Kuda Takes On Nigeria’s Hotly Contested Merchant Arena With POS Push

Kuda, a fintech company considered Nigeria’s pioneering neobank, is venturing into the merchant-acquiring segment with the recent launch of its Kuda POS terminals. This entry marks a significant development in Nigeria’s digital payment landscape, underscoring the intensified competition within the merchant-acquiring space.

In Nigeria, the evolution of digital payments is turning merchant acquiring into a major industry, projected to be a billion-dollar opportunity in the coming few years, per McKinsey, after hitting an estimated USD 200 M in revenue in 2021.

Merchant acquiring entails facilitating non-cash payments between buyers and sellers. While online merchant acquiring (non-cash payments on websites/apps) is growing, offline transactions (non-cash payments at physical storefronts) still dominate, comprising 95 percent of Nigeria’s digital transaction value.

The successful pilot and launch of the Kuda POS terminal, revealed amongst other updates in a New Year message by its Co-Founder/CEO Babs Ogundeyi, aligns with the broader trend of increasing interest and competition within Nigeria’s merchant-acquiring sector. The introduction of POS terminals tailored for businesses highlights the evolving demands of the market and emphasises the neobank’s capacity to tap new growth frontiers.

Target-Global-backed Kuda, having made a significant dent in the digital personal banking scene with 7 million customers and NGN 55.8 T in transactions processed since launching in 2019, has extended its attention to businesses in recent years.

In October 2022, Kuda Business was unveiled as an all-in-one business account, in line with the trend of fintechs adopting both consumer- and business-facing products in Nigeria. “To help entrepreneurs earn the revenue they need to keep running, everyone who signs up for a full Kuda Business account can now apply for a Kuda POS terminal with flexible payment options,” Ogundeyi writes.

Kuda would be facing stiff competition, however. Nigeria’s merchant-acquiring sector has seen a rapid evolution driven by various players. Established entities like banks and well-capitalised fintechs such as OPay, Moniepoint, Nomba, and FairMoney’s PayForce are vying for this space.

Additionally, Traction Apps recently secured a USD 6 M seed round, entering this competitive space by customising POS terminals for SMEs. Stripe-owned Paystack is also taking on offline merchant-acquiring in Nigeria with its terminals and SoftPOS solutions.

Moreover, Kuda’s new POS terminals come at a time when Nigeria’s merchant-acquiring segment is contending with tight profit margins, as highlighted by McKinsey.

Value-added services like instant settlement, lending, invoicing, and reconciliation are becoming increasingly pivotal to counter these constraints.  And. although there are fears of overcrowding, Kuda’s entry introduces a fresh player renowned for its nifty approach, potentially shaking up the established order.

Despite lingering concerns about lean margins, the segment’s allure stems from the country’s rapid digitalisation, a vast SME market, and the demand for innovative payment solutions. As more players like Kuda step in, offering tailored services to businesses, the merchant-acquiring space in Nigeria is poised for continued growth and transformation.