How to start a profitable POS business in Nigeria in 2023

The first time I heard about Point of Sale (POS) machines in Nigeria, I thought, “Who would use these machines? Why should I pay 100 naira for a transaction when it’s free with an ATM?”. I had anticipated it would fail like many other innovative solutions we have experienced in Nigeria. 

However, it’s become one of the most lucrative businesses in Nigeria. Everywhere you turn on a street, you will find a POS merchant with branded banners and wooden kiosks staring at you. 

Business owners, students, market women, and unemployed graduates are getting a share of this business, making up to 20-50 thousand naira in daily profit. The recent cash scarcity in Nigeria led to bigger publicity for this business, and even with the high number of POS service providers, more shops are still opening.

The POS service providers offer a mobile banking service to people in areas with limited access to commercial banks. It also serves as a convenient way to avoid bank queues. With the constant poor service delivery in most banking halls, this business will be around for a long time if nothing changes in banks’ service delivery or government policies. 

If you are considering setting up a profitable POS business, this article will guide you through the steps to follow and how to make profits. It will also provide answers to frequently asked questions about starting a POS business.

How To Start a POS Business in Nigeria?

If you want to start a POS business in Nigeria, you should consider your location and the demand for POS services in that area. However, that’s just a tiny part of the process. Here’s a list of steps to follow to create a profitable POS business in Nigeria.

Choose A Suitable Location for POS Business

The number one success factor for a POS business is foot traffic. Your commission depends on the number of transactions you complete in a day. That’s why, selecting a suitable location must be your first priority. 

To choose a location, you should consider the foot traffic that passes through the area. Locations like commercial areas, markets, event centers and bus stops have high foot traffic and will be profitable. 

Secondly, you should consider the competition in that area. 

• Do you have many banks? 
• How many POS stands are in that area?

For example, an area with many functional ATMs might not be suitable for a POS business. 

Lastly, you should consider the demand for POS services in that area. Although busy locations might have heavy foot traffic, they can also have low demand for POs services. This is the case in locations where there are lots of functional ATMs and Banks. Also, low-traffic areas can have high demand and volume of transactions. You should take time to do comprehensive research before creating a business plan. 

Create a POS Business Plan

You may wonder if you need a business plan for a POS business. Isn’t it just a kiosk, or an umbrella with a table and a machine? But you do need a projection if you want to build a profitable business with many branches or attract investors. Research has shown that about 70% of companies with a plan succeed beyond five years and have a 7% higher possibility of growth than those without. 

A business plan gives clarity to your ideas. It analyses the feasibility, location, requirements, starting cost, market demand, competition and pricing strategies. 

For example

• Feasibility: is there a demand, is the location profitable etc?
• Location: No. 23 X Road, Next to the Market
• Requirements: A shop, a table, air conditioners, TV, etc.
• Starting cost: 700,000 naira
• Marketing Demand: Banners, flyers, etc.
• Competition: banks, and other POS stands with Umbrella
• Pricing strategy: 100 for transactions under 10k, and 200 for transactions under 25k

Gathering this information and documenting it in a business plan will help you plan for future challenges and profitably start your POS business. Your business plan should contain an executive summary, risk analysis, operational processes, market analysis, financial projections, products and services and other relevant information. 

Raise Capital to Start the POS Business

One of the questions you might have if you intend to start a business is, “How much do I need to start a POS business in Nigeria?”. You can start your POS business with a capital of 200-350 thousand naira. This covers registering your business with CAC, acquiring a POS machine, setting up a kiosk and other miscellaneous charges like getting relevant documents or transportation. Three options are available to raise the capital to start the POS business. 

1. You can fund the business independently. You may have saved some money, have an inheritance you can claim or properties you can sell. This option gives you 100% of the profit from the business and no additional payback requirements. 

2. You can request a loan from a bank or an independent entity (family, friends, loan sharks etc). To apply for such loans, your business must be a legally registered entity, and you must present a guarantor and other documents. This option still gives you 100% business ownership, but you must meet your monthly interest payments agreement. 

3. You can source for investors or partners to split the cost or offer complete capital. In this case, you will have to agree on an ownership percentage. Most investors might opt in to be passive partners without owning any stake in the business. However, you will be required to make a certain deposit monthly or yearly for a duration. Others might ask for a share of the business, eliminating the need to make monthly payments to the investor. 

If you choose option two or three, ensure a thorough background check by reviewing social media handles, asking questions from past clients and confirming they have legit money streams and getting relevant documents to make any agreement legally binding.

Register your POS Business

Setting up a POS business requires compliance and authenticity since you will be handling financial transactions. Registering your business with CAC is one of the many requirements you must fulfil before applying for a POS machine. 

