E-Financial
Banks’ Hidden Charges Hindering Financial Inclusion — Report
Banks are charging customers above regulatory limits and are making them pay undeclared charges, thereby hampering the country’s effort to reduce financial exclusion, a new report has said.
The report by the Innovations for Poverty Action and the Inclusion for All initiative, Measuring Fees and Transparency in Nigeria’s Digital Financial Services, released on Thursday contains the outcome of a study that examined compliance levels with existing fee structures, compliance with price transparency requirements, the reliability of transactions and the consistency of information available from customer service channels – highlighting a series of barriers that impact consumer trust in financial services.
Nigeria’s digital financial services ecosystem has rapidly evolved over the last decade due to increased broadband and mobile penetration and digital payments, which boost financial access in urban, rural, and hard-to-reach areas across the country.
This progress provides underbanked populations with greater access to digital banking products, mobile payments, savings and credit facilities – transforming the financial inclusion landscape. However, between 2018 and 2020, financial exclusion in Nigeria decreased by only 1 percentage point, from 37% in 2018 to 36% in 2020.
The report said the cost of financial services remains a major barrier to access for price-sensitive consumers, especially within marginalised, vulnerable, and lower-income segments of society.
In addition, any lack of transparency on product pricing, departures from regulated pricing and limits trust between customers and service providers.
A new collaboration between Innovations for Poverty Action and the Inclusion for All initiative aims to address the challenges and understand the ease of accessing accurate price information from providers and their levels of compliance with the revised pricing guidelines.
At the virtual launch of the report, Rashida Monguno, Director, Consumer Protection Department, Central Bank of Nigeria (CBN), commended IPA and Inclusion for All for the study, saying: “This groundbreaking research provides new evidence and insights on one of the most critical aspects of consumer protection which is pricing transparency.
“Consumers’ right to easily access and understand the cost of services they use is one of the most fundamental rights of consumers. The research provides a baseline for future audits and identifies several areas which require improvement. I trust that the results will be instrumental in exploring new conversations that will result in tangible changes in the digital financial services marketplace.”
The government regulator, the Central Bank of Nigeria (CBN), recognised the impact of product pricing on financial inclusion outcomes and reviewed pricing guidelines in 2019, issuing lowered pricing caps for electronic banking transactions effective January 2020. In addition, CBN encouraged financial service providers to restructure transaction fees and limits.
The action supports Nigeria’s digital financial services uptake, which increased during the covid-19 pandemic, where government responses such as lockdown restrictions led to the temporary closure of bank branches, reinforcing digital access.
Presenting key findings from the digital financial services audit, IPA revealed multiple areas where improvements may be required to enhance the consumer experience and assure compliance with existing regulatory frameworks.
Drawing on the new research, William Blackmon, the Financial Inclusion Research Manager, IPA, said: “Most providers do not list their prices on their website – contacting customer care can take a matter of hours. Limited pricing transparency wastes consumers’ time and comes at a high cost that lower-income customers simply cannot afford.”
Without accurate and accessible information – consumers cannot make informed decisions about the services they want to use; this reduces competition in the market. During the panel, Adedotun Ifebogun, Head, Retail & SME, Wema Bank, emphasised the need for a more holistic approach to the transparency of pricing that ensures customers’ evolving needs are met across all preferred platforms and locations.
“We are committed to understanding consumers’ preferred information points and how well and easily statements can be accessed, especially for communities at the last mile.
“Customer service has been identified as a preferred platform for consumers to get information. We see the need for training in this area to ensure good customer service since competition between banks and mobile money should be on service delivery and not necessarily on price, which is regulated. The solution will be a collaborative effort,” he said.
Speakers also exchanged perspectives on market events such as price fluctuations and promotions that affect price reliability.
Jay Alabraba, Chairman of, Association of Licensed Mobile Payment Operators (ALMPO), commented: “Even though there are challenges with price transparency and reliability, we need to acknowledge that transparency and reliability are already an industry focus. And in speaking of serving consumers best, business sustainability is critical. In a way forward, sufficient dialogue between industries and telcos is key.”
Driving debate on the reliability of transactions and the impact of infrastructure on the financial service provider ecosystem, Gbenga Adebayo, Chairman, Association of Licensed Telecoms Operators of Nigeria (ALTON), said: “Several consumers are connected to Nigeria’s 2G and 3G networks which offer less reliable data access. Naturally, this impacts access to higher-quality network coverage and influences customers’ ability to transact. Further, pricing on USSD has not been transparent historically; this is a legacy issue that impacts customer confidence.”
The prospects of active data protection and security has brightened with the partnership between Nigeria Data Protection Commission (NDPC) and banks to create awareness about the requirements and operations of the Data Protection Act.
With more than two-thirds of Nigerians’ personal data and transactions in excess of a billion, banks arguably have the largest private data bank and are seen as critical stakeholders in data privacy and security.
While banks constitute less than one per cent of the over 500,000 data processors’ organisations in Nigeria, their huge customers’ base and data make them one of the most significant pillars of national data protection and security.
The KPMG West Africa Banking Industry Customer Experience Survey 2023 found that “the security, integrity, and privacy offered by banks continue to be important values for customers”, with a sense of security and privacy moderating customers’ choices. The survey also found a notable increase in digital lending, which exposes customers’ data to more online activities.
President, Association of Corporate & Marketing Communication Professionals of Banks (ACAMB), Mr. Rasheed Bolarinwa, during a working visit to NDPC headquarters in Abuja, engaged with the top management of the data protection agency with a view to achieving stronger collaboration with the financial services sector.
