Why Nigerians prefer using digital banks for fund transfers ahead of saving their wealth

Digital banks like Opay, Palmpay, Moniepoint etc. are beginning to gain huge ground in the Nigerian financial scene. This is mostly because of their innovative technology (apps) which guarantees instant transactions and far less margin of error than traditional banks.

However, despite their huge adoption, Nigerians mostly still consider them as funds transfer systems and nothing more.

Most Nigerians still prefer to keep their wealth in traditional banks like First Bank, Zenith, Guaranty Trust Bank etc. Thus, while the regular young Nigerian probably has all the digital bank apps on their smartphones, you are likely to find only a small fraction of their wealth there. This is because once they have received their funds through a digital bank, they quickly transfer it into their regular bank accounts.

Of course, some of this could be attributed to the fact that there’s a limit to how much a bank account without BVN could hold in Nigeria. And because many digital bank users open them without BVN (Opay is reported to have bank accounts for phone numbers whose users haven’t even applied for accounts), there’s probably a limit to how much they could keep there.

Addressing this important topic, Olubunmi Fabanwo who is the Affiliate Program Manager at Binance Africa said the major reason still boils down to apprehension, driven by a lack of physical locations for digital banks.

Olubunmi who has extensive experience working as a financial technologist said this during a panel session at the just-concluded Technext Coinference 2023 themed: Disruptive Tech: New Frontiers, New Opportunities. The panel session was on The Future of Payments in Africa.

“I think the first thing we have to ask ourselves is; why exactly am I not saving my money with a digital bank?

For me, the reason why I don’t do that is because if I want to save my money, I will like to save it where I can go and make some noise and seek recompense if anything happens to my money.

Digital banks don’t have physical branches and by their nature, they actually do not need them. But this is how Africans are generally. If we don’t know your house we can’t trust you,” he said.

Fintech shutdowns in Nigeria spurring apprehension

Despite their growing popularity, many Nigerians still view financial technology companies as loose cannons. This suspicion is drawn from the very nature of financial technology which makes the fintech platforms like digital banks look like they are operating out of thin air.

Companies in the space too aren’t helping matters as the rate of fintechs shutting down is also alarming. The most recent is Eyowo, a technology-focused microfinance bank which finally had to shut down earlier this year, trapping lots of depositor funds in the process. The company practically told its employees that things simply didn’t go the way it planned. The fintech also faced regulatory hurdles which it failed to overcome.

Before Eyowo,  other fintech companies like Cellulant and Oya Pay have witnessed disappointing outcomes. Presently, Nigerian fintech company, Payday, finds itself dealing with a lot of negative press after customers complained bitterly that they were unable to access their funds.

This kind of uncertainty and the helplessness that comes with it is the reason why many Nigerians are reluctant to store their wealth in the coffers of digital banks.

See also: Red Flags Abound; Payday users lament questionable service, loss of funds

Digital banks rely on social media as customer service desks

To make up for the lack of physical offices and centres where people can make complaints and seek solutions, digital companies have relied on social media as digital offices where customers can make their complaints in the DMs.

This in turn makes social media handlers de facto customer relations personnel. However, social media handlers are hardly customer relations experts and as such, all they can do is transfer such social media complaints to the people responsible for them.

But these social media offices are barely enough as they rarely get issues resolved. This explains why the comment sections of popular Twitter influencers are riddled with complaints by customers and the prompt responses by these companies. In the end, Nigerians prefer a place where they could go and make trouble if their funds went missing and that place isn’t social media, not for the non-influencers.

And Olubunmi who spent his formative years as a banker at Guaranty Trust Bank before a robust foray into financial technology, succinctly captures this:

We want to be able to talk to someone, an actual person. When you talk to people about preserving their money in (digital banks), they will ask you, if anything happens to my money where do I go to? Who do I talk to? When you tell them there’s a service online where they could make complaints they will be like so I have to go online and be talking to computer? Can’t I just go somewhere and talk to somebody?

He explained that the need to have a physical space, though understandable, is something that is keeping Africans back. To be able to move beyond something like that, digital banks have to ensure that they do better with customer service.

“How quickly you’re able to resolve complaints matters. If you look at what the regular banks have, it is that they have a physical space. Even when some of them have terrible customer service, they are still able to resolve problems no matter what. As long as the customer could come as many times as they want and be guaranteed to meet someone who would take their complaint all those times, they will be more rest assured,” he said.

The fintech expert also advocated for more robust and localised education. He therefore advised fintech companies to put in more effort to educate people.

“That’s how the regular person gets to know that they can save their money and even get better interest rates on digital bank platforms than on traditional banks. The education has to be localized as well so that the average Nigerian can easily understand,” he finished.

To follow this conversation and many others from the Technext Coinference, click here.