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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.
Keywords: POS security, Customer trust, Customer education, Customer motivation, Adoption of POS.
Word Count: 403
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 given:
Table 1.1: Volume of transactions for selected e-payments platform
| Payment Channel | Transactions Volume |
|
470,894,452
9,764,546 10,499,911 47,743,919 |
Source: CBN, 2016
Reasons as given by CBN for low adoption of POS include connectivity and network challenges, inadequate enlightenment, security and trust issues. This observation also indicated that many buyers of goods and services still do that by cash, this brings about enormous risk and high cost of cash management it also brings about inefficiency and corruption (Omotayo & Dahunsi, 2015).
Similarly, as reported in Adeoti and Oshotimehin (2012), the general increase in the adoption rate of electronic payments instruments and the rate of growth of adoption of POS are still low, among the factors identified as responsible for this low adoption of POS in Lagos state is low level of consumer education stating the benefits of using POS, lack of adequate infrastructure required to run POS, low level internet penetration, intermittent failure of network connectivity, absence of open standards or trust among banks and providers, frequent power outage, insufficient number of POS available per merchant store and security of network communications (Ayo & Babajide, 2006).
Furthermore, a recent survey by Nigeria Inter-Bank Settlement Systems (NIBSS) on the challenges of the adoption and use of POS in Lagos state, shows that the most significant challenge on the adoption and use of POS from the view point of merchants is technical, that is, 79.5% cited connection issues as the most significant challenge, while 34.7% says it is issuer or switch inoperative, suggesting a problem with infrastructure, security and trust (NIBSS, 2012).
The use of cash as the main medium of exchange of business transactions in Nigeria has become a major problem to the citizenry and it is associated with a lot of danger and costs (CBN, 2011). The researcher however viewed that this may largely be as a result of inadequate knowledge about the existence of alternative payments platform or the spirit of doing it the old way or reluctance to change. The adoption of POS in an organisation as alternative payments systems is an important step to overcoming some of the challenges involving the use of cash for daily transactions earlier explained. The adoption of POS involved a number of processes which includes the setting-up of its infrastructure which is inadequate to sustained its use (Kapurubandara & Lawson, 2006; Ladokun, Osunwole, & Olaoye, 2013; NIBSS, 2012), security challenges (Aminu, 2012; Ebiotemere & Ekuobase, 2014), inadequate customer education (Dada & Oronsaye, 2011; Ogu, 2011; Velmurugan & Velmurugan, 2014), poor customer motivation (Chen, Little, Ross, & Zhao, 2012) and lack of customer trust (Dixit & Datta, 2010; Geffen, 2000).
One of the major problems for low or none adoption of POS as a means of conducting financial transactions in Nigeria and Lagos state in particular is 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 inadequate must be in place (Odior & Banuso, 2012), this therefore explained the importance of continuous availability of electricity supply systems which will power the POS.
Infrastructural challenges militating against new technology adoption are classified into inadequate personal computer, poor internet access, inadequate electronic payment systems and erratic electricity (Aminu, 2012). Similarly, Zulu (2006) noted that the low internet bandwidth, unavailability of dedicated data service networks, and frequent power interruption are other challenges of e-payments adoption. Aminu noted that access to the internet is largely dependent on telecommunations infrastructures which serve as the bedrock of technology adoption.
However, telecommunication infrastructure in Nigeria is poor and thus may slow the rate of adoption of POS payment system in the country. Also there is inadequate infrastructure which constitutes some impediments to e-business (Heeks, 2002 as cited in Aminu, 2012). In a research conducted majority of the respondents strongly agreed that poor or lack of IT infrastructure in rural areas affects ICT adoption having a mean value of 4.4848 and a standard deviation of 0.9603, this means that banks and government need to invest more resources to enhance ICT infrastructure to increase productivity of banks. Network communications error slow down its operations and inadequate bandwidth are among the infrastructural challenges which discourages repeat patronage by banks customers and therefore loosing revenue (Basweti, Masese & Martin, 2013).
