12  For the non-cash options,  47% of merchants prefer the card payment scheme to other payment schemes.  On the available card types  40.7% of merchants prefer the Master Card  VISA is the next preferred card payment type with 31.9% of the responses followed by Verve with 27.4% of the responses. Merchants with PoS Terminals 12

13  A total of 24.4% of merchants indicated that the success rate of cards is less than 25%  29.8% of merchants believe the success rate to be between 25% and 55%.  29.6% claimed that success rate was between 55% and 75%  16.2% of the merchants indicated that the success rate of card payment was above 75% Merchants with PoS Terminals 13

14 Recommendation – Merchants With PoS Terminals  Based on the findings above, our recommendations are as follows:  Periodic checks should be carried out by the Payments Terminal Service Providers (PTSPs) in order to ascertain the condition of the PoS Terminals and get feedback about the functionality of PoS Terminals  The PTSPs’ technician contact number should be made available to merchants, so that they can receive quick/first hand technical assistance when they need it  The role of the NIBSS certification laboratory/facility to certify/approve PoS Terminal models should be popularised and communicated to merchants to boost confidence in the system and regulate PoS Terminals in circulation  PoS Terminal certifying agency should conduct periodic spot-checks of PoS Terminals with merchants. 14

15 Recommendation – Merchants With PoS Terminals  There should be partnership among banks, mobile payments operators, all other existing payment schemes and other support service providers to foster high availability and adoption of PoS Terminals, with the goals of:  Mitigating current network connectivity problems  Delays in accessing proceed of sales  A fair transaction charge should be agreed upon among banks, which should be communicated to the merchants, as:  Some merchants in certain locations are price-sensitive 15

16 Merchants Without PoS 16

17 Merchants Without PoS  From the surveyed 1,627 merchants without PoS  57.5% of them are general merchants  16.4% operate supermarkets  8.2% run restaurants/ eateries.  In terms of location, 49% are in open markets  26.9% are in neighborhood shops  21.1% are in shopping malls  1.8% are kiosks. 17

18 Merchants Without PoS  Cash payment was selected as the most accepted mode of payment (65.8%)  24.3% accept cheques  7.9% accept EFTs  2.0% accept other means of payments such as bank deposits  This establishes the expectation of high preference for cash by merchants without PoS terminals.  To engender the imperative of the Cash-Less Lagos project, this should not be accepted as a do nothing case. Bankers to these merchants need to introduce PoS Terminals to them and adopt more friendly criteria for PoS Terminal deployments 18

19  Reasons alluded for not having PoS Terminals in descending order are:  Fear of default and fraud %  Easy access to cash – 27.7%  Bank refusal to deploy – 26.6%  Customer’s insistence to use cash – 25.7%  Technical malfunctioning – 21.6%  PoS Deployment/Transaction fee – 20.0%  Connectivity – 18.1% Merchants Without PoS 19

20  70.0% of the merchants expressed willingness to accept PoS Terminal mode of payments. Merchants Without PoS 20

21  We make the following suggestions based on our finding above:  Banks need to revise the criteria for PoS Terminal deployment in such a way as to encourage Merchants without PoS Terminals  A massive awareness program should be undertaken to publicize the purpose and benefits of the PoS system and allay fears of default/fraud in the following ways:  Publicity through radio and direct contact  Focus on high and medium density areas (e.g. Oke-Arin, Nnamdi Azikiwe markets) because less sophisticated merchants are located in this areas.  Publicity in more sophisticated areas (e.g. Ikoyi, Victoria Island) should emphasize direct contact with the merchants and/or formal letters of introduction.  Other publicity means to be explored like bill boards, fliers, social media and TV adverts Recommendation – Merchants Without PoS Terminals 21

22  PTSPs to be encouraged to accept frontal roles in PoS deployment in line with approved guidelines  Training on the usage of PoS Terminals immediately after deployments  PTSPs should check on the merchants after a few days of training in order to ensure that merchants understand how to use the PoS Terminals and are using them appropriately  The same procedures mentioned under the ‘merchants with PoS’ section should be followed in order to ensure network problems and technical faults are addressed promptly  The fear of frauds would be resolved once the PoS Terminals are functioning properly because trust in the PoS system would have been built Recommendation – Merchants Without PoS Terminals 22