The business registration document will contain your business name, address, type of business and investor information (if any). You can register your business as an LLC or a sole proprietorship, making it a legal entity. This also serves as a credibility marker and shows that you are ready to do business correctly. 

Although it’s possible to do all these yourself, it’s best to consult a lawyer or professional organisation to help you with the process, to avoid mistakes and legal issues in the future. 

Choose a POS Machine Provider

The next step is to choose a machine provider. The leading providers in Nigeria are commercial banks like GTB, Access Bank, First Bank and Wema Bank, and Fintech companies like Opay, PalmPay and PAGA. You can also request a POS machine from Microfinance banks like Moniepoint. 

When choosing a POS machine provider, you must consider cost, requirements, charges, location and network stability factors. You also have to ask if they have merchant support and how it works.

What are the Best 10 POS Machine Providers in Nigeria

Currently, there are over 20 POS machine providers in Nigeria offering different services, incentives and requirements. Sieving through all of them will be a burden, so here’s a list of the best ten based on cost, merchant support, charges per transaction, network stability and requirements. 

POS Machine Provider	Cost of Machine (₦)	Application Requirements	Documents Needed to Apply	Type of POS Machine	Key Features	Pros	Cons	charges Range
Paga	₦30,000	Business registration documents, Valid ID proof	Completed application form, KYC details	Mobile POS	Multiple payment methods, Real-time transaction reporting, Inventory management	Wide acceptance, Inventory management, bonuses and incentives, beginners training, business capital support	Relatively higher cost	Varies
Interswitch	₦30,000 to ₦40,000	Business registration documents, Valid ID proof	Completed application form, Proof of address	Portable POS	Contactless payments, Analytics dashboard, Receipt customization options	Established brand, Enhanced reporting	Higher upfront cost	Varies
Opay	₦8,500  – for Opay mini POS,₦35,000 – for Opay traditional POS₦50,000 – for Opay smart POSOr you can get it on lease with a deposit of ₦20,000	Business registration documents, Valid ID proof, BVN, Utility bill	Completed application form, KYC details	Mobile POS	Quick setup, Multiple payment methods, Transaction history tracking	Competitive pricing, Quick setup	Limited network coverage	0.5% to 0.6%
Moniepoint	₦25,000	Business registration documents, Valid ID proof, bank verification number, account number, proof of address (Utility bill)	Completed application form, Proof of address	Portable POS	Built-in receipt printer, Compact design, Quick transaction processing	Low-cost, Portable solution	Limited features	0.5% for withdrawals below ₦20,000. ₦100 for withdrawals above ₦20,000. Deposit ₦12
PalmPay	₦25,000 – for Button POS₦70,000 – for Android Pos	Business registration documents, Valid ID proof	Completed application form, Business plan	Mobile POS	Secure transactions, Customer loyalty programs, Customizable receipts	Enhanced security, Customer loyalty programs	Relatively higher cost	0.5% on withdrawals. ₦10 on deposit
GTB	₦25,000	Business registration documents, Valid ID proof	Completed application form, KYC details	Mobile POS	NFC payments, Quick transaction processing, Real-time transaction reporting	Established bank, NFC compatibility	Limited customer support, Higher upfront cost, daily transaction target of ₦50,000	0.75%
First Bank	₦20,000 to ₦30,000	Business registration documents, Valid ID proof	Completed application form, Proof of address	Portable POS	Large touchscreen display, Inventory management, Analytics dashboard	Established bank, Enhanced reporting	Limited network coverage	₦50 to ₦200
Wema Bank	₦15,000 to ₦25,000	Business registration documents, Valid ID proof	Completed application form, Proof of address, BVN, and Current account references	Portable POS	Compact size, Long battery life, Multi-language support	Portable, Long battery life	Limited features	₦30 to ₦50
Nomba	₦20,000	Business registration documents, Valid ID proof	Completed application form, KYC details, Valid BVN	Mobile POS	Offline mode, Easy integration with existing systems, Inventory management	Cost-effective, Versatile	Limited customer support	₦25 to ₦150
Access Bank	₦30,000 to ₦40,000	Business registration documents, Valid ID proof	Completed application form, KYC details	Mobile POS	Multi-language support, Enhanced security, Real-time transaction reporting	Established bank, Enhanced security	Higher upfront cost	₦100 to ₦400

Apply for a POS Machine

Depending on your choice agency, you can get the POS machine on a lease, outright purchase or for free. You can apply online or visit a merchant store or bank. 

The application process can take up to a month. If you don’t have an account with the financial institution, you will have to create one and, in most cases, make an initial deposit. Once that is complete, you can proceed to request the POS machine, following all the requirements and submitting the necessary documents. 

