The death of cash counters: How digital banking took over Nigeria

Two decades ago, banking in Nigeria was a frustrating experience—long queues, excessive paperwork, and limited financial access kept millions excluded from the formal system.

“To stay competitive, banks upgraded their digital infrastructure, improved mobile apps, and formed fintech partnerships.”

For many in rural areas, like Okpella, the nearest bank was a 30-minute drive away—a luxury few could afford.

Today, everything has changed. With just a mobile phone, Nigerians can send money, pay bills, and manage finances in seconds.

Digital banking has revolutionised the industry, forcing traditional banks to either evolve or risk becoming irrelevant. But how did this transformation happen? And what does it mean for the future of banking in Nigeria?

A defining moment: The 2006 banking consolidation

Nigeria’s banking transformation didn’t happen overnight. One of the most significant turning points came in 2006, when the

Central Bank of Nigeria (CBN) introduced a banking consolidation policy, raising the minimum capital requirement to ₦25 billion.

This forced widespread mergers and acquisitions, creating stronger banks capable of withstanding economic shocks and expanding financial services.

One of the banks that emerged from this shift was Sterling Bank, which originated from Nigeria Acceptances Limited (NAL)—the country’s first licensed merchant bank in 1969.

At the time, merchant banks focused on corporate finance and industrial funding. But by the early 2000s, regulatory changes blurred the lines between commercial and merchant banking, leading many firms to either convert, merge, or disappear.

For Sterling Bank, the 2006 policy meant merging with Magnum Trust Bank, NBM Bank, Trust Bank of Africa, and Indo-Nigeria

Merchant Bank—a move that mirrored the broader shifts in Nigeria’s financial landscape.
But despite this consolidation, banking remained largely traditional, with digital services still in their infancy.

The digital banking disruption

By the early 2010s, internet penetration and smartphone adoption surged, forcing banks to rethink their approach. Online and mobile banking emerged, allowing customers to check balances, transfer funds, and pay bills remotely.

A game-changer came in the form of USSD banking, a system that enabled transactions using simple numeric codes on basic mobile phones. This innovation allowed millions, including those without smartphones, to access financial services, breaking the barriers of traditional banking.

At the same time, fintech startups like Interswitch, Flutterwave, and Paystack introduced faster, cheaper, and more secure payment solutions. Their rise put enormous pressure on banks to innovate or risk losing customers.

To stay competitive, banks upgraded their digital infrastructure, improved mobile apps, and formed fintech partnerships.

Seeing the shift, Sterling Bank rebranded in 2019 as a digital-first, innovation-driven bank. But rebranding alone wasn’t enough—it required real technological advancements.

The bank invested in fintech-driven solutions, enhanced digital banking platforms, and adopted an agile approach to customer service.

Why traditional banks had no choice

The rapid adoption of digital banking is evident in the numbers. According to FXCintel, mobile transactions in Nigeria skyrocketed from ₦4.86 trillion in the first four months of 2022 to ₦9.2 trillion by July 2022. Meanwhile, Statista projects that Nigeria’s digital payments market will reach $68.34 billion by 2025.

With this kind of growth, traditional banking models were no longer sustainable. Customers wanted speed, convenience, and flexibility—and banks had to adapt to meet those expectations.

Read also: Stakeholders’ collaboration seen to drive innovation in Nigeria’s digital banking ecosystem

Beyond digital banking: The rise of indigenous financial technology

Despite these advancements, one major challenge persisted: over-reliance on foreign banking software. Many Nigerian banks depended on expensive, foreign-built core banking systems that weren’t fully optimised for the local market.

This changed in August 2024, when Sterling Bank became the first to migrate to SeaBaas, Africa’s first indigenous core banking system, developed by Nigerian fintech firm Peerless.

This shift signalled a broader move towards homegrown financial solutions, aimed at reducing costs and improving efficiency.

The future: Open banking and embedded finance

The next stage of Nigeria’s banking revolution isn’t just about banks anymore. Open banking and embedded finance are reshaping the industry, enabling fintechs, startups, and even non-financial firms to embed financial services into their platforms.

Soon, customers may never need to visit a bank or even open a banking app; instead, financial services will be seamlessly integrated into their daily lives.

Who will survive in the next wave?

The Nigerian banking sector is moving toward a fully digital future, but the real test isn’t just about adopting technology; it’s about how well banks use it.

The banks that innovate, integrate seamlessly, and offer value beyond traditional banking will thrive. Those that fail to keep up with evolving customer demands may struggle to survive.

That said, traditional banking isn’t disappearing completely.
According to Statista, Nigeria’s traditional retail banking segment is expected to generate $19.93 billion in net interest income by 2025.

While digital banking is dominant, brick-and-mortar banking still holds relevance in Nigeria’s financial ecosystem.

Conclusion: The transformation is just beginning

Nigeria’s banking revolution is far from over. The next decade will determine which financial institutions will adapt, evolve, and lead, and which ones will struggle to remain relevant.

The lesson is clear: banks that embrace innovation will shape the future. Those that don’t risk being left behind.