How to start a successful POS business in Nigeria
The Point of Sales business, popularly known as POS business is everywhere on Nigerian streets. Wherever you turn, there is at least a POS store that is available for financial transactions. POS business is so common and popular that people hardly think of going to the ATMs or banks unless it is absolutely necessary.
Thanks to technology, there are very lucrative ways to make money and the POS business is one of them. The POS business began to spread in Nigeria after the Central Bank of Nigeria (CBN) introduced the agent banking system in 2013. This gave the financial sector an opening to reach customers in remote, unbankable or underbanked areas.
Here’s everything you need to know about POS business and how to run a successful one.
Table of Content hide 1What is a POS business? 2How do I start a POS business? 2.1Raise start-up capital 2.2Find a suitable location 2.3Apply to become a POS agent 3Which bank is best for POS business? 3.11. FirstBank 3.22. Wema Bank 3.33. Zenith Bank 3.44. FCMB 3.55. UBA 3.66. Access Bank 3.77. Polaris Bank 4How much do I need to start up a POS business in Nigeria? 5How to calculate profit in POS business 6POS business plan 7How to run a successful POS businessWhat is a POS business?
According to Investopedia, a POS business is a place where a customer executes the payment for goods or services and where sales taxes may become payable. The place can be a physical store where transactions through card payments or a virtual sales point such as a computer or mobile electronic device are made.
How do I start a POS business?
The process is simple and you need to follow them to the letter to run a successful POS business. Here’s what you should do.
Raise start-up capital
You cannot start a business without money or capital. Same goes for the POS business. Luckily, the start-up capital needed to start a POS business is not very expensive. So that should not be a problem for you if you’re serious about going into the business.
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Find a suitable location
The profit you’re going to make in the POS business depends on the location of your business. For instance, smart POS businesses set up POSs near store exits to increase the rate of impulse purchases as customers leave. The location should be in a densely populated area where banks cannot be easily assessed. Places like markets, parks, stores should be your focus point of location if you want to run a lucrative business.
Apply to become a POS agent
You have to be officially approved as a POS agent before you’re allowed to run the business. This means you have to apply to relevant authorities like the bank you have chosen for your business. The CBN has set some requirements that POS agents must meet before any bank approves them. POS agents are permitted to work under various POS service providers as long as they have the required documents which may vary from one provider to the other. Below is the general list of some of these required documents:
- Valid means of identification like National ID Card, Voter’s ID Card, etc.
- Passport photographs
- Bank Verification Number (BVN)
- Current Account references
- Evidence of business registration (CAC Certificate)
- Start-up funds/ capital minimum of NGN50,000
- Tax Identification Number (TIN)
You will be given a POS machine usually free of charge as soon as the bank you have chosen approves your documents. The bank can also attach a cautionary fee as they give you the POS machine so you can start the business.
Which bank is best for POS business?
There are two major financial institutions to get a POS machine – commercial banks and Fintech companies. Since we’re talking about banks, the ranking for the best banks in Nigeria for this business is based on ow transaction fee rate, network coverage, speed, and higher agent commission.
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Here are the top 7 banks that are as efficient and highly competitive in the POS banking sector.
1. FirstBank
Firstbank has an agency banking system known as Firstmonie. The charges are low but you will need to have a current account in which you must have made monthly transactions of at least N500,000. Luckily, you don’t need a corporate account for this. A personal account will do. Firstmonie POS charges are friendly which why the machines are all over POS stores in Nigeria. Here are the charges:
- Transactions from N1 to N5,000 = N50 charge fee
- Transaction from N5001 to N30,000 = N100 charge fee
- Transaction from N30,001 to N100,000 = N150 charge fee
- Transactions of above N100,000 = N200 flat rate.
2. Wema Bank
Wema Bank has POS machines which are distributed in an agency banking system known as WemaPay. The charges are lower and more competitive compared to other banks. Here are the charge rates:
- N30 charge fee for withdrawals from N1000 to N5000.
- N50 charge fee for withdrawals from N5,100 to N10,000.
3. Zenith Bank
Zenith bank has one of the best POS machines that can help you make the best margins when it comes to profit. Here is the bank’s charges for the POS machine:
- The agent is expected to charge between NGN50 to NGN300 for deposits and withdrawals between NGN1 to N100,000.
