– Fintech firms take financial services landscape by storm to erase the culture that made efficiency a luxury
August 24, (THEWILL) — In a surprising twist, Nigerian fintech companies have taken the country’s financial services system by storm — to fill the efficiency gap that had lingered in the digital landscape. The development was triggered by a long period of cash scarcity in the banks, and their dry Automated Teller Machine (ATM) terminals, which hampered businesses and compelled people to grope for the cashless alternatives.
The dramatic intervention by ‘angry’ Fintechs, created a boom in digital activities especially among the micro, small and medium enterprises (MSMEs) with handsome return on investment and a remarkable impact on electronic payment transactions penetrating into the rural areas.
The outcome of the digital revolution was historic.
The fallouts
According to the Nigeria Inter-Bank Settlement System (NIBSS), electronic payment transactions rose to an all-time high of N1.07 quadrillion in 2024 – a point never recorded in the nation’s financial services history. (A quadrillion is N1,000 trillion – about $702.6 billion based on the closing exchange rate of N1,535/$1 on December 31, 2024.)
The expansion in fintech platforms also boosted the Federal Government revenue from Electronic Money Transfer Levy (EMTL) to N31.2 billion in December 2024 – the highest monthly record. It was N15.06 billion in November 2024. It also contributed to the boost in the services sector which drove the GDP performance to a 3.84 percent growth in Q4 2024. This saw the outpouring of the Point of Sale (PoS) terminals into space.
PoS revolution
The protracted scarcity of cash at ATMs resulted in the aggressive push in PoS deployments by fintech companies. NIBSS reported that the value of transactions over PoS terminals in Nigeria surged to an all-time annual record of N18 trillion in 2024.
This stemmed from the aggressive expansion of the digital ecosystem by the ‘angry’ fintechs amid frustrations in traditional banking activities. The 2024 record represents a 69 percent increase when compared with the value of PoS transactions in 2023 at N10.7 trillion.
In the same upward trajectory, the volume of PoS transactions rose by 8 percent year-on-year to 1.5 billion in 2024 compared with the 1.4 billion recorded in the previous year.
Incidentally, the aggressive entrance of fintechs into the space disrupted the former trend whereby the deposit money banks were the major drivers of PoS terminal availability in the past, a scenario that has changed the narrative diametrically – shifting the ball to the fintechs.
This resulted in the astronomical growth of the number of PoS devices in 2024 to 5.5 million against 2.4 million in the previous year (2023) representing a 129 percent increase. At the same time, registered PoS terminals in the country jumped from 3.5 million in December 2023 to 7.8 million in December 2024. This indicates that about 4.3 million new PoS machines were registered last year.
Furthermore, the gap between deployed terminals and the number of registered terminals indicates that there are still over 2 million devices that are already registered but yet to be deployed. This holds prospects for the unbanked rural areas to experience business boom on account of expanding fintech presence.
Countryside impact
Findings by New Fortunes showed that the majority of Nigeria’s rural areas are booming with digital banking and e-payment services to ease the frustrations of spending long hours in the bank where their ATM terminals are equally not enough to meet the needs of the people.
For the first time in many years, most of the rural communities witnessed idle bank ATM terminals, yet businesses boomed on active, reliable digital payment transactions during the last Yuletide.
Petrol stations, public transport operators (like the bus, motor-cycle and tricycle), petty traders, market women who sell soup ingredients, among others embraced digital payments. Roadside mechanics, vulcanizers, itinerant hawkers and car wash operators accepted e-payment through transfer or PoS.
For instance, the cluster of banks at the busy Ahiara Junction on the Owerri-Umuahia Road in Imo state, which used to be a source of nightmare because of the mammoth crowd, was different this time. Residents said the bank premises were virtually empty.
The same was the case at the United Bank for Africa (UBA) branches at Bende (Abia), Arondizuogu, Nwaorieubi (Imo) and Isi-Okpo (Rivers).
Access Bank branches at Umunze, Aguleri and Ihiala in Anambra witnessed no crowds.
Residents at Sabongida-Ora and Ekpoma in Edo confirmed that the First Bank branches in those areas were not the beehive of activities they used to be in the past. The FCMB branch at Oko Erin in Kwara state was not besieged by customers — unlike in the past.
Also, Union Bank and Ecobank branches at Gboko, Benue state, were not besieged with customers struggling for cash in the banking hall, or fighting over the few ATM terminals.
One fact emerged from the scenario. While the initial motivation for PoS business was the lack of bank ATMs in some areas, this has shifted to the lack of cash in available ATMs and the need to make cash available to people became the priority of the emerging fintechs. However, notwithstanding the boom, the fintech firms are not relenting in their push for aggressive penetration into the countryside resulting in what observers now refer to as angry fintechs on rampage.
Fintechs on rampage
The fintechs are not relenting. For instance, Palmpay Limited has launched massive deployment of PoS through agents as an integral aspect of the company’s strategic plans to drive financial inclusion aggressively across Nigeria.
“This mission has fueled our efforts in deploying more PoS terminals across the 774 local government areas in the country,” Palmpay said, explaining that it had onboarded over 700,000 agents and keeps making investments in deploying more PoS terminals into all regions in the country.
Another fintech company, Moniepoint Microfinance Bank Limited, also disclosed that it had deployed over 800,000 PoS across the country and planned to introduce a new innovation with an all-in-one PoS machine that combines payment processing, inventory management, and transaction reconciliation.
