ABSTRACT
Nigerian payment
systems are cash-driven because cash is the main mode of payments for several
transactions. However, the Point of Sales (POS) Systems which is meant to
encourage cashless economy as against the cash-centered operations is
challenged with inadequate infrastructure such as network connectivity, lack of
constant power supply systems, inadequate Internet, insufficient hardware and
software needed to run POS, limited bandwidth for data passage, security
issues, lack of trust, inadequate customer education and insufficient
motivation to adopt POS. This study investigated determinants and adoption of
Point of Sales of selected business organisations in the banking, Oil and Gas,
retail and airline sectors of Lagos State.
The study adopted a
cross-sectional survey research design. The population of the study consisted
of individual SMEs who are users of POS in the selected sectors and business
organisations in Lagos State with population figure of 11,663 and sample size
of 2,059. The respondents were randomly sampled from the selected organisations
where the data were collected. A validated questionnaire was used. A total of 2,059
copies of the questionnaire were administered, with a response rate of 77.1%.
The Cronbach’s alpha coefficients for the constructs
ranged from 0.719 to 0.810. The data were analysed using descriptive and
inferential (Pearson Product Moment correlation and Regression) statistics.
The
findings revealed that there was a significant relationship between
availability of infrastructure and Adoption of POS (r=0.349;
p < 0.01), POS security and Adoption of POS (r = .437; p < 0.01),
Customer trust and Adoption of POS (r = 0.373;
p < 0.01), Customer education and Adoption of POS (r = 0.477; p <0.01), and Customer
Motivation and Adoption of POS (r = 0.399; p < 0.01), Model summary of the
regression showed the effect of independent variable on adoption of POS. The
value 0.733 (73.3%) obtained from R2 suggested that the variance
obtained from the adoption of POS can be explained by the identified variables,
which are availability of infrastructure, POS security, customer trust,
customer education and customer motivation.
The study concluded
that availability of infrastructure; POS security; customer trust; customer
education and customer motivation had significant and positive relationship
with adoption of POS in the selected business organisations who are SMEs in
Lagos State Nigeria. The study thus recommended that stakeholders should ensure
that infrastructure; POS security; Customer trust; Customer education; and
Customer motivation are in place to enhance the adoption of POS in selected
business organisations in Nigeria.
CHAPTER
ONE
INTRODUCTION
1.1 Background to the Study
It is observed
that following the global advancement in technological development, Nigeria is
not left out of this advancement. Information and Communications Technology (ICT)
has evolved and has become a vehicle for technological growth in the economy of
many societies as it has unarguably made life easier (Indjikian, Rouben, Donald
& Siegel, 2005; Okpaku, 2003; Paltridge, 2008; Zhen-wei, Pitt, & Ayers,
2004). The global acceptance of Information and Communications Technology as
well as its usage have attracted and received the interest of researchers who
are on regular basis out to proffer solutions for problems related to
technology development for decades (Davis, 1989; 1993; Park, Yang, & Lehto, 2007; Shih,
2004; Venkatesh,
2000; Venkatesh, Thong, & Xin, 2012;
Zhou, Lu, & Wang, 2010). This development had encouraged
further research on the utilisation and benefits of ICT to several nations in
order to improve their economic development (Indjikian, & Siegel, 2005;
Venkatesh et al. 2012; Venkatesh, 2000).
In the work of
Louho, Kallioja, and Oittinen (2006), technology acceptance is about how people
accept and adopt some technology for use. The user acceptance of technology has
further been explained as the willingness within a user group to employ IT for
the tasks it is designed to support (Dillion, & Morris, 2001).
The problems
arising from the use of several payments instruments have received the global
attention and so also is the close monitoring of efficient payments instrument
by various monetary authorities of the world (Adeoti, 2013). Omotayo and
Dahunsi (2015) asserted that many nations of the world have developed an
effective and efficient payments system whose transactions are required to
guarantee and sustained their economic development.
