COVID-19 accelerates Nigeria’s digital banking push

Reuters | The COVID-19 pandemic has increased the use of digital banking services in Nigeria where restrictions on the amount of dollars that can be withdrawn have also contributed to long waiting times since some people require multiple trips to get foreign currency.

A new breed of digital banks, without physical branches, say they have had a boost due to the pandemic.

Kuda Bank, a digital only bank launched in August 2019 with 500 customers, said it tripled its daily adoption of customers in a trend that began during lockdown in Nigeria’s main cities – Lagos and Abuja – from late March until early May.

The bank’s chief executive officer Babs Ogundeyi said it had taken on around 3,000 customers a day from April, compared with just under 1,000 a day before.

“We expect the growth to remain,” said Ogundeyi, adding the pandemic forced many to overcome concerns about the safety of online transactions in a culture where a fear of financial internet scams has made people wary of abandoning cash.

Uzoma Dozie, CEO of Sparkle, a digital bank launched in June 2019, said the digital only business model was more cost-effective.

“Seeing the impact of COVID and the fact that we might see a second wave or other pandemics tells us that we need to build resilience into our businesses, and that means being digital,” he said.

He said, however, the lenders collaborated with “bricks and mortar” banks for the use of cash machines.

Nigeria’s traditional banks have also seen an increase in digital transactions.

Local bank Fidelity said 87 percent of transactions in the second quarter of this year were made on its digital platforms, compared with 82 percent in the whole of 2019.

Guaranty Trust Bank said the number of people making payments using codes sent via text message rose between December and June from 6.1 million to 6.7 million.

Peter Mushangwe, a banking analyst at ratings agency Moody’s, said Nigerian banks were “pursuing digitalization quite vigorously” in a bid to attract more deposits to increase the proportion of their income from fees as income from interest makes up around 70 percent of their total income.