Blockchain Revolutionizes Nigeria’s POS Transactions Through Zone and NIBSS Partnership

Blockchain Revolutionizes Nigeria’s POS Transactions Through Zone and NIBSS Partnership
Image credit: Zone 

Zone, a Nigerian blockchain-enabled payments infrastructure, has partnered with the Nigerian Inter-Bank Settlement Scheme (NIBSS) to integrate blockchain technology into Point-of-sale (POS) terminal payments. This partnership represents a significant step forward in enhancing the efficiency and security of POS transactions in Nigeria.

Streamlining POS Transactions with Blockchain

Traditionally, POS transactions involve two intermediaries: the payment switches and the Payment Terminal Service Aggregator (PTSA). When a transaction is initiated, the PTSA manages the interaction between the cardholder and the terminal, while the payment switch routes the transaction data to the cardholder’s bank. However, this process can be inefficient, particularly during downtimes, leading to reconciliation challenges.

Zone, which operates as a payment switch, is addressing this issue by integrating a decentralized blockchain ledger into the POS transaction process. This innovation allows every node on the blockchain to perform necessary checks, effectively reducing the communication path and enhancing transaction processing.

NIBSS Adopts Blockchain for Enhanced PTSA Functions

NIBSS will continue its role as a PTSA within the blockchain system. The data from both traditional and blockchain systems will be harmonized into a central repository, providing a more efficient and reliable service for PTSA functions. This integration not only improves the transaction process but also reduces the likelihood of fraud and chargebacks, which have been persistent issues in Nigeria’s POS system.

Scaling and Adoption Challenges

For the blockchain-based PTSA system to be effective, widespread adoption by banks and fintechs is crucial. Currently, over 30 financial institutions have integrated with Zone’s network, which offers this service at no upfront cost. The incentive structure is designed to encourage more financial institutions to adopt this technology, with the potential for long-term partnerships if they are impressed by its performance.

The Future of POS Transactions in Nigeria

Zone has already implemented blockchain technology in automated teller machines (ATMs) and has now expanded its application to POS payments. While the transaction throughput of blockchain systems remains a concern, with some layers taking up to five minutes to reach finality, Zone reports a success rate of over 99% for its transactions. 

Zone's CEO, Obi Emetarom, anticipates that in five years, POS-related fraud, particularly chargebacks, will be nearly eliminated due to the widespread adoption of blockchain technology in Nigeria’s payment systems.

Conclusion

The partnership between Zone and NIBSS marks a significant advancement in Nigeria’s financial technology landscape. By leveraging blockchain technology, they aim to create a more efficient, secure, and reliable POS transaction system that could serve as a model for other countries. As the technology scales, it has the potential to dramatically reduce fraud and enhance the overall reliability of POS transactions in Nigeria.