23 Consumers/End-Users 23

24 Consumers/End-Users  Of the 1,587 consumers/end-users surveyed,  Current and savings account holders constituted 31.5% and 32.2% of responses from high-density (HD) areas  34% and 34.5% from medium-density (MD) areas  34.6% and 33.3% from low-density (LD) areas respectively  Card holders constitute 82.4% of total responses while 17.6% do not own cards  Despite the high ownership of cards, cash was still highlighted as the most used means of payment across the density areas (88.5% - HD, 93.9% -MD, 87.7% - LD)  The reasons highlighted by the consumers for their continuous use of cash include  connection and network difficulties of the PoS Terminals  delay in transaction time  fear of fraud amongst others 24

25 Consumers/End-Users  We also identified the closeness of banks and ATMs’ to both merchants and consumers as a major inhibition to PoS Terminal adoption  Despite the inhibitors, the respondents indicated that they feel most comfortable using the PoS and card payment systems where available and secure. This explains comfort to use cards in supermarkets than in the open markets  Supermarkets (24.8%), malls (17.0%), general merchants’ stores (15.0%), pharmaceutical stores and hospitals (11.5%), others (17.8%)  73% of consumers indicated they would encourage others to use the PoS and card payment systems based on their experience with the payment systems so far 25

26 Recommendations – Consumers/End-Users  Based on our findings above, our suggestions are as follows:  A massive awareness program to publicize the purpose and benefits of the PoS system (similar to that recommended for merchants without PoS)  Publicity through radio, bill boards, fliers, social media and TV adverts  Town storms and road shows are recommended to fast track end-users adoption  Ensure transparency in the PoS system process  All transaction costs and other issues associated with PoS Terminal usage should be made known to consumers during the publicity program  Necessary steps to ensure that the PoS Terminals are working as expected should be publicized to build trust 26

27 Recommendations – CONSUMERS/END-USERS  Carrying cash by consumers should be made less attractive through policy formulation  The cash withdrawal limit by individuals should be revised downward with more stringent charges for withdrawals above specified limits  The cash deposit limits for corporate account holders should be reduced and the penalty for large deposits should be increased 27

28 Conclusion  The potential for growth of the usage of PoS Terminal in Lagos metropolis remains strong.  With a population of over 16 million people, there are presently approximately 8 million card holders in Lagos State  Based on the aggregated data from the 6,776 survey sample, the study found out the following: Challenges / Perceived Obstacles to usage of PoS Terminals  Two out of the three categories of respondents (i.e. Merchants with PoS and Merchants without PoS Terminals) identify basically the same challenges and perceived obstacles to the smooth operation of the PoS Terminals 28

29 Conclusion  The obstacles in order of priority are as follows:  Connectivity and network challenges24.5%  Transaction charges/charges to bank account18.9%  Consumers/merchants insistence to pay cash12.7%  Rejected transactions11.8%  Card reading/technical difficulties11.3%  Consumers/merchant lack of card/pos10.1%  Access to after sales funds6.6%  Others4.3%  Poor awareness of the PoS payment systems and benefits  Long transaction time/late transaction notification 29

30 Conclusion  Challenges that deter consumers from making use of the pos terminals  According to priority, factors that inhibit consumers’ usage of the card payment system include:  Connection and network difficulties with the terminals  Non-Availability of PoS Terminals at merchants’ points/stores  Attributed to the poor rate of deployment as noticed by the Merchants with PoS  Merchants demand for cash  As a result of obstacles listed above 30

31 Conclusion  Long/delayed transaction time  Fear of fraud  Some consumers gave personal experiences on being debited twice  In some cases the terminals reject the transaction, however the consumer receives a debit alert some hours after the unsuccessful transaction 31

32 Next Steps 32

33 Next Steps  We suggest a follow-up integration survey in Lagos State most importantly in the areas not covered by this survey  This will help to further identify other cultural and fundamental barriers to the adoption of the PoS Terminals  Popularisation of NIBSS role as PoS Terminal certification agency and regular spot checks of PoS Terminals in use at merchant points  There is need for a pilot survey in other key cities where the Cash- less policy will be introduced before implementation  This will help to identify the necessary pre-implementation steps to be taken; identify the trend and compare results with the Lagos density areas  This will help underscore the model to be adopted for each of the new locations 33

34 Background & Methodology 34

35 Background and Methodology  The “Project NIBSS” entails a market survey of both merchants and end-users (cardholders) of PoS terminals in Lagos  Market survey conducted via administration of questionnaires in four categories of market areas across Lagos  Stratification of sample area (Lagos State) into  Lagos  Yaba  Ikeja  Badagry  Further stratification into high, medium and low density areas 35

36 Background and Methodology  Spot Check on enumerators during enumeration  By both FDC and NIBSS team  Project update presented during the course of the survey  Feedback from update incorporated 36

