The shortage of cash circulation in Nigeria has forced citizens in the country to adopt digital methods, which has provided a boon for Fintechs and mobile money operators.
Reports disclose that there has been growing panic among traditional banks in the country, over the rising popularity and increased adoption of digital banks.
Following the recent cash shortage in the country, due to the Central Bank of Nigeria’s (CBN) decision to redesign the higher denominations of the naira, many banks have shut out their customers in the past months due to cash shortage, with their digital payment channels grounded, automated teller machine (ATM) disabled, and over-the-counter (OTC) operations non-existent.
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This has led to a surge in mobile transfers, however, it has been plagued with several challenges as transfers which often take a few seconds or minutes, now take 48 hours or more in some cases to deliver. A Fintech expert stated that the downtime recorded in most banking apps is triggered by a jump in transactions, noting that some of the banks’ IT a not scalable enough to handle the sudden surge in a transaction seen in the past months.
This has spurred customers to resort to Fintechs for transactions to ensure swift delivery of cash transfers. Several merchants in the country are also replacing traditional banks with digital platforms for customers wishing to settle their transactions via transfer.
For flexibility and low transaction costs, many young people as well as several businessmen and women have long embraced the likes of several digital banks such as Kuda, OPay, PalmPay, etc to transfer and receive money due to how swift and less problematic it is, compared to bank apps.
Some of these platforms have recorded five to over 10 million downloads. The number of downloads, however, only suggests the level of interest a platform has received from the market rather than the actual subscribers.
Some digital banks offer unlimited free transfers. The popular ones, which also give instant uncollateralized but expensive loans, allow their customers at least 30 free transfers in a month. There are also saving options where customers with excess funds could earn close to 20 percent interest rate.
Reports reveal that MTN, the country’s largest mobile network operator, is planning to rapidly expand its mobile wallet platform’s (MoMo) customer base. To boost adoption, MTN is deploying 224,000 new merchants nationwide in addition to the existing 1mn active merchants.
The lack of physical money in circulation has no doubt been a significant catalyst to the adoption of digital financial services, which has forced the citizens to adopt digital methods of payment. Despite the chaos that has ensued nationwide in response to the cash crunch, the circumstances are a positive development for fintech operations and mobile money operators.
It is however interesting to note that some banks in Nigeria are reportedly making a move to acquire some digital banking platforms as the latter is taking a sizable slice of the market.
On the other hand, the Central Bank of Nigeria (CBN) hopes that the growing use of e-payments will increase the number of citizens within the formal financial system and reduce reliance on cash as it navigates the country towards a cashless economy.