He said a stronger working relationship between NDPC and banks and other operators in the financial services sector would enhance regulatory oversight and achievement of the goals of individuals’ data protection and private security.
Dr. Vincent Olatunji, National Commissioner and Chief Executive Officer, Nigeria Data Protection Commission (NDPC), assured ACAMB of the NDPC’s willingness to collaborate with financial sector players.
According to him, the Commission’s role is not punitive but rather to ensure full compliance with the Data Protection Act.
He welcomed ACAMB and NIPR Finance Hub’s offer to support the Commission’s advocacy efforts.
He noted that the NDPC’s mandate is to safeguard individuals’ data privacy rights, foster safe personal data transactions, and prevent the misuse of personal data, among other objectives.
Analysts said collaboration between banks and NDPC would be a game-changer for Nigerian data security given banks’ extensive investments and experience in data privacy.
Financial Institutions Training Centre (FITC), has reported an 8,993 per cent rise in fraud losses in Nigeria banks, totaling N42.6 billion in second quarter of this year.
The report noted that the amount lost between April and June 2024 alone exceeded the N9.4 billion lost to fraud by the banks throughout the entire 2023.
According to the FITC Report on Fraud and Forgeries, Quarter 2, 2024, which was released on Saturday, the Q2 loss shows an 8,993 per cent increase in loss when compared with the N468.4 million lost in Q1 2024.
This also represents a 637 per cent increase when compared with the N5.7 billion loss recorded in Q2 2023.
FITC said ‘miscellaneous and other fraud’ types constituted the largest loss, representing 96.46 per cent of the total amount lost, with a value of N41.14 billion.
This was followed by losses from fraudulent withdrawals and computer/web fraud, amounting to approximately N781.2million and N400.7million, respectively.
The FITC report stated that there was a staggering 1,784 per cent increase in the total amount involved in fraud cases from Q1 to Q2 2024, with the sum escalating from N2.9billion to approximately N56.3billion in Q2.
The increase via cash is likely to be fuelled by the demand for cash ransom for kidnapped citizens by bandits.
A further analysis of the data shows a significant rise in the amount lost across all channels, except for mobile fraud, which recorded a decline.
In terms of magnitude, losses through bank branch-related channels rose by 31,497 per cent to a value of N42.2 billion in Q2 from N133.9 million in Q1 2024.
Additionally, computer/web frauds also saw a monumental increase of 1,560 per cent, with losses growing from N24million to N400.8million.
However, there was no indication of the amount lost due to ATM-related fraud, while mobile fraud recorded a decline in the amount lost from the previous quarter, decreasing by 59 per cent from N216.4 million in Q1 to N88.7 million in Q2 2024.
During the second quarter of 2024, fraudulent activities were carried out through various channels, including ATMs, online platforms like web and mobile banking, bank branches, and point-of-sale (POS) terminals.
Among instruments used, card fraud recorded a significant decrease, declining by 47.66 per cent. from 21,469 in Q1 to 11,237 in Q2.
In contrast, fraudulent activity involving cheques and cash increased by 36.67 per cent and 9.09 per cent, respectively, with cheques surging from 30 cases in Q1 to 41 cases in Q2, while the use of cash rose from 209 in the first quarter of 2024 to 228 in the second quarter of 2024.
With the staggering increase in losses to fraud, the FITC advised the banks to enhance their monitoring and auditing procedures.
According to the Centre, deposit money institutions can utilize AI-driven tools that flag unusual entries or patterns to implement continuous and automated monitoring systems that can detect anomalies or discrepancies in settlement files.
Additionally, regular unannounced internal audits focusing specifically on settlement processes can be conducted to identify and address any irregularities promptly.
“Access controls should also be strengthened by limiting access to settlement files to only a small, vetted group of authorised personnel given the appropriate clearance and are regularly trained on the latest security protocols.
“The implementation of multi-factor authentication (MFA) and role-based access controls (RBAC) can aid the reduction of the risk of unauthorised changes to settlement files,” FITC stated.
Huawei has won a $3 million cloud computing contract from the United Bank for Africa (UBA), which will see Huawei provide UBA, one of Nigeria’s largest financial institutions, with 200 petabytes of storage, as well as cloud computing solutions.
The deal is particularly notable given IBM’s longstanding stronghold on Nigeria’s banking sector.
UBA reportedly chose Huawei for its more cost-effective and scalable offering, which comes as UBA’s existing infrastructure was reaching capacity.
Zhang Li, VP of Huawei Cloud Africa, said of the deal: “This is a milestone achievement for Huawei Cloud in Nigeria and Africa at large. UBA is a key player in the African banking industry, and we are excited to help them drive digital transformation. We believe this partnership will be a game-changer for the financial sector in Africa.”
The contract will help UBA with its digital transformation efforts and is hoped to improve its operational efficiency, data storage, and customer experience.
UBA had previously relied on IBM and VMware for storage and virtualization technologies. However, VMware’s shift to a subscription model following the acquisition by Broadcom saw licensing costs for UBA nearly triple.
This is the second cloud migration story we have covered this week alone that cites the Broadcom/VMware acquisition as a motivating factor, the other being the University of Waikato.
Other banks in Nigeria including Zenith Bank, Fidelity, Opay, and First Bank are also adopting Huawei’s cloud computing solutions, some opting for a hybrid approach by also using IBM’s technology for critical workloads.
Huawei is reportedly in talks with a least one other major Nigerian bank for cloud and storage services.
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