37 Scope of Survey 37

38 Scope of Survey LocationMerchant With POS Merchant Without POSEnd-Users TargetActualTargetActualTargetActual High Density Areas1,5001, Medium Density Areas1, Low Density Areas1, Total3,5003,5621,5001,6271,5001,587  7, 000 questionnaires were administered  6776 were successfully filled and analysed  Covering merchants with PoS, merchants without PoS and end-users ( Card and Non-card holders) 38

39 Drawbacks  Drawbacks included  Several duplication of addresses of merchants with PoS  Incorrect addresses of merchants with PoS  Difficulty in meeting owners and managers where sales personnel's/other staff insist they cannot fill the questionnaires  Some questionnaires administered were not returned as a result of merchants insistence on enumerators picking them up later  Respondents fear of confidentiality  Angry respondents (basically as a result of their bad experiences with PoS terminal) 39

40 Merchants with PoS Survey Findings -Quantitative 40

41 Respondents Status in Relation to Business 41

42  Responses from Survey shows  More business owners (45.43% - Yaba) responded to the questionnaires  20.8% - Ikeja, 16.5% in Badagry and 11.6% in Lagos  21.1% in Ikeja were by managers  20.7% were by secretaries and personal assistants in Badagry  40.5% were other staff and workers in the various outlets Respondents Status in Relation to Business 42

43  Equal number (25%) of respondents from the Ikeja, Badagry and Lagos zones are Owners, Managers, Partners and Sales representatives  However, a majority (38.5%) of the respondents in the Yaba medium density area were Owners  A greater proportion of the respondents in Yaba (46.7%) and Ikeja (24.0%) are Owners  Majority of the respondents in Badagry (24.0%) and Lagos (61.7%) zones are Managers  Sales representatives were 30% in the Lagos area 43 Respondent Status in Relation to Business

44 Nature of Business 44

45  35.6% (the majority) of the respondents in the Yaba high density areas were General merchants (traders)  Most respondents in Lagos (37.7%) own supermarkets  In the Badagry and Ikeja zones 20.2% and 20% own restaurants.  Most of the respondents in the Lagos (31.8%) and Yaba (43.9%) medium density areas were general merchants  In the Ikeja zone, 32.1% were owners of other kind of businesses  20% of respondents in the Badagry area were general merchants, own restaurants, supermarkets, pharmaceutical stores and hairdressing salons each 45

46  46.7% and 24.7% of respondents were general merchants and supermarkets respectively in the Yaba area  In the Ikeja zone,19.6% own barber shops/hairdressing salons  35% of Lagos respondents were mostly owners of other kind of businesses 46

47 Nature of Business and Business Location 47

48  General merchant stores (18.1%), supermarkets (7.2%), and restaurants (5.7%) were located in the open market, shopping malls, and kiosks respectively.  However, a majority of pharmaceutical stores (3.4%) and hair dressing salons (2.4%) were located in neighborhood shops.  General merchant stores (14.4%) and pharmaceutical stores (2.6%) were located in the open market  Supermarkets (7.1%), restaurants (3.7%) and hair dressing salons (1.3%) were located in kiosks, shopping malls and neighborhood shops respectively. 48

49  Like other density areas, a majority (13.5%) of general merchants were located in open markets  Supermarkets (6.1%) and pharmaceutical stores (3.1%) were located in shopping malls  Majority of restaurants (4.1%) and hair dressing salons (2.4%) were located in neighborhood shops. 49

50 Nature of Business and Proximity to Banks and ATMs 50

51  Most (9.9%) of merchants in open markets are 2 and 5 minutes walk from banks and ATMs  An average of 30% of the merchants take between 6 to 15 minutes to get to banks and ATMs  8.7% of total responses are merchants in shopping malls and are located less than 2 minutes away from banks and ATMs (24.9% - less than 2 minutes)  39.1% of total responses are merchants between 2 to 5 minutes from banks and ATMs’.  14.7% of them are located in shopping malls  27.3% of total respondents noted that their stores and outlet are between 6 to 15 minutes walking distance from banks and ATMs  11.5% of them are located in open markets 51

52  36.9% of the responses take between 6 to 15minutes, while 36.4% of merchants take 2 to 5 minutes to get to banks and ATMs  12.8% of those with 6 to 15minutes are located in Kiosk  12.% of those with 2 to 5minutes are located in open markets  18.7% noted that their stores and outlet are less than 2 minutes walking distance from banks and ATMs  6.2% of them are located in open markets 52