It cannot though be claimed that Nigeria completely lacked the necessary infrastructure to adopt POS but that the infrastructures are not in good shape where they exist, for example the unsTable nature of electricity supply in Nigeria is a problem (Oshikoya & Hussain, 2007). In a study conducted by a consulting outfit Financial Derivatives Company (FDC) for Nigerian Interbank Settlement systems (NIBSS) in 2012 it was discovered that merchants still prefer to collect cash despite the installation of POS in their location, poor network connectivity was cited as a major reason (NIBSS, 2012).
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). Various reasons have been adduced as responsible for apathy in some banking services such as the use of POS by bank customers, these includes security concerned especially in India. This is more evident in rural area as against urban centres. Security issues concerned both that of POS and the unbanked population in Lagos, in Ajayi and Ojo (2006) appreciable number of people are said to keep cash at home, this expose them to all forms of vices and the alternative which is putting money in the bank, making payments through electronic platform must be free of doubts.
Gefen (2000) reported that studies conducted on cellular phones revealed large number of cellular phone frauds, thus giving the users concerns about usage. Therefore, lack of security of POS and other electronic payment systems may be a barrier to their adoption by customers in a number of industries in Nigeria. Security is also a major challenge even in the transportation of cash between banks, therefore the adoption of an e-payment systems will reduce this challenges and encourage the use of alternative platform (POS) (Adeoti & Oshotimehin, 2011).
In addition, lack of trust arising from the security challenges associated with the use of POS and other electronic systems also 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) described trust as reliance on another party by individual under conditions of dependence and risk. Ganesan (2000) showed that trust is necessary for long term orientation because the outcome is futuristic.
Gefen (2000) noted that security challenges such as fraud lower customer trust in the use of technology to make transaction, and this affect its rate of adoption. Trust would have a positive impact on a consumer’s intention towards using an e-payment solution (POS) when it is absolute. Several researchers in marketing and social sciences have confirmed that security issues do affect adoption of electronic payments in an organization (Ganesan, 1994; Alsajjan & Dennis, 2010).
Similarly, low customer education will negatively affect the adoption of POS in Lagos state. Therefore, customer education has become a major factor to encourage its use and especially in line with the high number of illiterate population within the Lagos 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 depend 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). Hence educating customers on the use and the importance of POS to both the user and the organisation will positively impact its services. The researcher is of the view that consumers’ experiences from using ATMs may have negatively impacted the use of POS. For instance, consumers who have experienced failed transactions with the ATM, such as dispense error or captured cards may develop similar fears about the POS but needed to allay this fear by adequate customer enlightenment.
Finally, poor customer motivation has also limits the adoption of POS and new technology in Lagos state and Nigeria in particular. There is high cost of acquiring of POS in Lagos state 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. In order to overcome the problems enumerated above, the following objectives must be addressed. Similarly, gaining of social status by adopting POS which is an innovation in technology may be one of the most important motivations. Some adopt technology with the belief that it would launder their image, alter, or create a positive social status within their social setting (Teo & Pok, 2003). Therefore, there is need to encourage public and private initiatives in the provision of the basic infrastructures for improved motivation and opportunities for e-transaction. The problem of this study therefore is how customers can be motivated in order to adopt POS in an organisation.
In summary, Adeoti and Oshotimehin (2012) identified low adoption of POS compared to other electronic payments solutions, though there is a general increase on the rate of adoption of electronic payments instruments in Nigeria such as ATM. Among the factors that have been identified as responsible for these low POS adoptions are low level of awareness creation of the benefits of using POS, inadequate infrastructures, insufficient internet penetration, intermittent network failure, lack of open standards or trust among banks and providers, low level of awareness of POS existence, frequent power interruption, inadequate numbers of POS per merchant store where they are available, preference for cash by an average consumers, as well as security of communication over the network, (Ayo & Babajide, 2006; Adeoti, 2013; NIBSS, 2015). This study attempted therefore at examining the factors aiding the adoption of POS of selected business organisations in Lagos state. The levels of adoption of POS in comparism with that of ATM is low, this is as contained in Table 1.1 where the volume of transactions of ATM were given as 470,894,452 and POS 47,743,919 (CBN, 2016) as at June 30, 2016 showing the low level of adoption of POS. The determinants of POS involved the factors that encourage the adoption of POS or its usage.
