Nigeria’s mobile banking usage surged by 230.72 per cent year-on-year in January 2023 according to data from Nigeria Interbank Settlement System, despite multiple reported failures.
The leap in the use of mobile banking apps and mobile gateways is traceable to the Central Bank of Nigeria’s decision to redesign the naira and the introduction of a new withdrawal limit policy, which made bank customers embrace mobile banking for their transactions.
In January 2023, mobile banking gateways were used 108.14 million times, a 230.72 per cent increase from the 32.69 million times they were used in the corresponding period last year.
During the period under review, the value of mobile banking transactions surged by 124.85 per cent to N2.37tn from N1.05tn in January 2022.
While the surge in the use of mobile banking payment gateways began in 2020, a new CBN policy in 2022 is driving this new growth.
While issuing the directive which spurred the current rise in mobile banking, the apex bank said, “The maximum weekly limit for cash withdrawals across all channels by individuals and corporate organisations shall be N500,000 and N5m respectively.
“Customers should be encouraged to use alternative channels (Internet banking, mobile banking apps, USSD, cards/POS, eNaira, etc.) to conduct their banking transactions.”
Since the turn of 2023, a lot of transactions have been done cashless due to the scarcity of the naira.
A recent report documented how banking apps were failing, leaving people stranded and confused.
One of the bank customers, who spoke to our correspondent, said, “My two bank apps are currently experiencing problems. They are bringing error messages. And sometimes, the request takes too long to process.”
Explaining why mobile banking apps have been failing recently, the Chairman, Voriancorelli and Cofounder Cellulant, Bolaji Akinboro, stated that Nigeria has one of the most sophisticated payment infrastructure designs in the world.
According to him, the country’s technology and payment system is very vibrant, but its mobile network backbone leaves much to be desired.
He said, “The way I will look at it is this. What are the failure points? Because there are the payment apps and the digital payment services; the ones we all use to access all this stuff. I think these ones can carry the pressure.
“The question is the route. If you want to use your app, you need to ride on the mobile banking backbone. The real issue to me is not even the banking layer, it is the communications backbone. Regarding the communications backbone, Nigeria is not investing right in terms of infrastructure.
“For example, mobile network operators have been complaining about the multiple taxes that are placed on them by state governments when laying fibre. They want to lay fibre but they pay so much for right of way, and not only that, the charges are not the same across the states.
“If we want smooth services on the payment layer, we need this backbone. So, for me, the greater problem is the backbone, not the apps,” he explained.
Akinboro further stated that banking apps can withstand the pressure, but need the help of communication networks to be able to do so effectively.
According to the Nigerian Communications Commission, financial inclusion is dependent on broadband availability.
The country’s broadband access was 47.36 per cent as of December 2022.
The Executive Vice Chairman and Chief Executive Officer of the NCC, Prof. Umar Danbatta, recently stated that one of the benefits of financial service riding on telecom infrastructure was the provision of Unstructured Supplementary Service Data.
According to a source in the payment industry, mobile apps are failing presently because of pressure and a lack of robust infrastructure.
The source stated that the CBN would need to put pressure on banks and financial institutions to invest more in payment gateways.
The source said, “I don’t think we are ready for this. I think the infrastructure is not robust enough to carry out the volume of transactions we intend to do.
“With that said, what I believe is over time, the infrastructure will catch up. This will probably happen because the CBN will put pressure on the banks and financial institutions to invest more.
“With the entrant of new players into the fintech space and telecoms, I think the infrastructure will start getting expanded because we would start seeing a lot of investments in these things. The mobile network operators are investing in their payment service banks. They will step up investment over the next couple of years. But the infrastructure currently isn’t enough, and the success rate is probably around 80 per cent for transactions that go through.”
According to the CBN, a mobile-first generation will drive a cashless economy by 2025.
In a document titled ‘Payments Vision 2025’, it said, “The use of cash will naturally slow with the ‘mobile first generation’, which will be economically active by 2025, hence one of the focuses of the PSV 2025 is enhancing the cashless policy of the CBN.”
While the use of mobile devices for financial transactions has grown, smartphone access continues to lag in many developing countries like Nigeria with a large number relying on feature phones.
According to Alliance for Affordable Internet, only about 44 per cent of Nigerians had access to smartphones in 2022.
It said, “Smartphones enable digital participation – but they remain unaffordable for many around the world and especially in low and middle-income countries.
“For 2.5 billion people worldwide, buying the cheapest available smartphones would cost more than 30 per cent of their monthly income.”
GSMA added, “Owning an internet-enabled handset can be life-changing. Yet, for many living in low- and middle-income countries (LMICs), they are still unaffordable.”