[Nigeria] E-banking soars above N46trn in 9 months

In what looks like a major boon to digital banks eyeing the Nigerian market, electronic banking in the country has soared above N46trillion in less than a year.

According to the data from the National Bureau of Statistics (NBS) on  ‘Electronic Payment Channels in the Banking Sector for Q3 (third quarter) 2016’, the volume of payments across all the channels for the first, second and third quarters was 628,590,301 valued at about N46.091trillion.

The payment channels gauged were the Nigeria Inter-Bank Settlement System (NIBSS) Instant Payment (NIP), NIBSS Electronic Fund Transfer (NEFT), Cheque transactions, Point of Sale (PoS), Automated Teller Machine (ATM), Internet or Web  and Mobile (Phone Money) Payments.

A breakdown shows that in third quarter alone, about 238.89 million deals worth N18.16 trillion passed through the seven platforms, while 202.88 million transactions worth over N14.704 trillion and more than 186.82 million of businesses worth N13.23 trillion were recorded in the second and first quarters respectively.

Top on the list was NIP which recorded more than N25.956 trillion through about 95.15 million transactions. It was followed by NEFT with N11.26 trillion done in 22.54 million transfers. As for paper payment, about N4.31trillion was cashed through 8.741 million cheques, to make that channel ranked third in the period.

The rest include: ATM, which boasted of over N3.451 trillion carried out through 418.29 million withdrawals and retraction or savings. Recall that from 2013 to 2015, about N1.13 trillion was done via over 124.79 million transactions.

Mobile payments recorded more than N526.58 billion through over 33.6million business deals. PoS came 6th as bank customers use the platform to do business above N498.42 billion through 41.37 million deals.

Last year alone, PoS transactions peaked at about N448.513billion, representing 44 per cent rise over the N312.072 billion of the previous year.

In all, transactions worth of about N1.193trillion were done through the 75,000 active PoS in the country since 2014 up to last August.
The platform that ranked the least was  Internet or Web banking, with about N88.732billion done by customers in 8,913,148 deals.
Experts have applauded the trend as an indication that the culture of electronic banking is gradually taking roots in the country.
For instance, the Minister of Communications, Adebayo Shittu,  noted recently that the growth of the electronic banking is very fast especially now that several transactions are done via ATM, PoS, Internet banking, Mobile Money, and NEFT. He added that today, account opening is now possible on Social Media platforms such as Facebook as a result of the emerging migration of financial services and transactions from banking halls of brick and mortar to the clouds.

Also, KPMG, in its Africa Banking Industry Retail Customer Satisfaction Survey, states that Nigerian banks have certainly put significant investment and effort into developing a better and easier online banking system. And Nigeria’s customers have certainly proven themselves to be internet- savvy.

It adds: “The country is estimated to have more than 148 million mobile telephone subscribers and at least 92 million of them access internet data services on their devices. And, with around one-third of Nigeria’s population now under 24 years old and a growing middle class population, all signs suggest that internet penetration and usage is set to grow significantly.

“In particular, social media channels are gaining significant adoption in Nigeria. Platforms such as Facebook, Instagram, Twitter, LinkedIn and Tumblr are widely used by Nigerians as a way to communicate with friends and the wider public.

“The benefits of shifting transactions to web-based platforms are clear. For customers, web-based platforms offer convenience, 24 / 7 access, and freedom of location.”

All these are considered a big boon to the promoters of online-only bank in the country. Already, a bank which promised to conduct its business only through telephone, mobile and internet banking, has commenced business in Lagos. The bank, SunTrust Nigeria Limited, which opened for business last August vowed to run branchless office, while providing cutting edge banking services to its customers around the country.

Its Chief Executive Officer, Muhammad Jibrin, said the vision of thebank is “to offer high quality retail and commercial banking services in a modern and innovative manner.

“We will use technology and a new way of thinking to provide banking services to many people in Nigeria for whom access to bank accounts has previously been impossible.

“We will offer telephone, mobile and internet banking underpinned by the traditional banking ethics of probity and integrity,” Jibrin said.

Also last September, the former Managing Director of Jumia, popularly regarded as Nigeria’s biggest online mall, Tunde Kehinde, said he was set to float the nation’s first online-only bank in the country.

The bank, Lidya, which is being branded as Nigeria’s first digital bank, will have no branches, but would use a lot of technology, algorithms and machine learning to industrialise the credit assessment process.

For Nigeria’s banks, the shift promises the opportunity to improve service delivery and achieve a lower cost-to-serve.
The former Jumia boss also runs Africa Courier Express, a logistics company, along with Ercin Eksin, the other founder of Lidya.
Kehinde and Eksin are majority shareholders, but they hope to bring in other shareholders and raise more than $1 million in the next few months from investors, primarily in the US.

It was expected to partner with other Nigerian banks to allow them use it as a platform to target small businesses.
The online bank is looking to operate at a lower cost and offer financial services at such low cost to its customers.
“Because of how the banks are set up, with bricks and mortar networks, they’re more inclined to service multinationals and large government institutions.Their cost structure isn’t favourable to servicing small businesses. Because we’re using technology and algorithms to assess the risk, it allows them to offer financial products to these customers at a low cost,” Kehinde said.
To succeed in today’s banking environment, bank executives need to understand their customers: their preferences, their channel usage, their needs and their satisfaction.

Encouraging the shift to internet and mobile banking: A Nigerian perspective

Nigerians love the internet. The country is estimated to have more than 148 million mobile telephone subscribers and at least 92 million of them access internet data services on their devices. And, with around one-third of Nigeria’s population now under 24 years old and a growing middle class population, all signs suggest that internet penetration and usage is set to grow significantly.

Africa Banking Industry Customer Satisfaction Survey Ease of use is also a key challenge for Nigeria’s banks and this influences the willingness of customers to adopt web-based channels. As one – rather typical – Nigerian banking respondent told us, “My friends tell me it’s not easy to use so I’ve never really bothered. Besides, there’s too much hassle to sign up.” Our data reinforces this view: when it came to the use of the online channel, respondents reported the lowest levels of satisfaction for the ease of navigation and the visual design. With recent media attention on cyber security risks such as cloning and identity theft on the rise, many Nigerian customers are also deeply concerned about the security of their transactions. As another survey respondent told us, “I do not trust the system, I’d rather go to the bank for the money to be transferred by the bank’s staff than do it myself as I would get the blame should anything go wrong.”

So while many banks have introduced more robust security measures recently, they will need to continue to focus on assuring customers of the safety of their online channels. How can Nigerian banks start to improve internet banking penetration? We believe focus must be placed on three key areas:

• Improving the customer experience

Reinvigorate and refresh the bank’s web assets to prioritize ease of use, navigation and visual design; aim to simplify the number of steps to complete a transaction or add more robust capabilities that respond to their customers’ technological
sophistication.• Introduce improved functionality targeted to specific customer segments such as corporate customers or SMEs who are particularly focused on security and the need for customized financial reporting and access to reliable, real-time financial data.

• Harness employees as channel ambassadors and customer experience experts; banks should be encouraging their own employees to use online banking and suggest opportunities for improvement.

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