1.3 Objective of the Study
The main objective of the research is to examine the determinants and adoption of POS of selected business organisations in Lagos state (Lagos). The specific objectives are to:
- evaluate the relationship between availability of infrastructure and the adoption of POS of selected business organisations in Lagos;
- determine the relationship between POS security and adoption of POS of selected business organisations in Lagos;
- investigate the relationship between customer trust and the adoption of POS of selected business organisations in Lagos;
- assess the relationship between customer education and the adoption of POS of selected business organisations in Lagos; and
- Investigate the relationship between customer motivation and the adoption of POS of selected business organisations in Lagos.
1.4 Research Questions
In order to achieve the objectives of the study, the following research questions have become imperative.
- How does availability of infrastructure relate with the adoption of POS of selected business organisations in Lagos?
- What is the relationship between POS security and the adoption of POS of selected business organisations in Lagos?
- What is the relationship between customer trust and the adoption of POS of selected business organisations in Lagos?
- How does customer education relate with the adoption of POS of selected business organisations in Lagos?
- What is the relationship between customer motivation and the adoption of POS of selected business organisations in Lagos?
1.5 Hypotheses
In an attempt to come up with acceptable conclusions the research tested the following null hypothesis from the stated research questions:
H01: There is no significant relationship between availability of infrastructure and adoption of POS of selected business organisations in Lagos.
H02: POS security does not have significant relationship with adoption of POS of selected business organisations in Lagos.
H03: Customer trust does not have significant relationship with adoption of POS of selected business organisations in Lagos.
H04: Customer education does not have significant relationship with adoption of POS of selected business organisations in Lagos.
H05: Customer motivation does not significantly relate with adoption of POS of selected business organisations in Lagos.
1.6 Rationale for the Hypotheses
There is an inundation of studies on the benefits of adoption of POS availability of infrastructure, with the majority of these studies agreeing that availability of infrastructure significantly impact on the adoption of POS. These studies have argued that inadequate infrastructure have contributed to the low level of adoption of POS in Lagos state such as consistent power outage, inadequate bandwidth for data communication, low level of internet connectivity and constant break in network connectivity, insufficient hardware and software that drives it (Adeoti & Oshotimehin, 2011; Adeoti, 2013; Omotayo & Dahunsi, 2015; Bultum, 2014). Conversely, studies have shown that infrastructure does not significantly relate to adoption of POS (Adeoti & Oshotimehin, 2012; Stavins, Rysman & Crowe, 2010). Therefore, the following hypotheses were proposed:
Hypothesis i: There is no significant relationship between availability of infrastructure and adoption of POS of selected business organisations in Lagos.
This first hypothesis of the study is highly essential in that infrastructure goes a long way in determining the adoption of POS in an organisation, infrastructure in technology is like what a foundation is in building construction. The hypothesis I is that of testing the relationship between infrastructure and the adoption of POS of selected business organisations in Lagos. There are avalanche of studies on adoption of POS in an organisation with the majority of them agreeing that the low level of adoption of POS is attributable to infrastructural issues among which are (Ayo & Babajide, 2006; Adeoti & Oshimehin, 2012; Adeoti, 2013). However, the opponents of infrastructural availability in adoption of POS feared that the adoption of POS would lead to incurring huge capital for infrastructure development that POS would seat (Stavins, Rysman & Crowe, 2010). Therefore, the hypothesis was stated that there is no significant relationship between availability of infrastructure and adoption of POS in selected organizations in Lagos state.
Hypothesis ii: POS security does not have significant relationship with adoption of POS of selected business organisations in Lagos.
There is preponderance of academic work that links security issues to the low adoption of POS in an organisation, 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; Gefen, 2000; Alao, 2009; Azeez, 2011), all of which are concerned about security of electronic transactions and because of the vulnerability of the data Azzez (2011) asserts that security issue in the use of POS must be taken seriously. Pandy(2013) in his work enumerates some of the security challenges that could negatively affect the adoption of POS, however, there are other studies that do not see the significant relationship between POS security and adoption of POS in an organisations. Based on the above, hypothesis II was introduced.
Hypothesis iii: Customer trust does not have significant relationship with adoption of POS of selected business organisations in Lagos.
