The Cost of Starting a POS Business in Nigeria: Equipment, Fees, and Revenue Potential

Starting a Point of Sale (POS) business in Nigeria has become an increasingly popular entrepreneurial venture, offering financial services such as cash withdrawals, deposits, and bill payments to communities with limited access to traditional banking facilities. This comprehensive guide delves into the costs associated with launching a POS business, including equipment expenses, operational fees, and potential revenue streams, providing you with the insights needed to make informed decisions.

Understanding the POS Business Model

A POS business serves as a mini-bank, enabling customers to perform essential financial transactions conveniently. As a POS agent, you act as an intermediary between banks and customers, earning commissions on each transaction processed. This model has gained traction due to the Central Bank of Nigeria’s (CBN) financial inclusion drive, aiming to extend banking services to underserved areas.

Initial Setup Costs

1. POS Machine Acquisition

The primary tool for your business is the POS terminal. The cost varies based on the provider and the machine’s features:

Bankly: Offers POS machines for approximately ₦30,000.

Other Providers: Prices can be as low as ₦15,000, depending on the provider and any additional services included.

2. Registration and Licensing Fees

Some banks and financial institutions may charge a registration fee for onboarding new agents. This fee can range from ₦10,000 to ₦20,000, depending on the institution’s policies.

3. Shop or Kiosk Setup

Establishing a physical location is crucial for visibility and customer trust. Costs include:

Rent: Depending on the location, annual rents can range from ₦50,000 in rural areas to ₦200,000 in urban centers.

Furnishings: Basic setup with chairs, tables, and signage may cost between ₦20,000 and ₦50,000.

4. Miscellaneous Expenses

Internet Connectivity: A reliable internet connection is essential for transaction processing, costing about ₦5,000 monthly.

Power Supply: Investing in a backup power source, such as a generator, can cost around ₦40,000 to ensure uninterrupted operations.

Operational Costs

1. Transaction Fees

While you earn commissions on transactions, banks or service aggregators may charge a fee per transaction, typically ranging from 0.5% to 1.5%.

2. Maintenance and Repairs

Regular maintenance of the POS machine and other equipment is necessary, with annual costs potentially reaching ₦10,000.

3. Security

Ensuring the safety of cash and equipment might require hiring security personnel or installing security systems, adding to your operational expenses.

Revenue Potential

The profitability of a POS business depends on factors such as location, transaction volume, and the range of services offered.

1. Commission Earnings

Cash Withdrawals: Agents typically charge between ₦100 to ₦1000 per transaction, depending on the amount.

Deposits and Transfers: Fees can range from ₦50 to ₦500 per transaction.

2. Additional Services

Offering services like bill payments, airtime sales, and cable subscriptions can provide extra income, with commissions varying per service.

3. Daily Income Estimates

With consistent customer traffic, daily earnings can range from ₦5,000 to ₦20,000. This translates to a potential monthly income of ₦150,000 to ₦600,000, before deducting operational expenses.

Profitability Analysis

Considering the initial setup and ongoing operational costs, a well-managed POS business can achieve breakeven within 3 to 6 months. Profit margins are influenced by transaction volume, operational efficiency, and effective cost management.

Challenges and Considerations

1. Competition

The growing popularity of POS businesses means increased competition. Differentiating your services through excellent customer service and additional offerings can provide a competitive edge.

2. Security Risks

Handling cash transactions poses security risks. Implementing robust security measures and maintaining adequate cash management practices are essential.

3. Regulatory Compliance

Staying updated with CBN regulations and ensuring compliance is crucial to avoid legal issues and potential fines.

Top 10 POS providers in Nigeria

Selecting the right Point of Sale (POS) provider is crucial for the success of your business. Below is a review of the top 10 POS providers in Nigeria, including the cost of their machines and key features to help you make an informed decision.

1. Moniepoint POS

Machine Cost: ₦21,500, which includes a ₦10,000 caution fee and other associated costs.

Key Features: Moniepoint offers fast transaction processing, reliable customer support, and competitive transaction fees. It’s known for its user-friendly interface and robust network coverage, making it a popular choice among Nigerian businesses.

2. Opay POS

Machine Cost: ₦40,000.

Key Features: Opay provides a versatile POS system with features like multiple payment options, including QR code and mobile wallet payments. It boasts a long battery life and is known for its affordability and ease of use.

3. Palmpay POS

Machine Cost: ₦30,000.

Key Features: Palmpay offers a modern POS device with a large display screen, accepting all payment card types. It ensures secure and fast transactions, making it suitable for businesses of all sizes.

4. Paycentre POS

Machine Cost: ₦25,000.

Key Features: Paycentre provides a reliable POS system with features like quick transaction processing and user-friendly operations. It’s designed to cater to various business needs, ensuring efficiency in payment collections.

5. Flutterwave POS

Machine Cost: ₦30,000.

Key Features: Flutterwave offers a comprehensive POS solution with features like seamless integration with various payment platforms, real-time transaction monitoring, and robust security measures. It’s ideal for businesses seeking a versatile payment processing system.

6. Kudi POS

Machine Cost: ₦25,000.

Key Features: Kudi provides a user-friendly POS system with features like efficient transaction processing, multiple payment options, and reliable customer support. It’s suitable for businesses looking for a straightforward payment solution.

7. Baxi POS

Machine Cost: ₦30,000.

Key Features: Baxi offers a robust POS system with features like multiple service offerings, including bill payments and airtime purchases, alongside standard payment processing. It’s designed to provide additional revenue streams for businesses.

8. Bankly POS

Machine Cost: ₦15,000.

Key Features: Bankly provides an affordable POS solution with features like efficient transaction processing, user-friendly interface, and support for various payment methods. It’s ideal for small businesses and startups.

9. Kolomoni POS

Machine Cost: ₦15,000.

Key Features: Kolomoni offers a cost-effective POS system with features like quick transaction processing, support for multiple payment options, and reliable customer service. It’s suitable for businesses seeking an economical payment solution.

10. Kashzoo POS

Machine Cost: ₦25,000.

Key Features: Kashzoo provides a reliable POS system with features like efficient payment processing, support for various transaction types, and user-friendly operations. It’s designed to meet the needs of diverse business environments.

When selecting a POS provider, consider factors such as transaction fees, customer support, network reliability, and additional services offered. Choosing the right POS system tailored to your business needs can significantly enhance operational efficiency and customer satisfaction.

Steps to Start a POS Business in Nigeria

1. Conduct Market Research: Identify areas with high demand and limited banking services.
2. Choose a Reliable POS Provider: Select a bank or fintech company with favorable terms and reliable support.
3. Register Your Business: Obtain necessary licenses and register with the Corporate Affairs Commission (CAC).
4. Secure a Location: Find a strategic spot with high foot traffic.
5. Acquire Equipment: Purchase the POS machine and set up your kiosk or shop.
6. Promote Your Services: Use signage and local advertising to attract customers.

Conclusion

Starting a POS business in Nigeria presents a viable opportunity for entrepreneurs, especially in areas underserved by traditional banks. By understanding the associated costs, potential revenue, and challenges, you can make informed decisions to establish and grow a successful POS venture.

For a visual guide on starting a POS business in Nigeria, you might find the following video helpful: