Why Banks Are Competing With OPAY, MONIEPOINT & Others

The traditional banks in Nigeria are not having it easy with the sudden acceptance of Fintech banks among many Nigerians. Many of the regular banks are currently gasping for breath of survival as many Fintech banks have snapped up their customers, and the situation has become worrisome to many in the regular banking sector. Many banks have become empty and desolate as a result of low patronage from the public, while those who have bank accounts with them have left them unused for several months. Meanwhile, fintech banks like Opay, Palmpay, Moniepoint and others are gradually gaining more and more Nigerian customers on their platforms. Recent research has also shown that 73.2 million adults, representing 41.6% of the adult population in Nigeria, are financially excluded. Most of the financially excluded population are from rural areas where traditional banks have found it difficult to expand. As opposed to conventional banks, which need to expand their infrastructure to these rural areas to tap into these markets, Fintechs only need this population to have access to smartphones and the internet. They are also much less constrained by regulations.

As a result, they can capture this “unbanked market” faster and more cost-effectively than traditional banks. Just a few weeks back, City People spoke with a female top banker in Victoria Island, Lagos. But she pleaded for anonymity. She told us several reasons why conventional banks will continue to struggle against the fintech banks. She opined that one of the challenges that will continue to draw back the conventional banks is the effectiveness of bank apps, which have now become one of the crucial tools where most activities take place in making transactions. “The fintech banks are unbeatable when it comes to the effectiveness of app banking. They are far ahead of conventional banks. Fintech apps generally offer a better user experience, faster transactions, lower fees, and greater financial inclusion compared to traditional Nigerian bank apps. However, traditional banks still hold advantages in areas like regulatory stability, established physical presence, and the provision of complex, long-term financial products. Refunds on fintech apps are often instant, whereas traditional banks, relying on older legacy systems and manual processes, can experience delays. Lower costs and fees: Due to leaner operational models (no extensive branch networks), fintechs can offer services with fewer fees, lower transaction costs, and competitive interest rates on savings.

She also spoke on loans and others.

“Fintech often provide niche services like instant micro-loans, automated savings tools (e.g., PiggyVest), multi-currency accounts (e.g., Grey), and seamless cross-border payments that traditional banks may not offer or integrate as effectively” .

 Fintech apps are built on modern, API-first, cloud-native infrastructure, resulting in intuitive, user-friendly interfaces and seamless onboarding experiences. This is one of the to keep up with rapidly changing customer major factors many bank customer’s have switched from traditional to what we now have. 

She also talks about the high running costs of traditional banks, which is a big factor in competing with the fintech banks. She spoke about the thousands of staff that each bank will have to pay every month in 36 states of the country. “Starting from the cleaners to security personnel to bankers and many others. Unlike fintech, where most of the operation is done online by the customer themselves. So many of these funds, which weren’t spent on running costs, go to various advertisements, online awareness, constant innovation, and improvement of their bank apps and many others, making it difficult for traditional banks to compete with them,” she said.

It has even been said that Fintechs are better positioned to serve the fast-growing Nigerian young, digital-savvy population: Nigeria has one of the most youthful populations globally, with over 50% of its population below the age of 25. This age group is naturally digital savvy and more likely to adopt technology faster. As a result, this vast population of people is more likely to bank with FinTechs than traditional banks.

And a substantial portion of the Nigerian adult population (over 40%) was previously unbanked or underbanked. Fintechs like OPay and Paga have successfully targeted this segment through mobile money and agent banking networks, providing essential services like payments, transfers, and micro-lending to those without traditional bank accounts.  With high mobile phone penetration, fintech solutions delivered via user-friendly apps are easily accessible to millions of Nigerians. This widespread use of smartphones allows for seamless, 24/7 access to financial services, bypassing the need for physical bank branches.

Fintechs have capitalized on consumer dissatisfaction with traditional banking issues such as long queues, complex paperwork, high fees, and stringent lending criteria. They offer greater convenience, speed, transparency, and lower transaction costs, directly meeting immediate consumer needs.

Another issue affecting traditional banks is the physical structures that are a must to start conventional banking in Nigeria. This is also a big factor, and it is not just a structure; it must be well equipped and well positioned. All these don’t matter in Fintech banks. FinTechs are smaller, less rigid organisations, allowing them to innovate faster, respond better, create a better user experience and develop custom financial service offerings in an environment where banks struggle.

FinTechs provide a better customer experience,  While traditional banks are increasingly making considerable investments to create new digital offerings, many of these initiatives are not well integrated with their more established brick-and-mortar operations. This has created a poor user experience and avoidable customer frustrations. The complexity of their existing systems — built on generations of difficult-to-integrate legacy technologies — combined with an incumbent culture that may not be optimised for today’s digital marketplace acts as barriers to the kind of progress that many consumers expect from t heir service providers heir service providers heir service providersheir financial services providers. On the other hand, FinTechs are smaller, less rigid organisations, allowing them innovate faster, respond better, create better user experience and develop custom financial service offering in an environment where banks struggle.

Isaac Abimbade

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