Several
countries of the world have adopted policies to accelerate the use of
electronic channels and reduce the use of cash. The motivations for these
policies vary from country to country but typically reducing the cost of
banking, encouraging financial inclusion, increasing the amount of capital
available for investments within the banking system, driving real economic
growth and possibly reducing tax evasion (NIBSS, 2015).
In a recent
study, evolution of technology for use in financial transactions poses a lot of
challenges as questions arose regarding the stability of the instrument in
guaranteeing the efficiency and effectiveness of monetary policies of nations
worldwide (Odior & Banuso, 2012). From history, different payment systems
have being in use e.g. barter system was common, but incidences of double
coincidence of want necessitated the use of money. However, technological
development gave rise to the use of superior instruments as the technology
developed (Odior & Banuso, 2012). A little over three decades ago, the use
of cash in making purchases in the United States of America has declined, and
increasingly adopts the use of electronic payments systems. However, developing
economy like Nigeria are still at the introductory stage of the use of
alternative payments platform as recently introduced by the monetary policy
maker of Nigeria, the CBN (Humphery, 2004).
According to
Laudon and Laudon (1991), business organisations in similar industries
especially the banking industry attempts to competitively outdo one another,
this is done by embracing Information and Communications Technology (ICT),
hence ICT becomes the absorber to provide the cooling effect of the competition,
this also means that any banking industry who aspired to remain competitively
relevant and continue in business in local or global arena must embraced ICT.
Similarly,
studies have also shown that the use of cash for transactions made for payments
of goods and services in many nations of the world is risky and complex, and is
gradually giving way to alternative payments platform, this is because money
outside the bank cannot be subjected to financial regulations and operational
procedures by regulatory agency, and this limit the ability of the regulator to
achieve the set objectives (Adeoti & Oshotimehin, 2011).
In Nigeria, to
reduce the volume of cash in the economy and subsequently reduce the hazard
associated with cash carrying, the Federal Government through the regulatory
agency introduced several electronic payments systems which include payments
cards and other paper-based monetary instruments. This then necessitates the
establishment of companies involved in manufacturing of switches to facilitate
interconnectivities of the various devices such as ATM, POS etc with financial
transactions (Salimon, 2006).
As part of the
National issues relating to the use of POS, Central Bank of Nigeria (CBN)
recently came up with a new policy of cashless economy, focusing on the
deployment of point of sales terminals in order to achieve among other things
the reduction in the use of cash as a means of business transactions in
preference to the use of other electronic payment system (e-Payment) and hence
reducing the cost of managing cash. This policy is to address some of the
challenges that accompanied over dependent on the use of cash to transact
business in Nigeria, and particularly the cost of managing cash in Nigeria.
In the CBN
(2011) reports cited in Adeoti and Oshotimehin (2011), the cost of cash
management was huge and are as follow: in 2009, CBN was said to have spent the
sum of N114.6b, this rose to N135b in 2010, and N166b in 2011, and an estimated sum of N196b was projected for 2012, to manage currency production and
services, these amounts are substantially large and require an urgent attention
to address the situation, and could be reduced to a minimal level should the
economy embrace cashless and other alternative payments system especially POS.
This would then reduce the cost of printing currencies, cost of transportation
of cash, cost of sorting currencies, and also reduce security cost of managing
the printed currencies. Although an average Nigerian businessman prefers cash
transactions and will embrace an alternative if they are well informed or
educated of its benefits.
In the light of
the industry situations necessitating the introduction of POS, it is widely
recognized that POS which is regarded as safe and efficient retail payment
systems enhanced the effectiveness of the financial system, boost the consumer
confidence and facilitated the functioning of commerce by Business Information
System (BIS, 2003). Because Nigerian consumers largely depended on the use of
cash to conduct transactions, the introduction of POS by organisations in the
country is expected to ease the carriage of large sum of money by consumers and
also to enhance the effectiveness of organisations. In this regard, it has been
observed that funds that circulate outside the banking sectors are over 90%
(Adeoti & Oshotimehin, 2011; Ojo, 2004; Ovia, 2003), reasons are
attributable to poor awareness of e-payment solutions especially the POS, inadequate
campaign on its existence and what it can do, ignorance of the benefits to be
derived from keeping money in the bank, or poor banking culture (customer
education), lack of trust, illiteracy and the love for the status quo.