53 Accepted Means of Payment 53

54 54  Majority of the respondents in the high density areas accept cash  Lagos-39.54%, Ikeja-37.52% Badagry-37.24% and Yaba-40.75%  Debit/credit cards was next to cash in the Ikeja-32.22% Badagry-30.32% and Yaba-40.05%  Next to cash in Lagos was Cheque (24.61%) Accepted Means of Payment

55  Respondents in the Lagos (38.89%) and Yaba (32.47%) medium density areas accept cash.  In Ikeja (37.04%) preferred debit/credit cards  Equal number (40.28%) of respondents in the Badagry area accept cash and debit/credit cards 55 Accepted Means of Payment

56  In the low density areas, majority of the respondents accept cash (Ikeja-38.06%, Badagry %, and Yaba %)  Equal number (37.65%) of respondents in the Lagos zone accept cash and debit/credit cards. 56 Accepted Means of Payment

57 Frequency of Usage 57

58  In all the high density areas, cash is used many times a day  Lagos- 85.1%  Ikeja- 90%  Badagry- 92.9%  Yaba- 95.4%  EFT was never used  Lagos- 35.8%  Ikeja- 38.6%  Badagry- 31.2%  Yaba % 58

59  Like the high density areas, cash was used many times a day in the medium density areas  Lagos- 65.2%,  Ikeja-80%  Badagry-89.7%  Yaba-96.5%  Electronic funds transfer was never used  Lagos- 34.8%  Ikeja %  Badagry (80%)  Yaba- 34.2% Many times per day 59

60  In the low density areas, cash was used many times per day  Lagos- 60.4%  Ikeja-91.3%,  Badagry-96.9%  Yaba-90.8%  Cheques were never used in Badagry (36.2%)  Electronic funds transfer was never used  Ikeja -38%  Yaba -56.8%  Badagry -45.3% 60

61 Preferred Card Scheme 61

62  Majority of the respondents in the Badagry (38.1%), Ikeja (30.6%) and Yaba (29.4%) high density areas preferred the MasterCard  VISA card was preferred in Lagos (22.2%)  The second choice in the Badagry (30%) and Ikeja (23.7%) zones was the VISA card  MasterCard and Verve were the second best in the Lagos (20.9%) and Yaba (17.8%) zones respectively 62

63 Preferred Card Scheme  A greater proportion of the respondents in the medium density areas preferred the MasterCard  Lagos-38.5%  Ikeja -36.7%  Yaba-30.4%  VISA and MasterCard are equally preferred by majority (33.3%) of the respondents in the Badagry area  VISA card is the second best in Ikeja (26.9%), Lagos (17.9%) and Yaba (19.4%)  Verve card was the second best in Badagry (31%)  In the low density areas, the MasterCard was the preferred card scheme  Badagry-36.1%  Ikeja-42.9%  Yaba-23.8%  Verve card was the preferred card in Lagos constituting 38.9%  The second best in the low density areas were as follows:  Lagos- MasterCard (27.8%)  Ikeja- VISA (31.7%)  Badagry-verve (32%)  Yaba- VISA (20.4%) 63

64 PoS Usage Motivation 64

65  Majority of the respondents in the Ikeja (16.06%) and Yaba (14.55%) zones acknowledged that the main motivation for adopting the PoS was the simplicity of its usage.  Majority in the Lagos (15.46%) zone adopted the PoS due to high costs of cash management  Badagry (15.57%) zone adopted the PoS based on other reasons 65

66  A greater proportion of the respondents in the medium density areas adopted the PoS due to faster payment processing time, image of the outlet, and high costs of cash management respectively  Yaba (16.1%), Lagos (15.9%) and Ikeja (15.7%) 66

67  In the low density areas, the majority of the respondents in Badagry (17.43%), Ikeja (16.62%) and Yaba (15.04%) zones acknowledged that the main motivation for adopting the PoS was low transaction time, high costs of cash management, and need for an additional payment method respectively  An equal number (20%) of respondents in the Lagos low density area adopted the PoS due to high costs of cash management, faster processing time and to have an additional payment method 67

68 Perceived Inhibitions to PoS Usage 68

69  Majority of the respondents in the Badagry (33%), Ikeja (34.4%) and Lagos (30.8%) high density areas, believe that network/connectivity problems are the inhibitions to the usage of PoS terminals  37.9% in Yaba believe high transaction charges discourage people from using PoS  The second highest perceived inhibition to PoS usage in Ikeja (25.5%) and Lagos (26.5%) was PoS technical faults  Badagry (25.4%) and Yaba (34%) zones believe it was transaction charges and network problems respectively 69

