For the first time in five years, the rate at which banks’ earnings from electronic transaction increase in Nigeria slowed to 4 percent in 2020 from a record 50 percent the previous year.
While earnings from e-transaction increased by N61billion in 2019, Nigeria’s tier one banks reported N6.8 billion increase in 2020, N54.2 billion less.
This was despite the COVID-19 induced lockdown which forced many Nigerians to depend on electronic banking for their daily transactions.
According to analysts, the slowdown in banks’ earnings from the electronic transaction in 2020 was a result of the CBN’s downward review of charges for electronic banking transactions, removal of Card Maintenance Fee (CAMF), reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remote-on-us), review of other bank charges to align with market developments, and inclusion of new sections on accountability/ responsibility.
“Bank’s earnings fell, largely because of a regulatory cut in fees by the CBN,” Ayorinde Akinloye, Investment research analyst at United Capital said.
From January 1, 2020, CBN said charges on electronic funds transfer attracts N10 for transactions below N5,000; N25 for those between N5,001 and N50,000, and just N50 for those above N50,000. This is compared to the initial flat rate of N52 per transfer.
“As a result, lower value transactions less than N10,000 attracted lesser fees and so while the volume of banks’ transaction grew, the fee per transaction was lower,” Akinloye said.
Read Also: Bank of Industry grows assets by 78.84% in 2020
The Apex bank said the need to review the bank charges was in a bid to encourage financial inclusion and to reduce the burden of bank charges on consumers of financial service.
The Guide which was first released 15 years ago was revised in 2013 and 2017 in the light of market developments such as innovations in products and/or channels and new industry participants.
From 1892 when Nigeria’s first commercial bank was established in Lagos, the banking business in Africa’s largest economy has evolved to a point where bank customers can now complete transactions at the comfort of their palm.
The rapid penetration of Nigeria’s financial services over the years has been noteworthy, and the increasing ownership of smartphones, especially among the low- income groups, has been instrumental in reforming the financial services landscape.
Nigerian banks have continued to introduce digital products into the financial sector and their operations, driven by the need to eradicate long queues in banking halls, make cash transactions easier and faster and resolve other issues associated with payments and financial transactions. This is believed to have contributed to the growth reported in banks’ revenue from e-transactions.
The advent of technology is making a huge positive impact in the financial sector as analysis of the five-year financials of Nigeria’s five systemic important banks shows earnings from e-transactions grew by over 100 percent from N68.29 billion in 2015 to N187.87 billion in 2020.
Despite earning the second-highest income (N49 billion) from e-transactions in 2020 (second to Access Bank’s N56.09 billion), First Bank attracted the most revenue in the five years with a total of N193 billion.
The commercial bank earned the highest income on its electronic products in 2019 (N48billion), while it recorded N24.99 billion, N21.84 billion, N15.37 billion and N11.47 billion in 2018, 2017, 2016 and 2015, respectively.
