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In Spite Of Nigeria’s Cash Shortage, Mobile Wallets Are Revolutionizing Financial Landscape

Nigerians are better equipped to manage cash shortages as a result of the adoption of a new open banking policy for Mobile Wallets, as commercial banks only provide mediocre services.

Fintech (financial technology) is a catch-all term referring to software, mobile applications, and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike. In 2018, the market for fintech was estimated to be worth $127.66 billion, and by 2022, it was expected to be worth $309.98 billion. The Nigerian Communications Commission estimated that there are about 210-250 fintech operators/companies operating in the Nigerian space, and these players have brought about the valuation of the industry to $153.1 million in 2017 and was projected to rise up to $543.3 million by 2022. The financial services sector was responsible for the introduction of contactless payment technologies around the turn of the millennium, Internet banking in the 1990s, and credit cards in the 1950s.

Why is the Use of Mobile Wallets Growing?

Mobile wallets are innovations of  fintech and most telecommunication companies (Mobile money operators) facilitate mobile transactions through the use of mobile applications. Consumers love mobile wallet because it takes mobile banking to the next level. Everything that you need to make a purchase is in your phone or on your wrist. Mobile wallets eliminates the need for carrying cash or physical credit cards, as it allows you to shop online, store debit and credit cards, loyalty cards, and other forms of mobile payment. Mobile wallets are powered by NFC (Near-Field Communication) technology, which enables your device to communicate with another device to transfer data. The digital wallet serves as an alternative to the traditional physical wallet. The phone number of the account holder acts as the account number for mobile money wallets. Some of such companies in Nigeria join forces with microfinance institutions and other foreign financial institutions in order to provide customers with a simple way to conduct business both inside and outside of the nation.

In addition, mobile wallets are the general term for phone-based payment solutions like Google Pay, Apple Pay, Samsung Pay, Fitbit Pay and others. There are actually several other mobile wallets designed and managed by excellent fintech companies in Nigeria. Examples of mobile wallets include Paga, Opay, Get barter, Kuda, Chippercash, and PalmPay among others. The mobile wallet from Nigeria’s Paga is expected to reach a number of users by 2025 that is higher than that of four other wallets combined, according to Statista. In the past few months, Nigerians have complained of failed transactions, network failure, system timeouts, and cumbersome transaction fees with traditional banks, forcing them to seek solace from fintech and mobile wallet platforms. According to report, these fintech companies have built digital wallets and mobile savings platforms that have kept Nigerians from the clutches of excessive charges employed by Nigerian banks. Especially during the early 2023 cash shortage, there was a high and regrettable level of mistrust for Nigerian banks. Most small businesses and self-employed Nigerians are still in the woods.

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Access Bank, United Bank for Africa (UBA), and GTBank were found to be the three most important bank apps in Nigeria in March 2023, receiving ratings of 11%, 10%, and 9%, respectively, according to a report by Orange Group Nigeria’s research and technology unit, Orange Business Intelligence Technology (ORBIT). With 6% each, First Bank Zenith banking apps came in second to these banks, while StanbicIBTC and eNaira polled at 1.0% and 0.2%, respectively. Surprisingly, it also revealed that the top four fintech apps in the nation are OPay, PalmPay, Kuda, and PayPal, with corresponding user shares of 14%, 7%, 4%, and 2%. “OPay had the highest salience across fintech and banking apps. In addition to its mobile wallet, OPay offers payments and Point of Sale (POS) services,” adding that “Kuda, a digital bank, had impressive salience, with almost four times the salience of Stanbic IBTC’s banking app,”read the ORBIT report.

Oluwatósin Olatunji, a Business Development Executive who works in the Fintech industry, said that, an average bolt/Uber/Rida driver will give you an Opay account to receive fees because it’s instant settlement; no delays, so they prefer Opay. “I think most commercial banks didn’t prepare for this disrupt in the market, however, it is commendable that many are quick to accept the challenge by investing in digital infrastructure and people, the experience with our commercial banks can only get better in matter of days,” she argued. “The general lesson here is continuous innovation: Invest in people to research and come up with possible solutions to solve likely future problems. We will succeed.”

“This is one benefit of the cashless policy that I love. Opay has helped to deepen that policy by making transactions easy for the masses,” Victor Olusegun Mamora, an Entrepreneur indicated. He explained, “For weeks my bank could not issue me with an ATM card because of unavailability. I also needed one for quick use in the office Few days back someone mentioned Opay ATM cards. An agent was sent to me and within minutes I was issued a shining Verve ATM card.” “What a relief! What more do we want than efficiency, speed and excellent service delivery,” he shared.

“Many commercial banks need to just focus on the corporate banking space. Unfortunately, many commercial banks do not understand the need for engagement with this generation,” according to Chibuikem Diala, a businessman in Lagos. He claimed that the Chinese investors putting money in Fintech know this model will capture value. It happened in Asia and obviously, value is leaving the commercial banking space.

The Operational Guidelines for Open Banking in Nigeria (the “Guidelines”), published on March 7, 2023, by the Central Bank of Nigeria (CBN), include specific guidelines on what participants in the Open Banking ecosystem are expected to do, the framework for information sharing, and standards for customer experience. Prior to releasing a regulatory framework in February 2021, the central bank had started working on the adoption of open banking in June 2017. In line with the policy, the CBN is required to establish and manage an Open Banking Registry that will serve as a regulatory oversight tool for participants in the open banking ecosystem. This registry is also designed to enhance transparency and provide a means for regulating operators within the system. Expert says, the CBN Framework’s implementation is a positive step that may eventually improve Nigeria’s delivery of financial services. Open banking can have a few benefits, but there are also certain security issues raised by the sharing of data. Service providers who process customer data are also required to adhere to data privacy rules.

We can’t run away from the fact that trends often changes with time, in response to Uchenna Izundu, a chartered accountant. Opay, Palmpay and most of the digital Banks seems to have the digital infrastructure to serve the crowd but my challenge with them is that they haven’t strengthened their KYC practice. For him, most people who are unfortunate to have been robbed of their ATMs claim that the receiving bank where the thieves transferred their moneys into were these digital Banks. “Allowing people to open bank account at the click of a button will always have it’s merits and demerits. We actually need a tech savvy CBN, so that she can guide the banks well. As for the banks’ of the 90s they will do well to remember not to be at ease in Zion.”

The cashless system is beneficial. It’s a good idea to avoid using cash. Rapid economic growth will result from many benefits. Professionals agree that it is essential because of the many advantages and the potential for faster economic growth if the requisite infrastructures are in place.

Cover Photo: Africa, Market – Retail Space, Nigeria. Credit: Sam Makoji | Stock Photo

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