- 1.2% charge for transactions above N2000.
- The minimum agent commission is about 45%.
4. FCMB
The First City Monument Bank (FCMB) also has great charges for POS business. However, to be eligible for the bank’s POS machine you need to have an account with the bank, a shop or existing business, start-up capital, ID card, and proof of residence. The FCMB POS charges depend on the nature of your business. Here are the charge rates:
- Usually 0.2% for wholesale
- 1.25% for hotels.
- 0.75% for general merchants.
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5. UBA
The United Bank of Africa has an agency banking system called UBA Moni which has proven to be one of the best POS banking system due to its low charge rates. UBA expects their merchants of the POS machines to run a minimum of N1,000,000 monthly, that’s about N35,000 daily. The POS charges range from N50 and above and agents usually earn even up to 70% commission, depending on the transaction. Here’s a summary of the bank’s charges:
| S/N | Transaction Type | Transaction Fee (N) | Agent’s Commission (N) | UBA’s Commission (N) |
| 1 | Deposits | 100 | 70 | 30 |
| 2 | Withdrawals | 100 | 70 | 30 |
| 3 | Intra-bank Transfer | 100 | 70 | 30 |
| 4 | Interbank Transfer (N1-N5,000) | 50 | 31.58 | 12 |
| 5 | Interbank Transfer (N5,001-N50,000) | 100 | 70.53 | 23 |
| 6 | Interbank Transfer (N50,000-above) | 150 | 105.26 | 38 |
6. Access Bank
Access bank has an agency banking system called Access Closa Agent and they have very low transaction charges that are highly competitive. Here’s the POS machine charges:
- N1 to N5,000 = N100
- N6,000 to N10,000 = N200
- N11,000 to N15,000 = N300
- N16,000 to N20,000 = N400
7. Polaris Bank
SurePadi is a POS machine owned and issued by Polaris Bank. They have very low and competitive withdrawal charges. Here are SurePadi charges:
- Cash withdrawals = 0.75% charge fee
- Deposit from Polaris to Polaris = 0.5% charge fee.
- All fund transfers = N40 charge fee (flat rate).
- Bill payment = N100.
How much do I need to start up a POS business in Nigeria?
In the POS business, the more services you intend to render, the more investment you will need. For a small scale POS business that only requires you to focus only on withdrawals, you will need between N50,000 to N150,000.
However, the cost to start a POS business on a medium scale in Nigeria should be around ₦250,000 at least. Also note that the type of POS machine depends on the preferred network. 2G and 3G networks will differ in price from that 4G due to speed. With POS business, you don’t need a shop. Just mount an umbrella in a strategic location, have a POS machine, some cash and you’re good to go.
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How to calculate profit in POS business
To calculate profit in your POS business, subtract your expenditure from the total sales. The remaining amount is your profit. For instance, if you had spent a total of N500,000 in total sales and your total service charge is N150, 000, then your profit is N150,000. Other expenditures may include fixed commission charges by bank, transportation and salary paid to your sales personnel if you have any.
POS business plan
POS business plan serves as the blueprint for your business success. Here are simple steps to create the perfect business plan for your POS business:
- Your business plan must begin with an executive summary which include the mission statement and explains why the business will be successful. If you’re seeking for finance, you should add it briefly as well.
- Objectives where you explain in detail what you hope to achieve in your POS business
- Statement of problem where you explain the problems your POS business hopes to solve as well as some challenges you might face while running your business.
- Reporting and analytics which serve as the foundation for your business proposals and strategies. You should also list customer information, employee data (if you have any), and inventory numbers and data about its prospects for success.
- Your business financial projections and funding requests. They must include data from the POS system’s sales management, customer relationship and employee tracking features.
- Conclusion
How to run a successful POS business
- Get a good location
- Raise the start-up capital
- Have a good network provider
- Know your competitors
- Draft a business plan
- Take care of your safety since you’ll be dealing with cash most of the time.
- Set up a shop. An umbrella and chair in a good location will do.
- Set up a POS business banner
- Get a POS machine. You can get it by following the steps listed previously.
Congratulations! You’re about to run a profitable POS business.