70  Like the high density areas, 75% of the respondents Badagry, 30.6% in Lagos and 35.3% in Ikeja medium density areas believe that network/connectivity problems may prevent people from using the PoS  35.1% in Yaba believed that transaction charges was the main problem.  The second highest perceived inhibition to PoS usage in Ikeja (27.7%) and Badagry (25%) is PoS technical faults  In Yaba (18.6%), delay in access to funds is the second highest.  An equal number (27.4%) of respondents in the Lagos believe that the second highest inhibition to PoS usage was the high transaction charges and technical faults 70

71  In all the low density areas, network/connectivity problems discouraged their usage of PoS terminals  Lagos-66.7%, Ikeja-29.9%, Badagry-38.2% and Yaba- 35.6%  Technical faults are perceived to be the second highest inhibition to PoS usage in all the zones  Lagos-25%, Ikeja-24.8%, Badagry-28.7% and Yaba- 28.2% 71

72 Inhibitions to PoS Usage Based on Experience 72

73  Transaction charges were found to be the inhibitions to PoS usage by 20.2% of the respondents in Ikeja and 20% in Lagos high density area  In Badagry (22.3%) and Yaba (20.4%), the majority of the respondents chose connectivity problems and ‘transactions are often rejected’ as the main inhibitions to PoS usage 73

74 A greater proportion of the respondents in the Ikeja (19.6%) and Lagos (16.9%) medium density areas chose transaction charges as the inhibition to PoS usage 19.7% in Yaba and 19.6% in Badagry zones chose ‘customers insist to pay by cash’ and ‘transactions are often rejected’ In the Badagry (14.6%), Ikeja (22.9%) and Yaba (15.3%) low density areas, transaction charges were the main inhibitions to PoS usage Equal percentage (8.3%) of respondents in Lagos chose connectivity problems, customer’s insistence to pay by cash, and transaction charges respectively as obstacles to PoS usage 74

75 Merchants without PoS Survey Findings -Quantitative 75

76 Respondents Status in Relation to Business 76

77  Majority of the respondents in the high density areas are owners of the merchant stores (Badagry- 60.5%, Ikeja-36.9%, Lagos-48.8% and Yaba-62.2%).  In the medium density, 36.2% and 75% of respondents in Ikeja and Lagos respectively were owners,  Most of the respondents in Badagry (45%) and Yaba (58.6%) medium density areas were sales representatives and managers respectively.  Owners in the low density areas of Badagry and Ikeja were 48.4% and 64.6% respectively  Lagos (31.7%) and Yaba (50.5%) were managers. 77

78 Business Nature and Location 78

79  Most respondents (58.6%) were general merchants (traders) and they were located in the open market  16.7% of outlets business were supermarkets  Distribution of merchants’ location vary  50% were in Open markets  27% in Neighborhood shops  21% in Shopping malls  2% in Kiosk 79

80 Proximity to Banks and ATMs 80

81  In all the high density areas, majority of the merchants were located in places where banks/ATM were between 2 to 5 minutes away  Badagry-43.1%, Ikeja-54.7%, Lagos-74.4% and Yaba-70%  Similarly, a greater proportion of the respondents in the Badagry (55%), Ikeja (36%) and Lagos (40%) medium density areas were located in places where banks/ATM are between 2 to 5 minutes away  61.2% of the merchants in the Yaba zone take less than two minutes to get to banks/ATM 81

82 Accepted Means of Payment 82

83  Majority of the respondents in the high density areas accept cash  Badagry-97.4%, Ikeja- 94.7%, Lagos-97.6% and Yaba-100%  Cheques were the second best accepted means of payment.  The distribution of the medium density areas was identical to the high density areas.  Majority of the respondents accept cash (Badagry-100%, Ikeja-96.8%), Lagos-100% and Yaba-98%)  Cheques were the second best accepted means of payment.  In the low density areas, cash is also the favoured accepted means of payment (Badagry-96.5%, Ikeja-98.7%), Lagos-97.6% and Yaba-98.9%).  cheques were the second best in only Badagry (50.9%), Ikeja (28.1%) and Lagos (31.7%). 83

84 Why Merchants Discontinued Use of PoS 84

85  In the Yaba (66.7%), Badagry (54.2%) and Ikeja (73.1%) high density areas, the respondents discountinued use of the PoS due to;  Perceived difficulty in easy access to cash after sales  customer’s insistence to use cash and  technical malfunction  Equal percentage (66.7%) of respondents in the Lagos zone claimed that telecommunications and customer’s insistence to use cash were the factors that prevent them from having the PoS terminals. 85

