Nigerian banks have been experiencing a surge in profits, with five of the country’s largest banks ranking among the top ten most profitable public companies. However, as banks continue to cash in, customers are left frustrated by the increasing prevalence of failed transactions.
Justice Godfrey Okamgba writes on the challenges faced by Nigerian bank customers, the questionable profitability derived from failed transactions, and the role of the Nigeria Inter-Bank Settlement System (NIBSS) in addressing these issues.
Customers’ Frustrations
Abdullah Oladipo has been struggling for over two weeks to recover his funds from Access Bank following a failed transfer. Abdullah is an avid football betting enthusiast who attempted to deposit N10,000 into his Sportybet wallet using his mobile app. Despite being debited, the money did not appear in his wallet.
“I have sent several emails to Access Bank asking for a refund. I have spoken to their customer representatives, and they keep saying that the transfer was successful, but it never reflected in my Sportybet wallet, Abdullah told TechEconomy.
Despite reaching out to customer representatives at a Sportybet, Abdullah claimed that they were unable to track the transaction and advised him to contact Access Bank for a refund. Frustrated with the lack of progress, Abdullah described the entire process as a fruitless back-and-forth.
This is one of the many ugly stories Nigerians share daily about traditional banks. A critical look at the social media pages of almost all the big traditional banks shows that there is a huge lacuna in terms of customer satisfaction.
As a common ugly occurrence in the banking sector, reversals are an issue that takes weeks to solve, but many Nigerians suspect that the trend of failed transactions has become an income stream for the banks.
Godman Oman finds himself in a frustrating situation as he waits for a bank reversal that has now exceeded 10 working days. This extended delay has led him to contemplate a critical question: What if this transaction had been an emergency?
Godman said Nigerian banks must awaken to the gravity of the situation. While the Central Bank of Nigeria preaches the virtues of a digital economy, it is disheartening to witness the evident unpreparedness of our banks to meet the increasing demands of this digital era, he said.
Another victim of a failed transaction is Abiodun Adedeji, a Real-Estate Investment Advisor who claims that GTB is yet to refund his money for five months.
“It’s crazy what the Banks are doing to the Nigerian people. No form of apology for this failure that has been going on for more than 5 months now, it has caused the death of some Businesses, the death of sick people that need finance in the hospital, and all.
“I credited my mum for HMD, to thank her, but till today @GTCO has not credited her nor refunded me. This same GTB debited me last year without any transaction and has not been refunded till today.”
Banks Keep Cashing Out
Out of the ten most profitable public companies in Nigeria, according to StatiSence, five are banks – Guarantee Trust Bank, Access Bank, Stanbic ICT, United Bank for Africa, and Zenith Bank.
GTB generated N490.13 billion and had a profit margin of 34.52 percent. Stanbic IBTC made a 28.10 percent profit margin from N287.53 billion. Zenith generated N921.13 billion and a 24.31 percent profit margin. Access Bank generated N1.33 trillion with 11.44 percent as profit. UBA made N748.29 billion and 22.76 percent profit.
These banks defy many odds associated with running a business in Africa’s biggest economy: inflation, a spike in diesel prices combined with foreign exchange scarcity, and high input costs forced some firms to close shop while many others struggled to stay afloat.
Analysts at Tekedia argue that banks thrive not primarily due to hard work or innovation, but rather due to a system that heavily favors them. With minimal effort, they can still generate substantial profits. It is a rarity to come across commercial banks that do not report profitability.
“Our market system is broken, just like the Nigerian State, so profits and advancements aren’t necessarily tied to the ingenuity and excellent execution, rather a case of aligning with the right forces, and your small hustle will balloon in profits.”
Reports show that nine of Nigeria’s largest deposit money institutions generated N554.23 billion in fees and commissions in 2021. The difference between this and their 2020 revenue of N428.32 billion is 29.4%.
Access Bank Plc, Zenith Bank Plc, Guaranty Trust Bank Limited, United Bank for Africa Plc, First City Monument Bank, Stanbic IBTC, Wema Bank, Sterling Bank, and Fidelity Bank Plc are the banks in question.