The rapid growth
of electronic methods of payment in developed and developing countries is being
propelled by the use of payment cards (Credit or Debit) or contactless payment
cards in physical store (POS terminals) or on the web. In Nigeria, Verve cards,
Visa and MasterCard are issued by all the banks. These electronic transactions
that are being carried out in physical stores are done via Point of Sale
terminals. It allows for the merchant account to be credited while the
customer’s account is debited, thereby enabling the capabilities of retailers
to a high degree in accepting advanced electronic payment options such as
contactless payment cards, multi-application payment cards that can either be
debit or credit cards (Okechi & Kepeghom, 2013).
Similarly, the growing use of payment cards as
the preferred means of payment between business-to-consumer and
business-to-business transactions is synonymous to the advancement in
technology, e.g. the recent proliferation of internet has led to the
development of internet based POS terminals which allows for fast end-to-end
transactions that supports always on connectivity and at the same time lowering
the cost per transaction processing (Odlyzko, 2003).
The emergence of
Global Systems for Mobile Communications (GSM) has also led to the emergence of
a technology called NFC, Near Fields Communication which involves the use of
Mobile phone as a wallet containing different cards (Debit and Credit), with
this, a holder need not carry cards separate from the phone as the phone would
have been made card ready. Therefore, the role-played by the Point-of-Sale
(POS) terminals at the retailers’ location is of great importance, because such
terminals provide the most efficient and often preferred way of paying by the
customers using payment cards which in turn save merchants some of the cash
that are often lost to sales staff at the employment of the organisation
especially the low income bracket. Essentially, the POS ensures the processing
of credit or debit cards transactions and other electronically submitted
transactions in the retail environment and by doing this the POS deployment has
contributed immensely to the growth of the world’s economy (Ondrus &
Pigneur, 2007).
To reduce the volume of cash in
circulation, the risk involved with carrying it, and the menace described, the
adoption of payment system (POS) terminal will help to curtail these
challenges. It could also aid the integration of regional economy between
Nigeria and other countries within the sub-region as this has become a global trends
and acceptable form of payments. The adoption of this system can also encourage
e-payment initiatives by setting up of switching companies to facilitate
interconnectivity between the banking institutions and the payments systems
such as Automated Teller Machine (ATM), Point of Sales Terminals (POS), as well
as other add-on devices to be used to implement the POS device and thereby
leading to efficiency in an organisations operations.
The major
factors of interest in the use of POS include the discussions on ICT
infrastructure which has become an important element in the use and adoption of
technology in an organisation. The infrastructure is composed of a set of
hardware, software, services, and procedures, data security, power supply
systems, processes and person, networking and peripherals and all the required
devices to make it work, its continuous availability are key to the use of
Point of Sales (POS) as they form the basis for their interconnectivity in an
organisation, however this is inadequate, for example network failure, frequent
power outage, unavailability of POS to merchants, and insufficient bandwidth
are areas that needs improvement to encourage its adoption in an organisation
as these have been inadequate and therefore slowdown its adoption (Adeoti &
Oshotimehin, 2012; Adeoti, 2013; Aguilar, Baquero & Alejandro, 2004;
Buabeng-Andoh, 2012; Ebietomere & Ekuobase, 2014; Mohammed & Mohammed, 2012). The adoption
of POS in an organisation with availability of infrastructure as measurable variable
will make further contributions to the ongoing research and focusing
specifically on the determinants and adoption of POS of selected business
organisations in Lagos state.