86  Transaction fees and technical malfunction were the reasons most of the respondents discontinued the use of PoS terminals in the Ikeja (33.3%) and Yaba (50%) medium density areas.  In the low density areas of Ikeja and Badagry, 76.7% and 56.1% of the without PoS merchants said technical malfunction was the main impediment to the adoption of PoS terminals  In Lagos and Yaba, 40% and 77.6% chose ‘fear of fraud’ and ‘transaction fees’. 86

87 Cashless Policy Awareness and Perception on PoS Usage 87

88  Respondents that are aware of the cashless policy but don’t have the PoS rated the following excellent  Deployment  18.2% in Badagry  10.9% in Ikeja  42.9% in Lagos  44.4% in Yaba  Ease of Payment  66.7% in Lagos  28.6% in Yaba  8.1% in Badagry  The following were rated poor  connectivity – 68.7%,69%,100% and 42.9% in Badagry, Ikeja, Lagos and Yaba respectively  Technical assistance – 63%, 70.7%, 50% and 42.9% of responses in Badagry, Ikeja, Lagos and Yaba respectively NOTE: The same trend was noticed in the medium and low density areas Excellent Poor 88

89 Frequency of Usage 89

90 Frequency of Usage  In all the high density area, cash was used many times a day  Lagos %  Ikeja - 96%  Badagry- 68.3%  Yaba - 88%  EFT was never used  Cash was used many times a day in the medium density areas  Lagos %  Ikeja - 96%  Badagry %  Yaba %  Most respondents indicated that EFTs were never used by a large percentage  Badagry - 65%  Ikeja %  Lagos % %  Cheques were never used in the Yaba (54%) area  Similar to the high density areas, cash was used many times per day in the low density areas (Lagos- 60.4%, Ikeja-91.3%, Badagry-96.9%, and Yaba-90.8%) but electronic funds transfer was never used 90

91 End-Users Survey Findings -Quantitative 91

92 Bank Proximity 92

93  Majority of the responses in the high density area showed that banks were within 6 to 15 minutes distance from their place of work  57.6%, 35.2%, 47.7% and 60.6% in Badagry, Ikeja, Lagos and Yaba respectively  A greater proportion of the respondents in the Lagos (60.6%) and Yaba (38.25%) medium density areas take about 6 to 15 mins to get to banks/ATMs while those in the Ikeja area take less than 5 minutes  Similar to the high density areas, banks are 6 to 15 minutes close to the respondents in the Ikeja (44.7%), Lagos (44.7%) and Yaba (48.8%) low density areas  In the Badagry it takes less than 2 minutes to get to banks/ATMs 93

94 Payment Frequency 94

95  A greater proportion of the respondents have payment cards  Ikeja- 90.7%, Lagos- 91.8% and Yaba- 89.9%  Several payments per week is made by the majority of the respondents in the Lagos (42.1%) and Yaba (51.6%) medium density areas while those in Ikeja (54.9%) make several payments per day  Majority of the respondents in Badagry (38.6%), Ikeja (40.7%), and Lagos (43.8%) high density areas make several payments per week and have payment cards (Badagry-84.7%, Ikeja-85.9%, Lagos-84.2%)  Majority of the respondents in Yaba (44.9%) make payments only once a day, and have payment cards. 95

96  In all the low density areas, most respondents make several payments per day  Badagry- 45.1%  Ikeja- 51.3%  Lagos- 47%  Yaba- 41.3% 96

97 Consumer with Payment Cards 97

98  Across all density area, most consumers as seen in the chart are card holders 98

99 Range of Cards Owned 99

100  Given the range of cards owned (above) by consumers  Average range of cards owned  In the high density area – 5  In medium density area – 3  In low density area – 3 100

101 Average Number of Cards Owned  Average cards owned in High density area – 3  Average cards owned in medium density areas – 3  Average cards owned in low density areas

102 Factors Likely to Encourage Consumers 102

103  In the Lagos high density areas (Oke- Arin and Balogun), 28.16% and 18.02% represents the highest percentages of the total number of respondents who acknowledged that security and awareness are the factors that encourages them to make use of card payment system, in that order  In the Ikeja high density areas, majority (19.82%) of the respondents revealed that simplicity/easy payment was the factor that would encourage them to make use of the card payment system. This was followed closely by ‘availability’ accounting for 17.84% 103

104  However in the Yaba high density areas, better transaction time was selected by a greater proportion (22.39%) of respondents, then availability accounts for 18.66%.  The Badagry high density area has a similar distribution to that of the Ikeja high density areas. The top two factors that encourage the use of the card payment system are simplicity/easy payment (22.28%) and availability (20.34%) 104