Currall and Judge (1995) defined trust as an individual’s reliance on another party under conditions of dependence and risk. This supposed that making payments through electronic channels such as POS must be with some level of trust that the transactions will hit the various accounts accordingly. Studies have shown that trust is significantly related to adoption of POS in Lagos hence it is noted that transactions made must not be deniable either by the originator or the beneficiary of the transactions. Trust has also been described as an influential factor on consumer activities and hence success of e-banking services (Ganesan, 1994; Ling, Chai & Piew, 2010). However, some authors do not see the significance of trust to adoption of POS in an organisation. Therefore, hypothesis iii is hereby stated as follow: Customer trust does not have significant relationship with adoption of POS in selected organizations in Lagos state.
Hypothesis iv: Customer education does not have significant relationship with adoption of POS of selected business organisations in Lagos.
One of the factors stated as being responsible for low adoption of POS in an organisation despite an increase in other e-payments platforms is low level of awareness creations on the usefulness of the device (NIBSS, 2012). In a study conducted on market share in electronic payment in Lagos 2008 – 2012, the adoption of POS was seen to be low (CBN, 2012), the low patronage was attributable to inadequate customer education. Therefore, what is needed however is sustained awareness on the part of the banks and the service providers. Information and communications technology experts in Lagos believed that prospective users of POS are not aware of the system. If there is awareness, the penetration of the system will be high (Ilesanmi, 2012). It can be deducted here, that the higher the awareness, the higher the diffusion of the POS and vice-versa. Furthermore, previous studies yielded conflicting findings on the relationship between unified theory of acceptance and use of technology constructs and behavioural intention (Birch & Irvine, 2009; Foon & Fah, 2011; Gao & Deng, 2012).
Hypothesis v: Customer motivation does not significantly relate with the adoption of POS of selected business organisations in Lagos.
Studies have shown that there has been low level of motivation in adoption of POS in Lagos, low motivation and resistance to technology is the major reason for low level of adoption of technology in an organization in order to stay competitive (Maurer, 1997). This study is designed to further the understanding of how customer motivation relates to adoption of POS in the workplace, by testing what relationship exists between customer motivation and adoption of POS of selected business organisations in Lagos. Based on the above, hypothesis v was formulated.
1.7 Operationalisation of Variables
Y = f(X)
Where Y = Adoption of POS
yi = Adoption of POS
X = Determinants of POS
X = f(x1, x2, x3, x4, x5)
Where x1 = Availability of infrastructure (AI)
x2 = POS Security (PS)
x3 = Customer Trust (CT)
x4 = Customer Education (CE)
x5 = Customer Motivation (CM)
Therefore, the regression model is as stated below:
yi = b0+b1x1+b2x2+b3x3+b4x4+b5x5+u …………. (i)
Expressing relationship of each explanatory variable to a response variable for each of the hypothesis is
y= b0+b1x1+u …………..ii
y= b0+b2x2+u …………..iii
y= b0+b3x3+u …………..iv
y= b0+b4x4+u …………..v
y=b0+b5x5+u …………..vi
Bringing all the equation together implies that
y = combination of equation ii to vi which forms the working equation of the study
y = Adoption of POS
The study predicted the response variable from the five explanatory variables as stated in the five hypotheses above.
From the regression model above:
bo = gradient/intercept
b1….. b5 are the regression coefficients
u = error terms
1.8 Scope of the Study
The study examined the determinants and adoption of POS of selected business organisations in Lagos state. While previous studies have examined different topics related to this study, this study concentrated on determinants of POS which is the independent variable with five factors which are availability of infrastructure, POS security, customer trust, customer education and customer motivation (independent sub-variables) and their relationship with adoption of POS (dependent variable).
The scope of this study was restricted to Lagos State, as Lagos state was used as the pilot state for adoption of cashless economy. SMEs were the main focus of adoption of POS in Lagos state as they form the bulk of users of POS. The choice of Lagos state tallies with previous study conducted by Adeoti and Oshotimehin as Lagos was classified as the most urbanized city in Nigeria where more than 64% of the industries in Nigeria are sited (Adeoti and Oshotimehin, 2011).
Similarly, study shows that Lagos state accounts for majority of customers utilizing electronic payment instruments in Lagos (CBN, 2011), this also justified the choice of Lagos state for this study. The population of this study are Small and Medium Enterprise organizations who have deployed POS for payments transactions, however, a few of these selected organisations were made from the sectors that contributes most for Gross Domestic Products (GDP) in Nigera (SMEDAN & NBS, 2013) and uses POS.