Create a Terms of Service Policy for your Business

Money transaction is a sensitive topic that requires wisdom. There are times when a withdrawal fails, a customer transfers to the wrong account or other issues with the network providers. Before opening your shop to customers, you should create a Terms of Service that states your transactions and conflict resolution processes. 

This document or notice should contain 

• your transaction charges, 
• the type of transaction you support, 
• the deposit or withdrawal limit and 
• what happens if a transaction fails but the customer is debited. 

This notice should be positioned strategically in your kiosk where customers can see it. You should also ensure you draw their attention to these policies before initiating any transaction.

Setup your Storefront and Start Offering Your Services

If you already have a shop, you can skip this step. However, if you don’t, you should consider choosing a location with high demand for financial services. You should also consider the security of the area. 

• What kind of store will you rent – a wooden kiosk, a Caravan, or a brick store? 
• Will you require a safe? 
• Once you have these figured out, you can pay and open the shop for transactions. 

Implement a Marketing and Promotions Plan

Although the POS business sells itself, you must go the extra mile to stay competitive. You should include different valuable services that address customers’ pain points. 

You can adapt traditional promotion methods like printing flyers, banners and business cards to announce your business launch. You can also adopt digital marketing strategies like social media marketing to build awareness online and open up your business to a wider audience. 

How Can a POS Business Make More Profit?

Generally, POS agents make money from commissions on every transaction. Some POS charge a fee of 100 naira per 1000 naira transaction and are entitled to between 50% and 60% commission on that charge. This means you make about 60 naira for every 1000 naira transaction. The commission might differ for airtime, bill payment and other available POS services. With this in mind, you can make more profit by following four simple steps

1. Offer a Range of Services

Most POS agents only offer deposit and withdrawal services, limiting their ability to earn more. If you want to increase your profit, consider including Airtime purchases, bill payments, account opening and standing as a cash collector for business. For example, if you set up your POS shop in a market, you can partner with business owners to offer POS services to their customers. The amount is paid to your account, and you get a commission for the number of payments made through your POS. This and the bank’s commission should help you earn more. 

2. Be Consistent

If you are set up in a high-demand area, the last thing you want to do is be inconsistent. Being absent a day can be accepted, but consistently closing your shop will have long-term effects. If customers cannot find you when they need your services, they will patronise another agent. Soon, they will stop checking your shop and stick with a more consistent vendor.

3. Deliver Excellent Customer Service

You may not see this as necessary, but being rude to customers, poor communication, and consistent network issues will do more harm than good. If you want to make more profit, boost word-of-mouth marketing and win customers’ hearts, your service must be impeccable. Greet customers with a smile, be patient with them and help them with challenges they might have with their card. When there’s a conflict with a transaction, calmly explain the steps they can take to resolve it and offer suggestions to help them settle it quickly.

4. Have Backup Connectivity Devices

One of the main reasons most people opt out of going to the bank is the poor network and queues. As a POS agent in Nigeria, you should always be prepared for network issues. Purchase a backup connectivity device and check for the best service providers in your area before setting up your store. This approach will ensure that you have less downtime and can serve more customers daily. 

5. Offer Incentives and Complementary Services

Have you received a discount from your favourite vendor or seen those gala vendors on traffic selling drinks alongside? If your answer is yes, you know how incentives and complementary services work. You can study your location, and customers and create a solution that complements your POS offers. For example, you can sell stationary, set up a bar or even a restaurant so customers can get other items they need and pay via POS. This way, you will get more traffic and visibility in your shop. You can also set up a phone charging business alongside your POS shop. For incentives, you can offer free withdrawals for your loyal customers or give them a gift on special occasions, or when they reach certain thresholds. This method will give you an edge over competitors because humans love feeling appreciated. 

Frequently Asked Questions

1. How much do I need to start a POS in Nigeria?

The cost of starting a POS business in Nigeria varies for each provider. However, aside from the rent, a startup capital of 50-200 thousand naira should be sufficient to cover equipment costs and other miscellaneous charges. 

2. How much can I make from POS in a month?

You can make up from 20 thousand – 100,000 from POS commission monthly, depending on your transaction volume. 

3. Can I start a POS business with 50k?

Yes, you can start a profitable POS business in Nigeria with an initial investment of N50,000, although it may limit the scale and scope of your operations.

4. Can I get POS for free?

Yes, you can get free POS in Nigeria. However, it has specific requirements like maintaining a minimum transaction volume or account balance. 

5. What location is good for the POS business?

POS business thrives in locations with high demand and traffic, like universities, malls, events centres, markets, busy bus stops and commercial areas. 

6. Is the POS business profitable in Nigeria?

Yes, the POS business is profitable in Nigeria, thanks to the large number of unbanked areas and the slow adoption of cashless transactions in the country.