Notable researchers have thoroughly
examined the role of adequate infrastructure in the adoption of technology
especially POS with the expectations that it would enhance the operation of an
organisation’s financial transactions such researchers include (Adebayo,
Balogun, & Kareem, 2013; Balanskat, Blamire, & Kafal, 2007; Buabeng-Andoh,
2012; Gulbahar, 2007; Ladokun, Osunwole, & Olaoye, 2013; Lawson, 2006;
Plomp, Anderson, Law & Quale, 2009; Sajuyigbe & Alabi, 2012).
The policy through the use
of advance information technology accelerate fund transfer, hence reduces time
wasted in banks. Similarly, it was noted that the
communications infrastructure necessary for the wireless Internet environment
that will work with POS is quite complex and its complexity may have hindered
its adequate deployment (Tarasewich, Nickerson, & Warkentin, 2001).
Electronic
payments system (e-payment) refers to payments made electronically, that is
paying for goods and services rendered without exchange of cash in any form.
The success of the implementation would depends upon the infrastructure on
ground to drive the system; this is because the communications protocol must be
effective and efficient as customers would not condone excuses of network
breakdown which customers do experience even with normal banking application.
In order words infrastructure must be adequately enhanced for user acceptance
of point of sales terminals in Nigeria. The infrastructures in addition to the
one described above includes the physical environment, network connectivity,
backup and disaster recovery plans, energy management (power supply systems)
etc.
Security
challenges arising from robbery attack of cash holders, and other vices are
among factors of interest in the adoption of POS, as reported by the Central
Bank of Nigeria (CBN, 2009; CBN,2010; CBN, 2011), to overcome the challenges
and other vices associated with the use of cash for business transactions, this
study has become imperative in order to reduce the stated challenges in an
organisation, similarly, a recent study of challenges
militating against adoption of on-line shopping in retail industry in Nigeria,
fraud and security concern were identified as serious impediments to the
adoption of the internet to make transaction in the retail industry (Aminu,
2012). Security is defined in that study as set of procedures, techniques and
safeguards designed to protect hardware, software, data, and other system
resources from unauthorised access, use, modification or theft (Davis, Bagozz,
& Warshaw, 1989 as cited in Aminu, 2012).
Another issue of concern in the adoption
of technology in an organisation is security; this has been stressed in an
article challenges to the efficient use of POS terminals in Nigeria (Adeoti,
2013). The author asserted that the efficient use of POS terminals in Nigeria
will reduce the security challenges arising from fraud, and robbery occasioned
by withdrawal of cash by unsuspecting customers from the bank. The importance
of security of communication over the network as the network becomes available
to the public is also of immense importance, just like security on smart card a
device used in POS terminal has become a critical issue as various transactions
involving exchange of data and those through the internet must be well
protected.
This is to prevent unauthorized access
to critical data and other information of great importance by fraudsters and
hackers who daily attempts breaking into systems, by the adoption of POS in an
organisation (Taherdoost, Sahibuddin, & Jalaliyoon, 2011). Similar research
work done by Ebietomere and Ekuobase (2014) also agreed that security has
become an important issue in adopting technology, security by these authors
involved access to the network resources since unauthorized access could impact
negatively on the enterprise as well as the customers and therefore discourages
its adoption. A study indicated that relying on traditional security control
has become obsolete such as physical access controls, security guards at the
gate of the organisation securing their assets, processes and communications
(Tarimo, 2006).
The complex nature and the possible
intelligence of hackers makes it mandatory for adequate security applications
to be installed on each layers of POS operations, in order to discourage the
misuse of the technology, so the device connected to it must be well secured.
Other security issues to be considered and which are of immense importance for
consumer adoptions are anonymous and privacy, which relate to use access to
critical personal information of customers and purchase records (Jayawardhena
& Foley, 1998; Shon & Swatman, 1998).
Following issues
raised above, it is also pertinent to consider trust which in previous research
work plays a major role in the technology deployment. Geffen (2000) defined
trust as a confident belief in favorable expectations about what the other
party will do. In order words, a favorable expectation of the adoption of POS
will encourage its use. Trust will have positive impact on a consumer’s
intention towards using POS for financial transactions. Attempt to analyze the
role of trust in the deployment of POS terminal in an organisation have been
made, Dixit and Datta (2010) noted that factors like security and privacy and
trust among other factors increase the acceptance of technology deployment in
India. It is also argued that the face to face interaction in business
transaction involving electronic payment has made the place of trust in its
adoption important (Carter & Belanger, 2005; Gliber & Balestrini,
2004).
