Why Nigerians would rather transfer money through digital banks than save their money there

Opay, Palmpay, Moniepoint, and other digital banks are starting to make significant headway in the Nigerian financial environment. The primary reason for this is their cutting-edge technology (apps), which ensures instantaneous transactions and a far smaller margin of error than traditional banks.

However, despite their widespread use, most Nigerians still only view them as means of money transfers.

The majority of Nigerians still prefer keeping their money in conventional banks like First Bank, Zenith, Guaranty Trust Bank, etc. Therefore, even though the average young Nigerian has undoubtedly downloaded every digital bank app to their smartphone, you are probably only going to find a small portion of their wealth there. This is because they promptly move the money they get from a digital bank into their traditional bank accounts after receiving it.

Of course, part of this could be explained by the fact that a bank account in Nigeria without BVN is only permitted to retain so much money. There’s definitely a limit to how much they could retain there because many users of digital banks open them without BVN (Opay is known to hold bank accounts for phone numbers whose users haven’t even applied for accounts).

In response to this crucial issue, Olubunmi Fabanwo, the Affiliate Programme Manager at Binance Africa, stated that the main cause is still uncertainty caused by the absence of physical sites for digital banks.

This was expressed by Olubunmi, a financial technologist with vast expertise, during a panel discussion at the just finished Technext Conference 2023, which had the topic Disruptive Tech: New Frontiers, New Opportunities. The future of payments in Africa was the topic of the panel discussion.

“I believe the first question we should ask is, ‘Why exactly am I not saving my money with a digital bank?'”

For me, the reason I don’t do that is because I prefer to save my money in places where I can go and complain and seek compensation if something were to happen to my money I have with them.

Digital banks do not have physical branches because they are not required by their very nature. But this is basically how Africans are. We can’t trust you if we don’t know where your house is, he continued.

Nigerian fintech shutdowns are raising concerns

Many Nigerians still think poorly of financial technology businesses, despite their rising prominence. This mistrust stems from the fact that financial technology itself gives the impression that platforms like digital banks are appearing out of thin air.

Companies in the sector aren’t helping matters either because an alarming number of fintechs are closing their doors. The most recent is Eyowo, a microfinance institution with an emphasis on technology that was forced to close down early this year and trapped a large amount of depositor money in the process. The business essentially informed its staff that things did not turn out as expected. Additionally, the fintech had to overcome regulatory obstacles, which it failed to do.

Other financial businesses like Cellulant and Oya Pay had unsatisfactory results prior to Eyowo. Payday, a Nigerian fintech startup, is currently dealing with a lot of bad press since angry clients claimed that they couldn’t access their money.

Many Nigerians are hesitant to keep their cash in the vaults of digital banks because of this kind of uncertainty and the helplessness that it brings.

Social media is used by digital banks as their customer service channels.

Digital businesses have turned to social media as virtual offices where customers may lodge complaints in the direct message (DM) format to make up for the absence of actual offices and centers where people can do so and seek solutions.

As a result, social media managers serve as de facto customer service representatives. However, social media managers aren’t exactly experts in customer service, so all they can do is forward these social media concerns to the appropriate parties.

However, because problems are rarely resolved, these social media offices are hardly sufficient. This explains why complaints from customers and quick answers from these businesses are common in the comment sections of well-known Twitter influencers. In the end, Nigerians want a place where they can go and cause trouble if their money disappears, and that place isn’t social media, at least not for non-influencers.

And Olubunmi, who worked for Guaranty Trust Bank during his early years as a banker before making a significant flexion into financial technology, aptly sums it up this way:

We want to be able to speak with a real person. People will question you, “If anything happens to my money where do I go to,” when you discuss keeping their money in (digital banks). Whom do I speak with? They will ask, “So I have to go online and be talking to a computer?” when you inform them there is an online service where they may file concerns. I want to chat to someone, but I can’t just go anywhere.

He argued that although understandable, Africans are held back by their desire for a physical place. Digital banks need to improve their client service if they want to go past something like that.

“It matters how quickly you can address issues. If you examine what conventional banks have, you will notice that they have a physical location. They can always address issues, despite the fact that some of them offer poor customer service. Customers will feel more at ease if they know they may visit as much as they like and will always be able to meet someone who will listen to their concerns, he said.

The fintech expert also argued for stronger, more regionally focused education. Therefore, he suggested fintech companies increase their efforts to educate the public.

“In this way, the average individual learns that they may use digital banking platforms to save money and even get higher interest rates than they would from traditional banks. Additionally, the education must be tailored to the needs of the average Nigerian, he added.

Author

Samson Ayodeji

I am literally obsessed with technology. I love writing about the latest news in technology in different markets, segments and sectors across the world.

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