1.9 Significance of the Study
A system that involved reduction in the use of cash by introducing alternative platform for payments in business transactions reduced the danger inherent in carrying cash in Lagos. The role and relevance of efficient payments systems have been closely monitored and promoted by various monetary agencies of the world and including Nigeria. There is a gap between the use of cash for payments and efficient electronic payment systems which the study attempted to fill.
The Nigeria payment system is basically cash driven and does not guarantee the much needed efficient and effective transactions required for a sustainable economic development. Among some of the challenges identified are armed robberies, fraud, use of counterfeit bank notes, inconveniences of carrying large notes, long period of waiting in banking hall and frequent visit to banks (Nnanna & Ajayi, 2005). The research when implemented would address some of these challenges enumerated above and improving the social-economic life of individual, and the nation.
With the growing popularity of e-commerce, there is a global trend which involves the use of electronic payments system particularly; there is the need for a study such as this to contribute to the technological development of the state with payments system in focus. However, the empirical studies that relates to the use of debit card as payment instrument are foreign researches conducted in advanced economy (Adeoti, 2013), this study may therefore becomes a reference point in Lagos hence significant.
As the world moves further and faster into a thriving technological age, so must the way businesses are conducted. POS systems are fast becoming the technology of choice and here’s why. No matter what type of retailer you are, adopting a POS (point of sale) system can turn your business around by providing an all-in-one solution to a multitude of everyday issues this explained the significance of this study. This will certainly reduced the volume of cash carrying by merchants, customers and even the financial regulator – Central Bank of Nigeria. Foreigners will then be encouraged to do business much more in Lagos as the fear of attack by robbers will be reduced.
As e-payment is evolving and increasingly getting more popular and significant in Lagos’s financial transactional activities, investigating customers’ satisfaction with electronic payment systems is of great importance to bank managers in order to improve their systems and services and adapt them with their customers’ needs. Therefore, e-payment as a fast tool, convenience and modern means of transactions can be utilized by banks and consumers in order to facilitate payment procedures and consequently increase customers’ satisfaction. Studies have shown that less educated people are more reluctant in using electronic payment services as a result of their ignorance in using internet for doing their transactions (Banstola, 2007) but creating customer awareness among its users will assist in adoption and hence impact their level of satisfaction and usage.
The knowledge gained will help the owners, the marketers and the managers to appreciate the competitive advantage that accrued to the organisations with the promotion of POS among their customers. In addition, the knowledge would inform the customers, who traditionally carry large cash to avoid carrying cash and get protected from criminals.
1.10 Operational Definition of Terms
This research consists of some concepts which are critical to ensuring a successful research work and to understand the essence of the research. Therefore, there is the need to define and explain some of the fundamental concepts that would form part of this research work. Some of them are listed below:
Automated Teller Machine (ATM): An ATM can be defined as a machine that can dispense cash and perform other financial services such as deposit taking, transfer of funds between bank accounts, making enquiries about a given accounts etc.
Cash-based Economy: This can be defined as an economic policy that involves the use of cash to transact business on a daily basis in a country. For example, until very recently in Lagos, almost every transaction is cash based.
Central Bank of Nigeria (CBN): The Central Bank of Nigeria (CBN) is a regulatory financial institution set up by the Federal Government of Lagos to regulate and supervise banking operations in Lagos which includes the banks and other financial institutions. Its power is derived from an Act establishing it.
Contactless payment cards
This is an electronic payment cards used for processing payments without direct contact with the device; these are new technology which complements the traditional e-payment cards.
Debit and Credit Card
A debit or credit cards are cards issued by a bank to a customer for ease of financial transactions. Debit cards are issued to a customer who has credit balance in the account so that as such card is used, the amount equivalents to the transactions are deducted until it is zero and such account is funded for further use and a credit card carries a maximum credit limit allowed by the bank to the card holder until account is funded. Example of debit card is the one issued by bank for use by either ATM or POS machine.
e-Commerce: E-commerce is the buying and selling of goods and services electronically e.g. the use of POS. This includes buying and selling of products and services by businesses and consumers through an electronic medium.
