Have you ever received text messages from a small money lending digital institution, admonishing an acquaintance or a relation for blowing through a loan repayment deadline? Such messages also sometimes threaten to destroy the reputation of the said party, if they do not repay the loan as soon as possible. You are not alone. Millions of Nigerians have received similar messages.
Just a little over two months ago, digital financial services institutions in Nigeria were mostly reputed as small loan lenders. Although they served a very important function of filling up a gap as lenders of small loans, they had a dreadful reputation when it comes to getting lenders to redeem said loans.
Are you surprised that you haven’t received such messages for a couple of months? Well, those same digital financial technology institutions are currently busy making money. In fact, they are making billions of naira every day, thanks to the controversial monetary policy of the Central Bank of Nigeria (CBN), that has made cash transactions a pain in the neck. Didn’t they say one man’s meat is another man’s poison?
While they were the saviours of small loan borrowers, they also had a ruthless reputation when it comes to the methodology of retrieving their money. While it is understandable that they are expected to retrieve their money, they became a nuisance to people who have nothing to do with their loans or their apps in the first place. They do this by sending out threatening messages to contacts of borrowers to get the borrowers to pay back or service the loans, especially since they lend money without collateral.
The only collateral of these lenders are phone books and contact lists. This is why they send those desperate text messages to people that might not even remember who a particular borrower is. You might just be unlucky to have your name on their contact list. And it is enough for them to badger you over someone you don’t know.
Thanks to the currently cash scarcity in the country, these digital banks have seen their customer base grow exponentially. Not only have Nigerians who have accounts in regular banks joined the client lists of these payment services, millions of Nigerians who have never walked into a bank in their life now have a “bank” account with them.
One thing these platforms have going for them is the ease of opening accounts. The requirement does not involve walking into a physical banking hall or some brick and mortar building. All you need to open accounts with them is your phone number and an email address and you are already banking.
These payment platforms have been liberalizing their avenues for revenue even before this monetary policy came along. This is why they have been able to easily key into it to grow their market shares in leaps and bound. In the last year, they have gone into full-scale Point of Sale (POS) services and aggressively courted small business to win them over. It was easy to build on the little strides they have made, especially over the past two years.
Opay Digital Services in 2020, claimed to have facilitated transactions of over a billion dollars. The transaction of 2021 was almost 2 billion dollars. Going by the turn of events in the last few months, there is no doubt that Opay would have outdone itself and broken its own record many times over. Chances are that Opay has only in 3 months, facilitated more transactions than it has done for almost 5 years of its existence.
Opay and other digital financial services like Palmpay and Kuda make money through interests on small loans as well as commission from charges on POS machines and interbank transfers. Since, the cash scarcity hit Nigerians, There have been billions of these transactions, so much so that interests on small loans have been relegated to the background as a major source of revenue for the actor.
Though, these digital financial technology services do not charge much for their services, for example, there can be charges as low as N10 for some transactions, however the sheer volume of transactions in the last few months have obviously pushed revenues for these institutions to over a trillion naira.
