A Point of Sale (POS) terminal is a device that provides customers of banks with access to financial transactions in public places. This machine solves the problem of carrying cash for the customers and decreases cash management cost for financial institutions.
These days, POS accept not only debit and credit cards, but also gift cards and payroll cards. This gives flexibility, which means financial institutions can address all segments of their customer base.
In Ethiopia, this trend has a very short history. The Commercial Bank of Ethiopia (CBE), a pioneer of this service, is engaging deeply in the deployment of the technology as a means of serving its customers. In addition to CBE, private banks are also using the machines in selected big institutions, such as starred hotels, supermarkets, gas stations and restaurants.
As it stands, the main problem of banks is to mobilise and maintain their deposit bases. Most depositors are afraid to keep all of their cash in the bank because they are not certain they will get their money back at any given time. Improving the culture of using POS machines helps solve this problem.
A transaction made through a POS terminal enables the use of cash in deposit accounts for two purposes simultaneously. On the one hand, it enables the account holder to make any transaction without the physical presence of the cash. On the other, it enables the bank to use the cash for different purposes like credit for investors. This means specific sums of cash can add higher value in short time.
Transactions through POS also give card holders certainty about their payments. The burden of moving with a stash of cash will also be avoided. This provides freedom and decreases the risk of fraud.
For financial institutions, a POS transaction is very profitable because it enables them to maintain their deposit base. Since it is the movement of cash from one account holder to the other, the banks’ deposit base is still constant. In addition, it minimises the cost of cash management and serving customers in the window.
Service providers, such as hotels and supermarkets, will also benefit. Having a POS machine minimises manual processes involved in serving customers and enables service providers to focus on important activities other than cash management. The image of modernity it attaches to the service provider is also a huge plus.
Even if POS transactions are hugely beneficial, the absorption rate by cardholders is very low. This truth is exposed by the experience of CBE, which currently has 10,000 POS machines. In the past nine months of the fiscal year 2014/15, the bank’s POS machines facilitated 228,903 transactions worth 553 million Br. This means that one POS machine processed an average of 23 transactions within nine months. This is very low compared to the average transaction that a given POS machine could facilitate.
The great cliff we should lay a bridge on is the perception gap. We can see the perception gap in two ways. First, there is the part relating to potential users have no idea how to use POS. The second part relates to those cardholders who are afraid of the system’s reliability. Different solutions are necessary for both segments of potential users.
The main responsibility to fill this perception gap is that of the banks themselves and should entail more than promotion through mass media.
In my opinion, it would be very effective if the service providers where the POS machines are installed could facilitate the process because they have direct participation at the point of transaction. They can offer to the customers the choice of paying through their card.
But banks should also facilitate the process. In addition to the awareness creation, banks can make their POS machines accept all bank cards, as is the case with the ATM service.
Of course, this may be difficult because all banks may not have similar levels of commitment and financial capacity to distribute the machines. Banks that have a higher number of POS machines may be at a disadvantage and those with the lowest number can be at an advantage.
From the point of view of transforming the banking sector, collaboration would bring huge benefits and banks can find other ways to compensate their disadvantages.
Leave a Reply