THE EFFECTS OF POS ADOPTION ON BANK PROFITABILITY IN NIGERIA.

Abstract

The Nigerian banking sector has experienced significant transformation over the past decade due to the rapid expansion of digital financial services and electronic payment systems. Among these innovations, Point of Sale (POS) technology has become a major channel for transaction processing and financial intermediation in deposit money banks. This study examined the impact of POS adoption on the financial performance of selected deposit money banks in Nigeria from 2010 to 2025. Specifically, it investigated the effect of POS terminal deployment, POS transaction volume, POS transaction value, and number of merchants adopting POS services on bank performance measured by return on assets (ROA). Panel regression analysis was employed to analyze the relationships among the variables. The results of the study revealed that POS terminal deployment had a positive and significant effect on bank performance, indicating that an increase in the number of POS terminals enhanced ROA. POS transaction volume also exhibited a positive and significant relationship with ROA, showing that higher transaction activity improved profitability. In addition, POS transaction value was found to have a positive and significant effect on ROA, suggesting that higher-value transactions contributed to improved financial performance. Furthermore, the number of merchants adopting POS services had a positive and significant impact on ROA, implying that broader merchant participation strengthened bank profitability. The study concluded that POS adoption significantly improved the profitability of deposit money banks in Nigeria. It was therefore recommended that banks should expand their POS terminal infrastructure by increasing deployment across wider geographic and commercial locations to enhance efficiency, profitability, and service accessibility. In addition, banks should implement targeted merchant acquisition strategies, including incentives and support systems, to attract more businesses to adopt POS services, as increased merchant participation was found to strengthen transaction flows and overall bank performance.