For small and medium-sized enterprises (SMEs), adopting modern payment solutions is critical to staying competitive in today’s fast-paced business environment. A point-of-sale (POS) terminal, a device that facilitates card payments and streamlines transactions, has become a very important modern payment solution for businesses looking to enhance operational efficiency and customer satisfaction. For example, in Nigeria, the use of POS has displaced the use of Automated Teller Machine (ATM), according to data from the Central Bank of Nigeria in June 2025.

What Is a POS Terminal?

A POS terminal is an electronic device used by merchants to process card payments at the point of sale. It typically accepts debit and credit cards, contactless payments like mobile wallets (e.g., Apple Pay, Google Pay), and online cash transactions.

Modern POS terminals integrate with software to manage inventory, generate sales reports, and track customer data. For SMEs in Nigeria and other parts of the world, these devices offer a scalable solution to meet the demands of a growing customer base while maintaining operational efficiency.

Case Study: Data on the expansion of POS terminals in Nigeria (2023 VS 2024)

From January 2024 to December 2024, transactions worth N223.27 trillion were performed on POS terminals. In 2023, POS terminals handled N110.35 trillion, that more than 100% increase, Nigeria’s apex bank says in its quarterly statistical bulletin in June.

Comparatively, 1.022 billion transactions were carried out on Automated Teller Machines (ATM) in 2024. It was just 1.012 billion in 2023. This difference between transactions on POS terminals and ATM shows a steady migration of Nigerians into digital payment system. Take a look at the transactions on POS terminal in 2023 compared 2024, according to CBN data:

• POS transactions in January 2024 was N11.50tn, but it was N5.28tn in January 2023
• In February 2024, POS transaction was N12.46tn while it recorded N7.38tn in February 2023.
• In March, POS terminals handled N14.73tn transactions as against March 2023, when it was N10.62tn.
• In April 2024, POS transactions touched on N13.74tn as against N8.55tn recorded in April 2023.
• May 2024 was N13.91tn, while it was N8.30tn in May 2023.
• June 2024 POS value rose to N19.57tn while it was N8.31tn in June 2023.
• July 2024 saw POS transactions dropping a bit to N15.24tn, but still impresive than what it recorded in 2023.
•  In August, POS transactions rose again to N18.90tn. It was N9.10tn in August 2023.
• In September 2024, transactions on POS hit N19.69tn against 2023’s N9.40tn.
• October 2024 witnessed a POS in POS transactions to N22.27tn while it was N10.60tn during the same month in 2023.
• N29.42 trillion transactions were performed on POS terminals in November 2024 as against November 2023’s N11.28tn.

By the last month of 2024 (December), POS transaction reached All-Time High (ATH) of N31.84tn for the year, compared to N13.20tn in December 2023.

When you take a look at the above statistical data from the Nigeria’s apex bank (PDF), you will realise that the rise in the use of POS terminals can be linked to convenience and the inefficiencies of ATM across Nigeria.

But while you are seeking to adopt the use of POS terminal for as a new business owner, understanding the advantages and potential challenges of using a POS terminal is very important for making informed decisions.

This article explores the key benefits of POS terminals for SMEs, addresses a few challenges, and provides practical insights for those considering this technology.

Key Benefits of POS Terminals for SMEs

Enhanced payment flexibility for customers: One of the primary advantages of a POS terminal is its ability to accept multiple payment methods. In a 2023 report by the Worldpay Global Payments Report, 52% of global consumers preferred card or digital payments over cash, a trend particularly pronounced in urban areas.

By offering options like credit cards, debit cards, and contactless payments, SMEs can cater to diverse customer preferences, reducing the risk of lost sales due to payment limitations. For example, a small retail store with a POS terminal can seamlessly process a customer’s contactless payment via a smartphone, ensuring a quick and convenient transaction.

Improved transaction speed and efficiency: POS terminals streamline the checkout process, significantly reducing transaction times compared to manual methods like cash handling or paper-based invoicing.

For instance, a vegetable or tomato seller in Samaru market using a POS terminal can process a card payment in seconds, allowing staff to serve more customers during peak hours. This efficiency not only enhances the customer experience but also increases throughput, which is critical for businesses with high transaction volumes, such as food trucks or pop-up shops.

Accurate sales tracking and reporting: Modern POS terminals are equipped with software that automatically tracks sales data, providing real-time insights into revenue, top-selling products, and peak business hours.

For new business owners, this feature eliminates the need for manual record-keeping, which is prone to errors. A 2022 study by Square, a leading POS provider, found that 68% of SMEs using their POS systems reported improved financial oversight due to automated reporting. For example, a boutique owner can use POS data to identify which clothing items sell best, enabling better inventory decisions.

