Nigerian retailers should offer cash back on debit card transactions to their customers. Here’s why


We’ve all been there. It’s the weekend – a Saturday, precisely – and although you’ve spent countless minutes on several queues you’ve been unsuccessful in getting cash from the Automatic Teller Machine (ATM). You know you need the money for Church the following day, or to hang out with your friends at your favorite spot later that night. At this point you begin to panic, you’re desperate now. If only there was a way to get cash from your account through a third party, you wouldn’t even mind paying for the service.

Well, actually there is and the service is called a Debit Card cash back or cash out.

A cash back service is a solution offered by retailers to customers in need of cash when they pay for a transaction with their debit card. The amount needed is summed up with the total purchase price of the transaction so that the customer receives the amount in cash along with the items bought. For example, if someone was buying items worth N3000 from a supermarket, if the store has a cash back policy they could request for cash back, say N15,000, bringing their total purchase price to be N18,000. Thus they would receive their items as well as their N15,000 cash.

Cash back was first introduced in 1980 by British retail chain, Tesco and has been adopted by several other retailers in different countries. It offers benefits to both retailers and customers such as:

It reduces the amount of cash banking the stores need to carry out

This was the main reason behind the introduction of the idea by Tesco. By ‘giving away’ cash through the cash back service, it saves them the cost of transporting and insuring the cash on multiple trips to the bank.

It helps customers avoid long queues to use a cash machine

This is probably the number one benefit to the customer in using this service. With cash back, customers need not worry about not being able to find a nearby ATM, or finding one that is dispensing cash.

It offers customers flexibility in the note denominations they can receive

Most Nigerian ATMs only dispense N1000 and N500 notes. Retailers are more able to supply the customer with the required cash in smaller N200 and N100 note denominations.

Retailers charge a small fee for providing the cash back service

Commercial banks in Nigeria charge point of service (POS) merchants 1% for every debit card transaction. Since the customer will be paying with a debit card, the POS charge would be added to the total purchase price of the transaction. Recently, some private businesses in Nigeria are beginning to use this initiative as a business idea. They provide cash back services to people in return for a small fee. For example, some might charge N150 for each N5000 withdrawn.

Cash back provides a means of ensuring that the customer receives their cash

It’s common for bank customers to be debited for cash that they did not receive from the ATM. When this happens, they are often required to provide proof of not receiving the money which can be a long process. Retailers on the other hand usually require customers to sign on the checkout receipt to confirm that they received their cash before leaving the store. A copy of the signed receipt is kept by both the retailer and the customer. If, however, the transaction wasn’t successful due to a network failure and the customer’s account was debited, the retailer would have no hard time believing the customer since there was no record of a signed checkout receipt.

Cash back provides an opportunity for retailers to offer their customers good customer service

In some countries such as the UK, no fee is charged for providing cash back services. If Nigerian stores could offer such services, you can be sure that customers would patronize those stores because of the great relief it would provide them.

Update: 13/08/2018

However, according to a Central Bank of Nigeria (CBN) policy, Nigerian retailers are not allowed to sell naira notes to the public. The CBN instead advises Banks to register merchants who can act on their behalf in providing cash back services to customers. One such merchant seizing this as a business opportunity is Kpolom. Launched in December 2017 in Port Harcourt, they link people in need of cash to Kpolom agents stationed in verified business centres such as supermarkets, filling stations, and restaurants. You can download the Kpolom app to find out more about their service.

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About Fortune Chuku 89 Articles
Fortune Chuku is a Researcher and Storyteller. His interests include startups, technology ecosystems and technology adoption in emerging markets.