105  In the Lagos medium density areas, the factors with the primary will encourage the use of the card payment system are promotions/rewards (20.57%), security (19.86%) and awareness (17.73%).  In the Ikeja areas, the distribution was as follows: security at 18.69%, and simplicity/easy payment at 18.07%.  In the Yaba area, 21.51% identified availability as the factor primary factor followed by security (20.35%), simplicity/ease of payment (19.77%) and better transaction time (18.02%). 105

106  In the Lagos medium density areas, the factors with the primary will encourage the use of the card payment system are promotions/rewards (20.57%), security (19.86%) and awareness (17.73%).  In the Ikeja areas, the distribution was as follows: security at 18.69%, and simplicity/easy payment at 18.07%.  In the Yaba area, 21.51% identified availability as the factor primary factor followed by security (20.35%), simplicity/ease of payment (19.77%) and better transaction time (18.02%). 106

107 Factors that Discourage Consumers 107

108  In all of the high density areas, majority of the respondents indicated that the non-connectivity of PoS terminals discourages them from using the terminals  Lagos-19.39%  Ikeja-23.59%  Yaba-20.90%  Badagry-24.22%.  The second highest selected by the various areas include:  Fear of fraud- Lagos  Demand for cash- Ikeja  Non-availability of PoS at merchant stores- Yaba  PoS transaction charges-Badagry. 108

109  In the medium density areas, ‘terminals not connecting’ also ranks highest as the factor that discourages consumers from making use of PoS terminals  Lagos-25%  Ikeja-21.19%  Yaba-27.81)  In the low density areas, respondents in the Lagos (25.04%) and Ikeja (22.22%) areas indicated ‘terminals not connecting’ as the factor that discourages them from using PoS terminals  38.81% of the respondents in the Badagry zone reveal that the fear of fraud was the factor that discourages consumers from using PoS terminals 109

110 Locations Consumer Feel Comfortable Using Cards 110

111  In all of the high density areas, the majority (Lagos-26.7%, Ikeja-17.4%, Yaba-30.6% and Badagry-27.7%) of respondents feel comfortable making payments with the PoS terminals in a supermarket.  Pharmaceutical stores (18.3%) and malls (20%) were preferred in the Lagos zone after supermarkets 111

112  In the Ikeja area, malls (18.3%) and restaurants (14.3%) were preferred.  In the Yaba high density area, general merchant stores (20%), restaurants (10.3%) and pharmaceutical stores (9.7%) were selected after supermarkets  In the Badagry zone, general merchant (20%) and malls (17.7%) were chosen. Note: the trend was relatively the same in the medium and low density area 112

113 Customer’s Insistence for Card Usage And Merchant’s Change of Position 113

114  The survey result shows that 54.1% of the respondents insisted on using the PoS terminals and the merchants agreed to their request  45.9% of the respondents who insisted on using the PoS terminals had their requests rejected by the merchants 114

115 Conclusion 115

116 Conclusion  The potential for growth in the usage of PoS terminals in Lagos metropolis remains strong  With a population of over 16 million people, there are approximately 8 million card holders in Lagos state  Based on the aggregated data from the 6,776 survey sample, the study finds that: 116

117 Conclusion  Profile of Merchants/End-Users  Most of the merchants with PoS terminals are general merchants or traders located mainly in open markets and neighborhood shops.  Over 60% of the stores and outlets are located less than 5 minutes walking distance from banks and ATMs  Though merchants accept cards and have PoS terminals for payment, the majority still prefer the cash payment method to other forms of payments (i.e. Checks, Cards and EFTs) and cash payment remains the most frequently used payment system 117

118 Conclusion  With regards to consumers, the majority were fully employed and self employed  Average income is between N20, 000 and N100, 000 across the density areas (i.e. high, medium and low)  Banks and ATMs proximity to the consumer by walking is an average of 6 to 15 minutes from their place of work  Most consumers make several payments daily and weekly and prefer the cash payment option due to the challenges they often face when using PoS terminals 118

119 Conclusion  Merchants without PoS terminals are also mostly general merchants/traders  located in open markets and shopping malls that are within 2 to 5 minutes walking distance from banks and ATMs.  As expected the most preferred method of payment is cash and in some cases checks or bank drafts  Challenges / Perceived Obstacles to usage of PoS Terminals  Two out of the three categories of respondents (i.e. Merchants with PoS and Merchants without PoS terminals) identify basically the same challenges and perceived obstacles to the smooth operation of the PoS terminals 119