The latest data released by Opay Digital Services Limited late last year showed a similar trend. The company has over 500,000 PoS agents spread across the country and is pushing to spread its presence in all nooks and crannies of the countryside.
Generally, the fintechs are exploiting the opportunity that exists in a bad situation: the difficulty in accessing cash through the usual banking channels.
This came amid doubts over the ability of the banks to offer their customers efficient and professional service that would eliminate the long queues and wait times, in addition to intermittent unavailability of cash in the ATM machines.
Industry analysts believe that the expansion in digital financial services is not just a channel for payments and withdrawals but an avenue of bringing the banking services closer to the rural areas as well as accelerate Nigeria’s financial inclusion strategy which has witnessed a sluggish growth.
Encumbered financial inclusion
Nigerians in the last couple of years witnessed the Central Bank of Nigeria (CBN) champion financial inclusion, digital banking, cashless transactions and alternative payment systems. The exasperated public responded to the move by the banks to expand their footprint through the adoption of digital payments in diverse channels. It was a welcome relief from the trauma of ‘sleeping’ in the banking halls for simple transactions that should not take much time.
However, despite Nigeria’s robust financial inclusion strategy, the financial inclusion journey has been trapped in lethargy of circumstance. A recent report by the FT Partners’ Fintech Industry Research revealed that Nigeria and nine others lead African countries with the most unbanked population in 2024.
According to the report, in Nigeria over 117 million people remain unbanked, followed by Egypt with 79 million people, Ethiopia with 66 million, Tanzania 31, and Morocco 21 million people.
Others include Uganda, Cote d’Ivoire, Kenya, Ghana and South Africa reporting 16 million, 14 million, 11 million and 9 million people respectively.
The report cited lack of trust in the banking system, a deep-rooted preference for cash, and lack of infrastructure in rural communities as hampering past efforts to bring consumers into the formal banking system.
“It is a major concern that despite Nigeria’s fast-growing financial sector, and digital banking revolution, a significant portion of the population remains unbanked,” said Tony Kaonyeagwam, an Asaba-based finance expert.
The report noted that the expanding mistrust against the banks was also due to inefficient operations often attributed to “network challenge” which frustrate the operations of the new fintech firms to expand their operations into the rural areas.
In response to the challenge, the Federal Government has approved the construction of 7,000 new telecom towers in rural areas to expand access to telecommunications services and improve digital connectivity across the country.
The government said the investment would complement its ongoing deployment of 90,000 kilometers of fiber-optic cables across the country. This has raised hopes for the fintech firms to deploy their facilities and cover more territories
Unseen hands of NIBSS
Unknown to many people, the reinforced commitment by NIBSS towards advancing the country’s financial inclusion strategy, played a major role in the business boom that is occurring in the rural areas.
NIBBS provides the infrastructure support that drives the financial services industry, especially the payment systems, towards advancing business opportunities.
As an enabler, NIBSS is engaged in a silent revolution of the financial services sector which is “hidden” from the prying eyes of the public. This is accomplished through its mandate of focusing on problem-solving initiatives, resulting in the quality digital financial services being celebrated in the countryside.
In the past, the inability of the rural dwellers to enjoy satisfactory financial services transactions, especially the payment systems collectively added to the frustration of cash and fuel scarcity during the festive periods.
This resulted in loss of business opportunities, compelling many people to travel to the cities to access bank and network services in order to have something to show for their efforts. collectively
According to the Managing Director/CEO, Premier Oiwoh, NIBBS upgrades its systems continuously. A reason for this is that NIBSS was established to carry on business as a service-oriented institution providing mechanisms for problem-solving innovations.
He explained at a media parley in Lagos last year that, with over 65 million Bank Verification Numbers (BVN) holders enjoying the products offered by the financial services institutions, NIBSS plays a major role in facilitating the technology-based innovations that make for seamless financial transactions.
This is in line with part of its mandate: ‘To provide infrastructure for the automated processing and settlement of transactions between banks acting on their own account as regards deposit placements, Treasury Bills Transaction, Naira settlement on inter-bank foreign exchange transactions.’
Oiwoh said, “We are working to make Nigeria work; hence NIBSS must guarantee Nigeria’s efficient payment system. We will continually remain in our creative thinking because technology is about creating value, and collaboration is the key.”
A major breakthrough is the NIBSS New Quick Response (NQR) payment platform initiative, considered a revolutionary solution designed to transform how Nigerians pay for goods and services. NQR enables consumers to scan QR codes directly from their bank mobile applications for end-to-end transactions.
The platform caters to a broad range of use cases, including: Making payments fast and convenient for shoppers and merchants; Enabling digital payments for taxis, buses, and other transport services; Allowing users to pay utility bills, subscriptions, and more with a simple scan; Providing cost-effective payment options for SMEs to scale their operations.
Industry experts emphasise on the need of extending the digital payment transformation to the countryside in an efficient and affordable manner that enhances financial inclusion penetration.
This appears the driving force behind the recent surge in fintech activities that have transformed the hitherto frustrating banking experience into a pleasure ride that suits all segments of the society. Although the banks have embarked on major upgrade of their systems since last year – apparently to position for the challenge of the post-recapitalization era, their brick and mortar operating system cannot match the revolution by the fintech companies who have taken the financial services landscape by storm.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
