NIBSS slashes electronic transfer fees from N5 to N3.75k effective July 1

In a move aimed at promoting financial inclusion and supporting innovation, the Nigerian Inter-Bank Settlement System (NIBSS) has announced a significant reduction in the electronic transaction processing fee for instant payment.

The fee will be slashed from N5 to N3.75k, effective from July 1st, 2023. The decision was conveyed through a letter dated May 31, 2023, signed by the Managing Director/Chief Executive Officer of NIBSS, Premier Oiwoh, and the Executive Director of Business Development, Ngover Ihyembe-Nwankwo.

The CEO said the development was in line with the NIBSS’ commitment to drive financial inclusion and support innovation. He said the scheme would also be embarking on a volume-driven discount regime to complement the fee reduction as further details will be communicated in due course.

“We are delighted to inform you that the board and management of Nigeria Inter-Bank Settlement has approved a further reduction in the transaction processing fees on NIBSS Instant Payment from N5 to N3.75k which will be effective July 1, 2023.

NIBSS

Reason for the reduction of electronic transfer fee

The NIBSS Instant Payment has emerged as a groundbreaking and innovative e-payment solution for the banking industry. With the reduction in processing fees, NIBSS aims to incentivize greater adoption of electronic transactions and facilitate wider access to financial services across Nigeria.

Nigeria’s financial inclusion is nothing to write home about, with about 40% of its adult population without a bank, and even more unable to enjoy electronic financial services. One reason for this is that the unbanked and financially excluded find it relatively cheaper to undertake basic financial activities by proxy.

Slashing the cost of electronic transfers by nearly 35% might be one way to go in the country’s bid to solve its financial inclusion problem and get the financially vulnerable on board with electronic banking.

The NIBSS, serving as Nigeria’s Central Switch, plays a crucial role in ensuring interoperability between various entities within the financial system. This involves enabling seamless electronic fund transfers, document processing, and other transactions between banks, mobile payment operators, non-banking financial institutions, government institutions, and their customers, using the NIBSS as a common channel.

“In line with our commitment to drive financial inclusion and support innovation, we are also embarking on a volume-driven discount regime to complement this fee reduction and further details will be communicated in due course,” the NIBSS letter reads.

Read more: More Nigerians are going cashless: E-payment transactions rise to ₦32.8trn in September 2022- NIBSS

How will the reduction will affect banks?

Data released by the Nigeria Inter-Bank Settlement System (NIBSS) shows that bank customers in Nigeria transferred a total of N87.49 trillion over mobile in 2022.

This shows a 142% increase year on year, compared to N8 trillion worth of transactions in 2021. The data from the NIBSS also shows that the volume of mobile inter-scheme transactions rose by 151% year on year from 284.5 million recorded in 2021 to 609 million in 2022.

The decision to lower the fees comes at a time when banks and other financial institutions are witnessing a surge in electronic transaction volumes. This upswing can be attributed to increased reliance on digital channels, driven in part by the recent setbacks associated with the Central Bank’s naira redesign policy.

Fees and commissions emerged as the primary or secondary sources of non-interest income for the banks, making them significant contributors. This clarifies why the banks desire that the Central Bank of Nigeria (CBN) does not request a reduction in their fees.

Transaction fees constitute a significant source of revenue for Nigerian banks. However, industry experts suggest that the reduction in NIBSS fees is unlikely to impact the transaction fees charged by banks to their customers.

The Central Bank of Nigeria (CBN) issued a directive in December 2019, mandating banks to lower their fees. However, certain banks expressed reservations as they were worried about the potential impact on their profit margins. These banks faced penalties as a consequence of their reluctance.

In addition to the fee reduction, NIBSS also plans to introduce a volume-driven discount scheme to complement the new pricing structure. Further details regarding this initiative will be communicated at a later date.

Read more: E-payment transactions grow by 40% to ₦205.4trn in H1 2022- NIBSS report

The move comes as banks and other financial institutions report a surge in electronic transaction volumes following heightened reliance on the channel due to the failed Central Bank of Nigeria naira redesign policy.

NIBBS says that cashless transactions increased by 44.84% to N126.73 trillion in the first quarter of 2023 from N87.49 trillion in 2022.

The decision by NIBSS to lower electronic transaction processing fees reflects a proactive approach to promote financial inclusion and innovation in the Nigerian banking sector. By making digital transactions more affordable, NIBSS aims to facilitate broader participation in the financial ecosystem, contributing to the overall growth and development of the country’s economy.