By AYOOLA OLAOLUWA
The innovative and aggressive drive deployed by Kuda Bank and other challenger banks operating in the country to attract customers and build deposits is gradually breaking down the hold held by Deposit Money Banks (DMBs) on the nation’s retail banking space, Business Hallmark findings can reveal.
Some of the challenger banks giving the DMBs a run for their money are Kuda Bank Sparkle Bank, V FD Bank, Eyowo and Rubies Digital Bank.
While the 25 DMBs still have significant headroom in terms of deposits and the ability to sustain their growth, available data indicate they are finding it difficult to starve off the challenger banks encroachment into their territories.
In the first 9 months of 2021, deposits held in ten largest DMBs totaled N34.4 trillion. Access Bank retained its position as the bank with the largest customer deposit in Nigeria with N6.2 trillion, followed closely by UBA N6.08 trillion and Zenith Bank N6.04 trillion.
Despite their impressive showing, challenger banks, particularly Kuda Bank, have made significant inroads into the retail banking space as they offer incentives to younger Nigerians to abandon the more traditional banks.
While not averse to taking on board old and conservative minded customers, the new banks focus majorly on technology obsessed younger generation made up of students, young graduates, young and urbane workers as well as burgeoning entrepreneurs.
For instance, Kuda Bank with over 1.4million customers, reported $2.2billion (almost a trillion naira) in transactions processed in February 2021 alone. This, according to the bank, includes inflows and outflows, airtime purchases, and other user transactions.
The bank was able to achieve this by delivering superb digital products through IT and mobile applications. Its free debit card, 25 free transfers every month, budgeting tools, overdrafts, 15% annual interest on savings and the possibility to connect account to Payoneer have continued to attract customers to the bank as ant is attracted to honey.
Perhaps the bank’s greatest strength is the development of an application that allows customers to send money without having an account number. Using a payment link, such customer can send transfers more faster to anyone who has a smartphone.
Some of the bank’s customers who spoke with BH, said apart from getting the best banking services without needing to visit a banking hall, they also claimed they favour Kuda as they have been banking with it without incurring excessive charges unlike in traditional banks.
“Every month, I enjoy 25 free transfers to other banks each and I am able to save around N15,000 yearly”, said Abiodun Olajide, a student of Lagos State University (LASU) who operates an account with the bank.
Another challenger bank that is giving the traditional banks a run for their money is Sparkle Bank. Established by Uzoma Dozie, the former chief executive officer of the defunct Diamond Bank, the bank, since its launch in 2019, has handled more than $16 million in transactions.
It also has over 30,000 customers with over N500 million in deposits. The bank offers its esteemed customers personal and business accounts, with account opening taking only five minutes from a smartphone.
A customer earns 3.75% per annum interest rates if he keeps a minimum amount of ₦100,000 in his Sparkle wallet.
VBank, also known as V by VFD, is a digital bank that offers different products to individuals and businesses, from instant loans, cardless withdrawals and fixed savings.
The bank is the pick of many Nigerians, particularly the youths because it charges nothing on transactions and account maintenance, while offering its customers monthly interest on their savings.
The icing on the cake that entices customers to the bank is its prime product, Veelage. Users earn between N30,000 and N2million monthly by sharing a referral code with their network. The more accounts use the code, the higher customers earnings.
Like Kuda Bank which pays 15 interest on savings (fixed), Vbank also has one of the best interest rates on a fixed account in the country with up to 14% interest paid on the deposits.
“When there is a mouthwatering offer like this, while risk putting my funds in very volatile businesses like cryptocurrencies, MMMs and unreliable forex trading,” a risk averse youth based in Lagos, Rufus Olamilekan, enthused.
Customers of the bank are also adopting the V Target Savings option which make the bank to match 20% of their first contribution towards the desired target amount. The savings account package offers a mouthwatering 8% compounded interest per annum.
A major factor that has helped the challenger banks to take on the more entrenched and dominant market leaders, is the expansion in mobile phone penetration.
Traditional banks, however, are not allowing the challenger banks to take over their market without offering a fight. Using the same weapon the challengers deployed against them – technology -, DMBs have upgraded their mobile applications with features that can compete favourably with their tech savvy rival’s banking applications.
Similarly, they have also taped fully into their biggest strength of mobilising funds from risk aversed government ministries, agencies and parastatals, fund managers, multinationals and big corporations, manufacturers, SMEs, and wealthy individuals.
A traditional bank that is matching the new digital banks, technology for technology, is WEMA. The bank has been able to play a major part in the digital banking revolution through its innovative ALAT product.
The product comes with a full package of current account, savings account with 10% annual interest, instant loans, free virtual dollar card and corporate banking.
Signing up for an ALAT account takes a few minutes. A customer basically needed his or her full names, address, phone number and BVN for an account to be opened and operable.
WEMA Bank’s savings account and Savings Goal offers about three times more than what other conventional banks offer. For instance, an automated savings plan earns 10% annual interest.
Customers using ALAT also have access to a free virtual dollar card with which they can convert their naira to dollars and make payments or purchase products any time they like.
Another factor driving younger customers to the digital banks is curiosity. Most youths, BH learnt, are and excited about the opportunities presented to explore and earn more money for themselves.
For instance, many Nigerian youths used the platform of the new banks to trade in cryptocurrencies before the Central Bank of Nigeria CBN wielded the big stick against cryptocurrencies, as well as individuals and firms dealing in it.
Kuda’s Chief Operating Officer (COO), Ryan Laubscher, said his firm’s plan is to bank not only Nigerians, but every African on the planet.
“We’ll do that by blowing customers away with unparalleled service,” Laubscher boasted.
To be able to do that, Kuda Bank recently raised $55 million through its London entity. The Series B funding has a valuation of $500million.
A financial expert based in the Federal Capital Territory (FCT), Dr. advised Banjo Ilori, advised players in the retail banking market not to waste time worrying over the incursion of the new banks into the retail banking market.
“To have a chance of having a piece of this massive deposit mine, challenger banks embark on a massive expansion of the operations. But presently, the don’t have the muscle to do that.
“The best they can do now is to continue to bite into the cake (deposits) bit by bit.
“But my candid opinion is that the banks should not waste unnecessary time worrying over the incursion of the new banks into the retail banking market.
“There is still a large room considering that bank deposits to GDP is still under 20% in the country,” Ilori stated.