Business
Fintechs boom as Nigerians grapple with naira scarcity, failed bank transactions
By AYOOLA OLAOLUWA
Financial technology (Fintech) and e-payment platforms have continued to reap from the chaos caused by the shoddy implementation of the demonetization policy of the Central Bank of Nigeria (CBN), Business Hallmark can report.
According to findings, many Nigerians are daily switching to fintechs in their bid to overcome the resultant cash crunch and failed electronic transactions on commercial banks platforms caused by the over-stretching of their infrastructure owing to unexpected traffic.
The CBN Governor, Godwin Emefiele, it would be recalled, had on Wednesday, October 26, 2022, announced the introduction of the redesigned N200, N500 and N1,000 banknotes.
According to the CBN governor, the new redesigned bank notes would go into circulation from 15 December 2022, while the old notes would cease to remain legal tender until 31st January 2023.
While giving reasons for the naira redesign policy, Emefiele said it would enable the apex bank to take control of the currencies in circulation, manage inflation, combat counterfeiting and ransom payment.
On December 6, 2022, the apex bank moved to further drive its demonetization policy by limiting weekly cash withdrawals available to individuals and businesses to only N100,000 and N500,000 respectively.
Unfortunately, the policy sparked widespread scarcity of cash across the country, with many Nigerians unable to get the much needed funds to meet basic daily needs like transport fares.
Unable to lay their hands on raw cash, millions of Nigerians, from petty traders to transporters and individuals reluctantly embraced the cashless policy.
Expectedly, the phenomenal rise in e-payment transactions in the country led to crash of banks networks, leading to failed transactions.
On many instances, funds transferred through banks’ mobile apps, USSD and other electronic platforms ended up as failed transactions, while account holders funds were debited.
For the lucky ones, their transfers take several hours, even days and weeks to drop.
As a result, banks customer service desks are daily bombarded by angry customers who demand the prompt reversal of their trapped funds.
According to the latest report by the Nigeria Inter-Bank Settlement System Plc (NIBSS), volume of transactions increased significantly in February 2023, rising by 121 per cent year on year.
NIBSS further stated that there was an appreciable increase in small and micro level transactions, with a massive 70 per cent increase in volume and a 7.8 per cent increase in volume of transactions between January and February 2023.
However, owing to multiple failed mobile transactions, transaction value recorded a slight growth of only 7.88 per cent from N2.37trillion in January to N2.56trillion in February, compared to 121 per cent year on year in volume.
Meanwhile, as failed banks transactions continued to mount, Nigerians are daily adopting fintechs whose services are more efficient as preferred alternatives.
According to a one-week survey conducted by BH, 74 out of 100 Nigerians confirmed they had opened alternative e-banking channels to sidetrack the challenges faced with banks failing digital platforms.
Leading the pack of new brides as failed financial transactions linger are payment solution providers like Opay, Palmpay, Carbon, Paga, MTN’s MoMo Wallet, and others.
Many of the respondents claimed they switched over to fully digitalised payment solution providers because of the high failure of transactions on banks apps.
““I transferred N15,000 through my Access Bank account to my sister’s account on March 15th. Up till now the intended recipient is yet to receive it, while the money has not been reversed.
“I was advised by a colleague to sign on to Opay last week. Though, I have heard about the firm before, I was reluctant to open an account for the fear of losing my money.
“But with the incessant failed transactions I experience on banks apps, I decided to listen to the advice.
“Since I started using Opay, I have not experienced any problem, not even one.
“The icing on the cake is that the transactions were all free of charges. I wished I had joined the train earlier”, declared Mrs Ruth Ibidapo, a civil servant with the Lagos State government.
Another bank customer, Moses Orji, said his N1.2 million which he mistakenly transferred to a supplier is still hanging for over one week now.
“I am a school proprietor. I decided to pay for some learning materials I purchased from a supplier since January after some of my pupils brought the money for the materials.
“I owed the supplier N220,000 and decided to pay him N200,000, leaving N20,000. I tried six times and received transaction failed messages. On the 7th try, I received ‘insufficient fund’ message.
“I couldn’t believe my eyes as I had about N1.3million in the account. I quickly called the supplier who denied receiving any money.
“Unknowing to me, the first six transfers that displayed failed transactions on my screen were all debited. The 7th attempt of N200,000 didn’t go because I had around N100,000 left in my account. If it had been up to N200,000, that’s how all my money would have been debited.
“I was able to meet with my bank’s customers service representatives after three days of trying and was assured that the funds will be reversed in 48 hours.
“Today is the 10th day (Saturday), yet, they had not given me back my money”, Orji lamented.
Owing to the experience, he said he decided to open an account with Carbon.
“Since I joined them, I have transacted over 30 times without any glitch. Am planning to close all my accounts in conventional banks and focus on Carbon”, he stated.
BH gathered that apart from the low or almost non existent failure rate in transactions, what is driving more Nigerians to digital financial service providers is the ease in opening their accounts.
Checks showed that it takes only three steps to open an account on any of the fintech firms.
The steps are: downloading the app; taking a selfie and the provision of a valid BVN, unlike in banks where opening of banks are more stringent.
It was also discovered that the adoption of alternative e-service channels are predominant among the lower class, especially traders, artisans and drivers.
Meanwhile, Opay is leading the pack, with about 40% of all new accounts, while Palmpay closely follow with 20%.
While others share the remaining 40%, educated and urbane Nigerians seem to favour MTN’s MoMo Wallet, Carbon, Kuda and Paga.
Some financial experts who spoke with our correspondent on the development all agreed that as long as Nigerians continued to experience failed bank transfers and poor mobile internet banking services that have hindered payments and other financial activities, more people will be tempted to migrate to alternative service providers.
They, however, warned that the fate that befell commercial banks might also befall fintechs if their infrastructure is not expanded to meet up with growing demands.
“The rate at which Nigerians are migrating to fintechs portends grave danger. While the biggest and most successful fintech is said to have about 5 million subscribers, some banks have more than 30 million accounts.
“You can then imagine what will happen if, let say just six million of Access Bank or GTbank customers migrate to Opay at a go. Their systems will no doubt shut down.
“Though, I personally think the cashless policy is good, but the CBN was hasty in its implementation without adequately putting in place necessary infrastructure”, noted Seun Ogunji, a bank IT staff.