120 Conclusion  These obstacles are as follows according to priority:  Connectivity and network challenges24.5%  Transaction charges/charges to bank account18.9%  Consumers/merchants insistence to pay cash12.7%  Rejected transactions11.8%  Card reading/technical difficulties11.3%  Consumers/merchant lack of card/PoS10.1%  Access to after sales funds6.6%  Others4.3%  Poor awareness of the PoS payment systems and benefits  Long transaction time/late transaction notification 120

121 Conclusion  Challenges that deter consumers from making use of the pos terminals  According to priority, factors that inhibit consumers’ usage of the card payment system include:  Connection and network difficulties with the terminals  Non-Availability of PoS terminals at merchants’ points/stores  Attributed to the poor rate of deployment as noticed by the merchants with PoS  Merchants demand for cash  As a result of obstacles listed above  Long transaction time  Fear of fraud  Some consumers cited personal experiences of being debited twice  In some cases the terminals would reject the transaction, however the consumer receives a debit alert some hours after the unsuccessful transaction 121

122 Recommendations Awareness  Increased awareness of consumers will accelerate the adoption of the PoS terminal and the card payment system  including the new electronic money and mobile payments systems  Collective efforts by all key stakeholders towards achieving greater awareness via:  Initial Stakeholder Road show across various key regions  Periodic summits, workshops, seminars to enlighten and keep targets informed  Mass media coverage via:  Print Media – billboards, newspapers, magazines, bulletins, publications  Digital Media – television, documentaries  Voice Media – radio advertising, jingles in various local languages  Social Media – internet, web (facebook, twitter etc)  Mobile/Vehicular Media – advertisements on mobile vehicles 122

123 Centralized Provider of PoS Terminals and Equipment  Maintaining a single or limited source of equipment manufacturers/type  This will simplify the deployment of PoS terminals and equipment  It will also facilitate easy education for the stakeholders (merchants, end-users and providers) Recommendations 123

124 Improve Connectivity  Our findings show that there is a low level of coordination among banks, mobile operators, and existing payment networks  Inter-operability across provider solutions (mobile, financial institutions, networks) will be necessary to drive mass market adoption.  We suggest that NIBSS/CBN partner with mobile network operators  Collaboration between the key regulators and mobile network operators will bring about  efficiencies in processes  quick identification and resolution to network and connectivity issues  thus enhancing the merchants, end-users improved PoS experience  resulting in increased PoS adoption Recommendations 124

125 Incentives  In many new programs, incentives have played a major role in attracting customers  Our findings show that merchants and end-users across the density areas are willing to adopt PoS usage irrespective of any incentive program  Despite these findings, incentives are suitable at this stage in order to encourage people and impress upon them the seriousness of implementing the cashless policy  We suggest that several promotions be put underway such as the ‘cash back’ promo as already adopted by GTBank  Suggested incentives for merchants and end-users include:  Cash-Back Promotions  Reward Promotions  Loyalty Rewards  Raffle Promotions  Coupon/Discount Promotions Recommendations 125

126 Pricing Strategy  Stakeholders must develop a pricing strategy that promotes and encourages PoS adoption  Charges on provision of an electronic payment system by a merchant should be similar and at a fair cost  The policy objectives must factor in the affordability for merchant and end-user access and adoption  Some merchants in certain locations are price-sensitive Recommendations 126

127 Safety and Security of Information  Merchants and customers recognize the importance of safety and security of information  There is need for secure transaction platforms and security of information cannot be compromised  Cases of fraud or lapses in the system can have the potential to undermine confidence in the use of the system  which will ultimately impact public perception.  Safeguarding transactions and client information is an imperative as a high level of security is required  Fraud prevention is required to encourage acceptance and adoption of the electronic payment systems Recommendations 127

128 Mobile Money is the Game Changer  Mobile phone technology has reduced communication costs in Nigeria to very low levels  This transformation has increased teledensity significantly  However, telco's are not allowed to lead cashless policy implementations  The high level of specification in roles and responsibilities will limit innovation by banks, telco's and payment companies  Inter-operability across provider solutions (mobile, financial institutions, networks) will be necessary to drive mass market adoption Recommendations 128

129 Next Steps 129

130 Next Steps  We suggest a follow-up integration survey in Lagos State most importantly in the areas not covered by this survey  This will help to further identify other cultural and fundamental barriers to the adoption of the PoS Terminals  Popularisation of NIBSS role as PoS Terminal certification agency and regular spot checks of PoS Terminals in use at merchant points  There is need for a pilot survey in other key cities where the Cash- less policy will be introduced before implementation  This will help to identify the necessary pre-implementation steps to be taken; identify the trend and compare results with the Lagos density areas  This will help underscore the model to be adopted for each of the new locations 130

131 Thank You 131


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