Report: Digital Banking Driving Financial Inclusion


Hamid Ayodeji

Due to the increase in the number of Nigerians with access to mobile phones and the increasing internet penetration in Nigeria estimated at 56.4 per cent, the digital banking industry is currently experiencing significant growth with enormous opportunities more than ever before.

This has encouraged several banks to take advantage of this opportunity to reach out to more banked and unbanked Nigerians through digital banking solutions.
According to Agusto & Co. 2019 Consumer Digital Banking Satisfaction Index, mobile and app banking platforms are the most preferred digital banking platform for about 60 per cent of the respondents.

This, was largely due to the increase in the number of Nigerians with access to smartphones estimated at about 21 per cent of the population, as well as the ease of executing banking services and the wide range of banking services that can be executed on the platform.

However, the number of Nigerians without access to internet-enabled smartphones especially in the rural areas was still significantly high.
The report explained that as a result, banks and telcos partnered to enable customers have access to banking services through the USSD platform.

“In an attempt to protect customers from the risk associated with executing transactions on the USSD platform, the Central Bank of Nigeria has set a maximum daily limit per person of N100,000 on this platform and customers who wish to have a higher limit will need to provide their banks and mobile money operators (MMOs) with indemnities.

“The increase in the number of digital banking transactions has resulted in the exposure of banks and customers to cybersecurity risks which entails the unauthorized access to customers data with the aim of defrauding the customers,” it stated.

According to the report, about 13.3 per cent of the respondents in Agusto & Co. 2019 Consumer Digital Banking Satisfaction Index receive unsolicited emails and short message service (SMS) frequently while 4.6 per cent receive phishing emails and short message service (SMS) very frequently.

“Agusto & Co. believe that more security measures need to be put in place by the banks to reduce the losses arising from cybersecurity breaches. Predicting the future of Nigeria’s banking services with the continuous increase of mobile phone usage, the question then will be, “will the anticipated empowerment of Telco’s affect banking industry?”
“Agusto & Co believe that strategic partnership between banks and Telcos will not only deepen financial inclusion but also ease the process of banking operations,” it added.

These partnerships, according to Agusto & Co aims at leveraging the telecommunications operators’ existing infrastructure, clients, know your customers (KYCs) and the digital footprints of clients.

“The responsibility is now left to the Central Bank of Nigeria (CBN) to ensure a rational co-existence of the two bodies. Recently, the apex bank put in place guidelines to foster good relationships between the banks and Telcos. For example, CBN’s guideline on the regulation of the Payment Service Banks (PSBs), requires that funds above the PSB’s operational float are to be placed with a deposit money bank. Thus the operations of the PSBs will not affect the deposits of the banks as a significant amount of the money mobilized will remain with the banks.

“This could, however, mean that the associated fees on payments will be lost by the banks, but collaboration rather than competition with telecommunications operators will further drive success within the industry,” it added.