Six months ago, Paul Matthew, a 31-year-old personal shopper, would not agree that fintech startups should have any business with his money. Today, his mobile device features mobile apps from Kuda Bank and Moniepoint, and he is quick to project them as his main accounts, thanks to naira scarcity.
The Central Bank of Nigeria (CBN) had set January 31 for N200, N500, and N1,000 notes to cease to be legal tender after they were redesigned. The deadline was later shifted to February 10 following the scarcity of the new notes. Most Nigerians could not get the new notes because banks did not have enough to give out.
The scarcity impacted many industries across different sectors. In the agriculture sector, for example, farmers are finding it difficult to sell their produce due to a lack of cash or transfers being declined. Experts at AFEX, a pan-African organisation championing efficient trade and wealth creation through the commodities market in Africa, predict that the country is likely to see a lag in GDP numbers and food sustainability.
Following the suit by some state governors, the Supreme Court ordered that the old notes remain in circulation until December 31, 2023. The CBN has complied with the order, mandating banks to dispense and accept the old notes. Nonetheless, normalcy is taking too long to return.
Edwin Okunnaiya, a trader, said since he opened two accounts with OPay and Moniepoint, he had stopped going to ATMs or bank branches to queue up for cash. BusinessDay also observed that fuel stations are also asking customers to transfer to a fintech account. At an Enyo filling station, in Ajah, Lagos, customers can use a Moniepoint PoS terminal to pay for their purchases.
Apart from the swift transfers, charges on OPay are free, which is apparently a huge incentive for many consumers.
“Banks’ networks these days can be so frustrating, especially when you need to make an urgent transfer. But I couldn’t care less since I started using OPay,” said Pamilerin Adegoke, a social media influencer.
Some CEOs of the fintech platforms said they have seen an increase in the volume of transactions in recent months.
“Our business is a business bank and we have different types of businesses including agents and merchants. As cash declines, our merchants’ volumes have gone up also,” Tosin Eniolorunda, CEO of Moniepoint, told BusinessDay. “In total, this period has given us even more volume than we have seen in recent times – including December – due to an increase in merchant transactions.”
While the CEOs are holding their secret to fast transfers close to their chest, experts believe fintech companies such as OPay and Moniepoint have built some custom rails for themselves so they can depend less on the Nigerian Inter-Bank Supplementary System (NIBSS).
Read also: Naira scarcity : Osinbajo seek deployment of more fintechs
“Moniepoint will do direct integration with multiple banks, so they don’t have to route through NIBSS. They’ll route through the direct integration,” said an expert who wanted to remain anonymous to speak freely.
Kuda, in an email in February, told BusinessDay that it had prepared ahead for the pressure that would come with the scarcity of cash and the adoption of digital banking by more Nigerians.
“Kuda has always been able to handle demand, particularly because it built its own core banking system that effectively manages large volumes of transactions every day,” the company said.
Experts also say the fintech companies seem to be doing better because they have fewer customers than the banks, so their systems do not get as overwhelmed. Also, fintech companies use newer technologies, which allow them to be more efficient and flexible. Big banks often have older systems that can’t be easily changed or improved.
“Fintechs have been able to make their transfer services more efficient because they’ve been built recently, using the latest advancements in technology. This allows them to do some things differently than big banks, making their services more reliable. Additionally, since fintechs are smaller, they can quickly change and adapt when needed,” an expert said.
However, the fintech companies are not entirely averse to the glitches many of the banks are facing. Kuda, for example, suffered a glitch that forced many customers to call the company out on social media. The company said the glitch was not caused by demand pressure.
“The recent service disruption wasn’t a demand issue at all. There was an unusual glitch during a database backup initiated by a service provider. The company has since addressed the issue and the platform is back to doing business as usual,” Kuda said.
Read also: African fintech firms attracted $1.5b funding in 2022 – Report
Transfer declines are also rising among the fintech companies as more people subscribe to their digital banking services. Joe Ubah, an OPay user, said he made a transfer from his newly adopted OPay account to a bank three weeks ago. He got a debit alert but the recipient is yet to receive the credit alert. After several efforts to get OPay to address the issue through online channels, Ubah went to the company’s headquarters in Ikeja on March 23, only to find a massive crowd of consumers, many of whom came to complain of similar uncompleted transactions.
“I have been going back and forth with OPay and Access Bank over who is with my money. Today, a lady at the customer service checked and said the money is with Access Bank, that I have to return there and if by Thursday I don’t get my money back, I should come back to OPay,” Ubah said.
Even Matthew says he is careful to ensure he does not transfer from OPay to some banks where there will be delays. He prefers to transfer from one fintech app to another fintech app. But he admits that it is better said than done. His customers are always going to demand transfers with other banks and he can’t refuse.