Trust may have
positive impact on the customer’s intention towards using POS for financial
transactions (Adeoti & Oshotimehin, 2011) which may in turn increase the
customer base in an organisation in Nigeria. Creating an awareness of the
importance of POS deployment in an organisation has become a major factor to
encourage its use and especially in line with the high number of illiterate
population within the Nigerian society and vast numbers of unbanked population
and porous banking systems (Dada & Oronsaye, 2011). The majority of the
unbanked population are illiterate and will therefore depends on the few
literate for their transactions through the POS which may make them vulnerable
on the scruples few literate therefore there is the need for serious customer
assurance of non negativity in this respect (Ogu, 2011).
Every new
technology into the market has to go through a proper introductory process for
the populace to be able to adapt and then benefit from the use of such
technology (Agboola, 2006; Amaoko, 2012; Ayo, 2006; Dixit & Datta, 2010;
Nyangosi & Arora, 2009). The POS device should undergo proper introductory
process through basic education and awareness creation just like ATM. Many of
the consumers need to know what POS is, what it stands for or what it looks
like and what its functions are. Prospective users need to be motivated to
adopt the use of POS in an organisation.
As part of
technological innovation, Humphrey, Pulley, and Vesala (2006) asserted that
payment cards are considered as the main drivers of the shift from paper-based
towards electronic-based payment instrument, which is commonly viewed as a
significant socio-economic and welfare improvement in the society. Payment
systems are going through a period of rapid change with paper-based instruments
increasingly giving way to electronic forms of payment.
For
adequate deployment of electronic payments (POS) systems in Lagos state,
variables that are needed to measure the adoption of POS of selected business
organisations in Lagos state have been identified. This has become necessary
because of the present government policy on the reduction of cash carrying for
business transactions in Nigeria with its attendant costs and risks. The
existing studies on the adoption of POS in the country have examined various
aspects of POS adoption and other e-payment systems in Nigeria (Adeoti &
Oshotimehin, 2011; 2012; Adesina & Ayo, 2010; Ayo, 2006; Ayo, Adebiyi,
Fatudimu & Ekong, 2008; James, 2012). These studies include factors
influencing customers’ adoption of point of sale terminals in Nigeria (Adeoti
and Oshotimehin, 2011) and adoption of point of sale terminals in Nigeria,
assessment of consumer’s level of satisfaction Adeoti & Oshotimehin. Others
include an empirical investigation of the level of users’ acceptance of
e-banking and commerce (Adesina & Ayo, 2010), framework for e-commerce
implementation (Adebiyi, Ayo, Ekong, & Fatudimu, 2008), the prospects of
e-commerce implementation in Nigeria (Ayo, 2006) and the acceptance of
e-banking by customers in Nigeria (James, 2012).
Researchers having examined the factors
for motivating the adoption of technology in an organisation, that student
motivation in adopting an e-learning technology is a product of the interest
generated by the instructional medium used in the delivery of the subject
matter (De-lange, Suwardy, & Mavondo, 2003; Hassenzahl, 2003, Hassenzahl
& Allrich, 2007; Schalk, 2009; Sun & Zhang, 2008). Follows (1999)
contended that innovative and high-level technology mediums can stimulate
learners, increase motivation and enhance learning outcomes just as it is applicable
to the adoption of technology in an organisation, customers’ involvement in
technology adoption create a sense of joy in being part of introducing
innovations to an organisation as motivating factors. Similarly, it has been
posited that the mode of use of technology is closely related to motivation and
motivation is of intrinsic or extrinsic (Sun & Zhang, 2008), while
intrinsic motivation means performing an activity with inbuilt satisfaction and
extrinsic motivation can be described as performing an activity in order to
achieve a given objectives.