Inventory management integration: Many POS terminals integrate with inventory management systems, allowing SMEs to monitor stock levels in real time. When a product is sold, the system automatically updates inventory counts, reducing the risk of overstocking or stockouts.

For a small grocery store, this means knowing exactly when to reorder popular items like fresh produce, avoiding lost sales or excess waste. This integration is particularly valuable for SMEs with limited resources to dedicate to manual inventory tracking.

Enhanced customer relationship management: POS terminals often include customer relationship management (CRM) features, enabling businesses to collect and store customer data, such as purchase history and contact details.

SMEs can use this information to create targeted marketing campaigns or loyalty programs. For instance, Captain Cook bakery could use its POS system to offer discounts to repeat customers, fostering loyalty and increasing repeat business. According to a 2023 Visa Small Business Report, 74% of SMEs using POS systems with CRM capabilities saw improved customer retention.

Reduced cash handling risks: Handling cash increases the risk of theft, loss, or accounting errors. POS terminals minimize these risks by encouraging card-based transactions.

For SMEs operating in high-traffic areas, such as markets or festivals, reducing cash on hand enhances security for both employees and the business. Also, digital transactions create an electronic trail, simplifying audits and financial reconciliation.

Scalability for growing businesses: POS terminals are highly scalable, making them suitable for SMEs at various growth stages. A new business owner can start with a basic mobile POS terminal, such as a card reader connected to a smartphone, and later upgrade to a more advanced system with features like employee management or multi-store integration. This flexibility ensures that SMEs can adapt their payment infrastructure as their business expands without incurring significant upfront costs.

Challenges of POS Terminals for SMEs

While the benefits of POS terminals are great, new business owners should be aware of a few challenges associated with their adoption.

Initial setup costs: Acquiring a POS terminal involves upfront costs, including hardware (e.g., card readers, tablets) and software subscriptions. For budget-conscious SMEs, these expenses can be a barrier.

For example, a basic GTBank POS terminal is free in Nigeria, beginning from February 2025. In other countries such as the United States, POS system may cost between $500 and $2,000, depending on the provider and features, according to a 2023 analysis by Magento. Some providers offer affordable mobile POS solutions in Nigeria such as MoniePoint and Opay.

For instance, the OPay Traditional POS costs N20,0000 while Opay Smart POS is N30,000, businesses must carefully evaluate their budget and needs. MoniePoint POS is N21,500 (covering caution fee: N10K; logistic fee: N10K; and one year insurance fee: N1,500)

Transaction fees: POS terminals typically charge transaction fees, ranging from 1.5% to 3.5% per card payment, depending on the provider and card type. For SMEs with thin profit margins, these fees can add up. New business owners should compare fee structures from providers like MoniePoint, Opay, FirstMonie, Square, PayPal, or Clover to find a cost-effective solution.

Technical dependence and downtime: POS terminals rely on internet connectivity and power, making them vulnerable to technical issues. A network outage or hardware malfunction can disrupt transactions, potentially leading to lost sales.

For instance, a restaurant relying solely on a POS terminal may struggle during a power outage unless they have a backup system, particularly in local areas in Nigeria where power supply is epileptic. SMEs should invest in reliable power supply via solar power, internet and consider offline-capable POS systems to mitigate this risk.

Staff training requirements: Implementing a POS terminal requires staff training to ensure smooth operation. For SMEs with high employee turnover, such as seasonal businesses, repeated training can be time-consuming and costly. New business owners should prioritize user-friendly POS systems with intuitive interfaces to minimize training time.

Practical Considerations for New Business Owners

For SMEs considering a POS terminal, the following steps can help maximize benefits and address challenges:

Responsive customer support: Check reviews on POS terminal providers in your location, pay attention to providers are are responsive when users have issues such as transactions involving debits and credits. A rsponsive POS provider will make your business easier. From experience, fintechs in Nigeria such as Palmcredit, Opay, MoniePoint are better POS providers than the conventional financial institutions.

Choose the right provider: Research POS providers to find one that aligns with your business needs. For example, like paying attention to operators that offer affordable mobile POS solutions for startups.

Evaluate costs: Factor in both upfront costs and ongoing transaction fees when budgeting for a POS terminal. Look for providers with transparent pricing and no hidden fees.

Ensure reliable connectivity: Invest in a stable internet connection and consider POS systems with offline capabilities to prevent disruptions.

Train staff effectively: Select a user-friendly POS system and provide concise training to ensure staff can use it efficiently.

Leverage data insights: Use the POS system’s reporting and CRM features to make data-driven decisions about inventory, marketing, and customer engagement.

Conclusion

For SMEs in Nigeria, a POS terminal is more than just a payment tool, it’s a gateway to operational efficiency, customer satisfaction, and business growth. By offering payment flexibility, streamlining transactions, and providing valuable data insights, POS terminals empower small businesses to compete in an increasingly digital marketplace.