Electronic Data Interchange (EDI): EDI is the exchange of business data using the current data format and it involves data exchange among parties that are connected through network connectivity i.e. point-to-point connection, usually dial-up.
E-Mail, Fax, and Internet Telephon: E-commerce is conducted through the more limited electronic forms of communications called e-mail, facsimile or fax, and the emerging use of telephone calls over the Internet.
Global wireless Systems: Global wireless systems consist of interconnected network of devices which allows access through a gateway to information sources.
ICT: ICT is the use of digital technology which covers any product that will store, retrieve, manipulate, transmit or receive information through communication devices.
IP: An IP simply mean Internet Protocol, this is a routine or set of rules that uniquely identified a communicator in a network. For example a client in a network must have a unique address to be so recognized and have access to the resources of the network.
Kiosks
This is another device that functions almost exactly like ATM, except cash dispensing. In order words, kiosk is an electronic device which is capable of accepting deposits, reads magnet strip cards supplied by the bank and after supplying a valid and recognized PIN number, a customer would have access to the banks accounts or details, allowing the performance of all banking transactions with the exception of cash dispensing.
NFC
This is an acronym meaning Near Field Communications. This is a system where a device is activated by placing it near another device that is contactless operations, for example a mobile phone can perform the task of an ATM or POS card by placing it near an ATM, or POS terminals without physical contact and transactions will be triggered.
Point of Sales Terminals:
Point of sale (POS) terminals is a device used for payments made electronically without the use of cash to transact business in an organisation.
The Security of Business Transactions: Security of business transactions involves putting control on access to business critical data by ensuring users are authenticated at different levels of entrance into the Computer systems, in general, ensuring the privacy and effectiveness of transactions. Among the most widely-used security technologies is the Secure Sockets Layer (SSL).
Verve Cards: This is one of the newest cards in use issued by banks on Interswitch network used either in ATM, POS, KIOSKS or with both CHIP and PIN
The combination of Chip and PIN gives it additional security features, such that information stored is not accessible to unauthorized user, and it also includes features such as identity Guard, Money guard, Fraudwatch, FraudAware etc.
Visa and Master Card: These are different models of credit and debit cards used for electronic payments in various devices Retrieved such as POS terminals, ATM etc.
Adoption of POS: POS is defined as the device used to make payments for goods and services electronically in an organisation, while adoption of POS is defined as the acquisition and use of POS to make payments for goods and services in an organisation.
Determinants of POS
Determinants of POS can be defined as the independent variables used to measure the acquisition or adoption of POS in an organisation and the following sub-variables are used to measure it; availability of infrastructure, POS security, customer trust, customer education and customer motivation.
Availability of infrastructure
Infrastructure availability is defined as availability of a combined set of hardware, software, networks facilities, communications etc. (including all of the information technology peripherals), in order to develop, test, deliver, monitor, control or support IT services.
POS security
The POS security can be defined using the following five constructs: Privacy, Non-repudiation, Authentication, and Integrity, difficult to break – in and verification before acceptance. Privacy mean there must be an assurance of non-disclosure of data and other information by a user to a third party. Non-repudiation means transaction performed on the system can never be denied e.g. message sent cannot be denied by the receiver. Integrity implies that only authorized user can access or modify the content of the system. Similarly, verification will confirm the identity of the cardholder before transaction can be done and concluded and authorization will ensure that data or information remains intact and allow only by person with authority to do so.
Customer Trust in POS
This can be defined as the ability of a user to recognize that the device is confidentially secure, with high level of integrity and authentication and authorization before transactions can be made.
Customer Education
Customer education on POS is the creation of awareness about the existence of a device, its meaning, what it can do with the intention of ensuring its patronage or adoption.
Customer Motivation
Customer motivation on POS can be defined as the attribute that moves a customer or potential users to adopt POS.
Perceived ease of use
Perceived ease of use in this study is defined as the degree to which a person believed that using a POS will require less efforts in the use of the systems.
Perceived usefulness
Perceived usefulness can be defined as how a person believed that a POS is useful for an operations in their organisation.
Bandwidth
This can be defined as the width of the pipe through which data travel in a given period of time when data transmissions are made.