The number of Nigerians visiting the banks for transactions has significantly decreased in recent years, City People has discovered. This is a trend that became evident shortly after the COVID-19 pandemic. Several factors contribute to the decline in physical bank visits, including the widespread adoption of digital banking, the rise of agency banking, dissatisfaction with traditional banking services, and various economic challenges.
The banking industry is rapidly evolving due to advancements in fintech, digital banking, and financial technology. Traditional banks face numerous challenges, such as outdated systems and the need to adapt to changing customer preferences. Fintech is essential in helping banks keep pace with these transformations.
Fintech, digital banking, and financial technology are creating new opportunities for growth, efficiency, and enhanced customer connections within banks. Analyzing the significant challenges faced by traditional banking highlights fintech’s crucial role in improving the sector.
Traditional banks struggle to meet the evolving needs of their customers, while digital banking has raised expectations for a seamless and personalized experience. The gap between customer desires and what banks currently offer is widening. Research indicates that an increasing number of individuals are turning to digital banking, particularly mobile banking.
The rise of digital banking and fintech is driven by several key advantages:
Digital banks, or “neobanks,” along with online banking services, allow customers to perform transactions—such as transfers, payments, and balance inquiries—using their mobile phones or computers, any time of day or night.
Digital banking has streamlined the account opening process, eliminating the lengthy paperwork commonly associated with traditional banks. New customers can now be onboarded in just minutes by providing a phone number and a Bank Verification Number (BVN).
Digital-only financial institutions have reduced operational costs since they do not maintain physical branches. This enables them to offer lower transaction fees and more competitive interest rates to their customers.
The success of fintech companies has raised customer expectations for seamless, quick, and modern banking services. As a result, traditional banks are compelled to invest heavily in digital transformation to remain competitive.
In areas where bank branches are scarce, particularly in rural communities, Point-of-Sale (PoS) agents serve as informal bankers by providing cash withdrawals, deposits, and bill payments.
By utilizing a network of agents, traditional banks can extend their reach and offer services to previously unbanked populations without the high costs associated with operating physical branches.
Economic Necessity: A recurring challenge with the formal banking system is inadequate access to physical cash. PoS agents have thrived by offering this service, especially during periods when “cashless policy” implementations have failed.
Problems with Traditional Banking are and why many Nigerians have now embraced the FinTech for their daily transactions.
High Operational Costs: Operating brick-and-mortar banks is expensive. As a result, Nigerian banks are closing unprofitable branches and shifting towards a more digital strategy to reduce costs, mirroring a global trend.
Poor Customer Experience: Many customers express frustration with traditional bank services. Common complaints include illegal deductions, unexplained charges, inadequate resolution of complaints, and long queues.
Outdated Technology: Some traditional banks still rely on legacy systems that are slow and unable to meet the demands of modern, tech-savvy consumers. This reliance can create cybersecurity risks and challenges in providing a consistent customer experience.
Limited Access in Rural Areas: Financial institutions have little incentive to establish branches in remote areas with low-income populations, leaving many individuals without access to traditional banking services.
The shift away from physical banks is driven by both innovation and necessity. While digital and agency banking provide increased access and convenience, many Nigerians remain excluded from the formal financial system due to a lack of funds, irregular income, or living far from financial institutions. This transformation in the banking sector is reshaping how Nigerians manage their money, moving the landscape away from traditional bank branches.
Unnecessary Charges: Unnecessary fees are another major factor working against traditional banking. Charges such as stamp duty and ATM maintenance fees have deterred many customers from using conventional banks. Despite numerous complaints regarding these issues, little action has been taken.
According to a 33-year-old named Debo, who spoke with City People, her money has been deducted several times without clear explanation. She recounted, “There was a time I had 42,000 naira in my bank account, and almost 1,000 naira was deducted before I realized it. That experience has discouraged me from using a traditional bank.” She also noted that many people only use physical banks for large transactions, while salary earners tend to utilize these services.
Another factor why more and more people don’t want to patronise physical bank now is that, there are unnecessary long queues, especially when there system is down causing many people helpless while waiting to get there money for use.
And in many cases, the bank application for traditional bank are not helping matters. Some of them are too slow, while some can’t be access foe days due to back configuration, unlike the bank application.. There are many cases where millions of Nigerian will troop to banks to demand for their money when they sent money and the people can’t get the money..
Other advantages are: Easy Accessibility: With just a few clicks, you can access your account 24/7, make transactions, check balances, and pay bills from the comfort of your own home or anywhere with an internet connection.
This convenience is especially beneficial for individuals with busy schedules or limited mobility, as it eliminates the need to visit a physical branch.
Lower Fees: In many cases, account fees at online banks are lower than they are at traditional banks.
For instance, most digital banks don’t charge a monthly account maintenance fee, whereas many traditional banks do. This can result in lower fees and higher interest rates on savings accounts.
Enhanced Security: Online banking platforms usually employ advanced security measures, such as encryption and multi-factor authentication, to protect your account and personal information. Additionally, online banking reduces the risk of physical theft or loss of sensitive documents.
Paperless Transactions: Online banking promotes environmental sustainability by reducing the need for paper statements, checks, and other physical documents, which can contribute to a more eco-friendly banking experience.
Quick and Efficient Transactions: This Internet banking system allows for faster processing of transactions compared to traditional banking methods.
Transfers between accounts, bill payments, and other transactions can be completed with just a few clicks, saving time and effort.
Faster Access to Financial Information: With online banking, you can quickly access real-time information about your account balances, transaction history, and pending transactions.
Limited Physical Presence: Online banks do not have physical branches, so you may not have access to in-person customer service or assistance. This can be a disadvantage for individuals who prefer face-to-face interactions or need immediate support.
Dependence on Technology: Online banking requires access to internet-enabled devices, such as computers or smartphones. If you don’t have reliable internet access or encounter technical issues with your devices, it may hinder your ability to manage your account effectively.
Security Concerns: While online banking platforms have robust security measures, there is still a risk of online fraud, phishing attacks, or identity theft. It’s important to be vigilant, use strong passwords, and follow best security practices to mitigate these risks.
Limited Cash Access: Online banks may have limited options for depositing or withdrawing cash into your account. This can be a disadvantage for individuals who frequently deal with cash transactions or prefer the convenience of physical currency.
Potential for Technical Glitches: While online banking platforms strive to provide a smooth user experience, there is always a possibility of technical glitches or system failures. This can temporarily disrupt your access to your account or cause delays in processing transactions.
Learning Curve: Some individuals may need help adapting to the online banking interface or navigating the various features and functions. However, most online banking platforms are designed to be user-friendly and offer customer support to assist with any difficulties.