When an organisation acquires technology
in order to enhance its operation, the overall objectives would be to achieve
efficiency in the organisational operations and with right human resource in
place, this objective could be achieved. In a recent research conducted in
Nigeria, it is observed that technology acquisitions are essential for
organisational efficiency (Anyadike, 2013).
The intention of the regulatory agency
(CBN) as part of its strategic plan is to ensure that large chunks of the cash
outside circulation are captured within the banking system. Some economists
have even suggested that if less cash are allowed to float in the economy,
social welfare will increase (De-Grauwe, Buyst, & Rinaldi 2000). Nigeria as
a developing economy needs to learn from the success story of advanced nations
that have gone far ahead in the deployment of this system, though Adesina and Ayo (2010), found that all
banking institutions in Nigeria uses one form of Information and Communications
Technology for its services including ATM, and other e-payments solutions. The
adoption of payment instruments such as Point of Sales Terminals (POS) could
give rise to significant growth in the use of electronic payment systems (Salimon,
2006), and therefore improve the economy of Nigeria.
Finally, in
summary, as an emerging problem around the use of POS necessitating this study,
major challenges in this regard as examined by researchers includes inadequate
infrastructure. Study conducted indicates that there are problems of low or
none adoption of POS as a means of conducting financial transactions in Nigeria
and Lagos state in particular as a result of inadequate infrastructure that is
necessary to support the new and innovative payment system, NIBSS (2012)
reported that telecommunications and network connectivity accounts for 58.5% of
challenges merchants face in POS transactions which discourages its use and low
adoption.
For effective
electronic payments systems such as POS to be in place, infrastructure
especially electricity which is not in adequate supply must improved (Odior
& Banuso, 2012), this therefore explained the importance of continuous
availability of electricity supply systems which will power the POS. Similarly,
Security concern is another barrier to the adoption of POS in Lagos state and
particularly Nigeria and several countries of the world (Alao, 2009; Aminu,
2012; Gefen, 2000; Siau, Sheng, Nah, & Davis, 2004; Shon & Swatman,
1998). For example, it is noted that the key requirements for securing
financial transactions in electronic environment include confidentiality, data
integrity, authentication, and non-repudiation (Shon & Swatman, 1998), all
of which are concerned about security of electronic transactions. Siau et al.
argued that lack of consumer perceived security and trust in vendors and
payment systems in an electronic environment constitutes major barriers to
electronic and mobile commerce transactions.
Furthermore,
lack of trust arising from the security of data originating from the use of POS
poses a problem to the adoption of POS in many countries (Ganesan, 1994; Currall
& Judge, 1995; Friedman, Kahn, & Howe, 2000; Gefen, 2000). Currall and
Judge (1995) defined trust as an individual’s reliance on another party under
conditions of dependence and risk. Ganesan (2000) showed that trust is a necessary ingredient
for long term orientation because it shifts the focus to future conditions.
Also a new product must have through proper introductory stage which is done by
adequate awareness creation which also limits the adoption of POS as enumerated
by existing study. Finally, lack of motivation are also stated as one of the
reasons for low adoption of POS in an organisation, for example it has been
stated that there is high cost of acquiring of POS in Nigeria
which discourages its adoption by merchants. Although the Federal Government
had through the Central Bank of Nigeria (CBN, 2011) went into negotiations with
the selected manufacturers of POS terminals to discount the cost of the
equipments, installation and training so as to motivate its adoption, but they
still need to do more as it has been seen to be inadequate.
1.2
Statement
of the Problem
In spite of the achievements recorded so far in
the implementation of the cashless policy of Federal Government of Nigeria, it
is observed that to sustain customer usage of e-payments platform especially
POS has been difficult. This is in reference to data obtained from CBN releases
e-payments statistics for the period 2012 - 2016 (CBN, 2016) which indicates
that despite the introduction of cashless economy with its attendant benefits
the following data representing low penetration of POS compaired to ATM was
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