Net fee and commission income banks’ annual financial statements ended December 31, 2021, were combined to arrive at a total of N554.23bn.
NIBSS’s Role and Challenges
The Nigeria Inter-Bank Settlement System (NIBSS) serves as a vital platform for the clearing and settlement of inter-bank transfers and payments.
This institution plays a crucial role in facilitating seamless interbank transfers and payments, yet its operational disruptions have caused significant inconveniences. It has been plagued with frequent downtimes since last year, hindering its ability to automatically reverse unsuccessful transactions.
The continuous occurrence of dispensing errors and the absence of a reliable system for reversing failed transactions have placed the blame squarely on NIBSS.
Many Nigerians are left frustrated by the inability to rectify transaction errors promptly, leading to customer dissatisfaction and mistrust in the system.
TechEconomy gathered that upon any failed transaction, the NIBSS platform is supposed to reverse it. However, a bank official said “But the non-reversal has put our customers against us. Of course, we are not blaming customers because they only know us, not NIBSS and the intricacies of the electronic payments system.”
Addressing the Challenges
NIBSS must recognize the significance of its role in the Nigerian financial ecosystem and take decisive action to rectify the current challenges. By prioritizing system stability, transaction reversals, and effective communication, NIBSS can regain confidence from banks, merchants, and customers alike. Ultimately, a reliable and robust NIBSS platform will contribute to the overall growth and development of the Nigerian financial sector.
“Nigerian banks: what is going on? Transactions have been failing and reversals are now a constant. This MUST be fixed urgently. Stop paying dividends to your investors and invest some of your profits in better technologies,” Professor Ndubuisi Ekekwe, Chairman Fasmicro noted.
“I understand that NIBSS is part of this weak link – and if that is the case, inject funds into NIBSS and evolve the ownership. Stop these reversals; they’re affecting our operations in Nigeria.”
Ibukun Olaniyan, Operational Risk Analyst, LOTUS Bank said evolving the NIBSS leadership remains imperative as everyone has a role to play in ensuring seamless transactions across boards.
“There are interdependencies and links between every payment system when one is down, the processors and end users would experience transaction failure. This will affect all service users(of any institution)”
According to Ibukun, industry regulators should also be involved in ensuring seamless transaction processing by developing and enforcing policies and frameworks that will provide direction and ensure all necessary services record 100% uptime.
“One of those policies could be on DR, routine upgrades, patches, staffing, and affordable technology. Achieving a stable system and services is an intentional effort and the regulators must make this a top priority to instill confidence in e-payments as we lean towards cashless policy.”
Fintechs
Nigerians have started seeking alternate channels, this was most evident when the likes of Opay, Palmpay, and Moniepoint experienced a surge in the number of accounts that were opened during the case crunch few months when almost all the digital channels from traditional banks were down.
Fintech businesses have emerged as disruptive forces, utilizing technology to offer the general public cutting-edge financial services, particularly to individuals who were previously underserved by traditional banks. They have launched technology-driven financial services such as mobile banking apps, peer-to-peer lending platforms, and digital payment systems.
Nelson Offor, former Data Analyst at UnikHeights Services Ltd said the sooner the banks realize that customers no longer need a bank they just need banking, the better.
“According to a global survey, 54% of consumers trust at least one tech company more with their money than banks. Competitors are fast emerging in the financial services space to satisfy unmet customer demand through disruptive business models.”
According to Nelson, it is evident that financial services incumbents are largely unable to adapt to changing consumer preferences, including a desire for personalized and low-cost options, seamless transactions, and hyper-convenience.
“The incumbents have a choice to either own the future or get disrupted by it.”
In conclusion on the failed transactions, customers struggle with the ongoing problem of unsuccessful transactions notwithstanding the financial success of Nigerian banks. Concerns about the banks’ accountability and dedication to customer happiness are raised by the disparity in fortunes.
The Nigerian banking sector may promote trust and offer smooth transactions by putting a priority on system stability and good communication while also addressing the difficulties faced by NIBSS, thereby assisting the nation in its transition to a cashless economy.
