Analysts see the new CBN cashless policy adding impetus to banks’ income from fees and commission income, a boon in disguise for lenders operating in a low yield environment.
As part of its cashless policy initiatives, the Central Bank of Nigeria (CBN) announced that banks will now be allowed to take charges on customer deposits in excess of N500 thousand (individuals) and N3 million (corporates), respectively.
The charge applies to the excess cash.
The new policy means a lot of customers may migrate to alternative channels, which is likely to increase deployment of Point of Sales (POS) and Automated Machines (ATM) terminals as well as encourage debit card issuances.
That means Banks, whose gross earnings have been growing at a slow pace due to a sharp drop in short term government securities, could see increased adoption in their USSD code.
“Banks like Zenith and Access that have premium customers with cash above N500,000 will benefit the most,” said Yinka Ademuwagun.
“On the other hand, the ones that do more of retailing banking may not benefit because their customers may not have cash at that limit,” said Ademuwagun.
Between June 2016-19, the largest lenders in Africa’s largest economy raked in N948.12 billion in fees and commission income, according to data gathered by Businessday.
A breakdown of the figures shows fees and commission income increased by 17.81 per cent to N280.89 billion in June 2018 from N238.41 billion as of June 2018.
“On the positive side, there may be a boost to the bank’s earnings for the rest of the year. Fintechs such as Interswitch also stand a lot to benefit from an increased usage of alternative channels,” said analysts at CSL Research Limited.
A copious investment made by banks on the latest technology and digital expansion has yielded fruits as online there has been an increase in sundry electronic transactions.
For instance, the volume of Access Bank’s debit/ credit holders surged by 100 per cent to 330 million, while in value terms it upsurge by 136 per cent to N2.89 trillion in June 2019 from N1.22 trillion the previous year.
Access Bank’s USSD spiked by 160 per cent to N422 billion in the period under review to N163 billion. It generated N997 billion and 236 million in fees from ATM and POS in the period under review.
The lender plans to develop variants of products that suit the needs of its customers while expanding its digital capability and providing service and credit.
Firstbank Holding said revenue from Electronic Banking income is now 34 per cent of Non-interest Revenue, while USSD transactions processed stood at N1.20 trillion.
The bank has launched competitive and future-ready digital initiatives/ platforms while improving revenue synergies across the Group.
Fidelity Bank saw the number of debit cardholders increase by 6 per cent to 2.09 million in June 2019, as mobile and internet banking holders hit 2.15 million in the period under review.
Fidelity Bank said 82.0 per cent of its customer’s transactions are now done on electronic banking channels, Digital Banking now accounts for 29.0 per cent of Fee Income
Analysts say the timing of the announcements could stoke negative sentiments as Nigeria is cash-driven society, and they added that coupled with the VAT online transactions, consumer wallets will continue to be pressured.
Analysts at Cardinal Stone are of the opinion that BDCS, petrol stations, traders and small businesses who handle a lot of cash are likely to be negatively impacted by the new charges.
“It is also unclear how the general populace will react to this measure, given that Nigeria remains a hugely cash-driven society,” said analysts at Cardinal Stone.
“We, however, note that the CBN had previously backtracked on attempts at nationwide implementation of similar initiatives in the past, and we do not rule out the possibility of similar occurrence come March 2020,” summed the analyst.
