Banks ride on digital services to grow non-interest income

Nigerian banks are raking in profits from electronic business income, indicating the sustained uptake in e-payment channels.

Total income from the electronic businesses of four banks rose to over N205 billion in the first six months of the year, up from N137.1 billion recorded in the same period of 2023, according to the banks’ unaudited financial statement result.

These banks include First Bank of Nigeria Holdings Plc (FBNH), FCMB Group, Sterling Financial Holding Company, and Wema Bank.

According to analysts, financial institutions are increasingly using financial technology products to boost operational efficiency and enhance customer satisfaction. These products include applications that ensure transactions are carried out expeditiously.

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These investments are paying off, as lenders have recorded growth in electronic business commissions and fees, which invariably increases their non-interest income. Non-interest income is revenue generatedfrom non-core activities by banks and financial institutions through Automated Teller Machines, USSD, internet banking, point-of-sale payments, agency banking, and other fees.

FBNH

First Bank’s 2024 six-month financials revealed that e-banking income constituted 27 percent of its non-interest income. Analysis of its half-year report showed that First Bank earned N35.1 billion as e-banking income in the first six months of 2024 from N34 billion earned in the same period of 2023.

The bank’s non-interest income in the first six months of 2024 was N130 billion, an increase from the N87.1 billion recorded in the same period of 2023.

FCMB Group

The bank’s e-banking income was N10.8 billion in the first six months of 2024, an increase from N7.4 billion in the same period of last year.

This e-banking income comprised 29.8 percent of its non-interest income, which was N36 billion in the period under review compared to N28.4 billion in the same period last year.

Sterling Financial Holdings Company Plc

Sterling Financial Holdings Company Plc’s e-banking income was 30.2 percent of its non-interest income. Analysis of its half-year report showed that the bank earned N4.6 billion as e-banking income, an increase from the N.44 billion earned in the same period of 2023.

The bank’s non-interest income was N15 billion, up from the N11.6 billion recorded in the same period of last year.

Wema Bank

The bank’s e-banking income was N6.1 billion in H1 2024, up from N3.1 billion in the same period of the previous year.

Its e-banking income was 25.8 percent of its non-interest income, which stood at N24 billion in H1 2024, compared to N10 billion in H1 2023.

Banks’ e-banking income growth has been connected to the Central Bank of Nigeria (CBN)’s push for a cashless society, underscored by several initiatives to promote digital payments and reduce dependence on cash.

Analysts stated that the apex bank’s 2012 digital payments directive was a significant milestone in the country’s cashless journey. The directive required financial institutions to increase their investment in digital payment infrastructure, promote digital payments among their customers, and work with the regulator to develop a strong regulatory framework.

According to reports, the number of Automated Teller Machines (ATMs) rose from 11,000 in 2011 to 22,600 in 2021, where it remained as of December 2023. The number of PoS terminals rose from around 155,000 to 1.1 million as of April 2022, and the number of active banking agents is over 1.9 million, according to data from SANEF.

Gloria Fadipe, head of research at FCMB, said, “Fintechs have been able to make their transfer services more efficient because they’ve been built recently, using the latest technological advancements. 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,”

Financial inclusion rose to 74 percent in 2023 from 68 percent in 2020 as more Nigerians embraced digital channels, according to the 2023 Enhancing Financial Innovation and Access survey.

However, this progress is being threatened by transaction chargers. High transaction charges would limit the progress of financial inclusion as customers will avoid operating a bank account, Ayodeji Ebo, an investment professional, noted.