The growing smartphone penetration in Nigeria and a shift towards mobile applications as the preferred means of conducting transactions is driving online transfers, relegating ATM transactions to the background.
The growth in mobile phone penetration in Nigeria, coupled with initiatives led by the Central Bank, has led to a sustained shift in user behaviour towards mobile applications as the preferred means of conducting transactions, increasingly replacing traditional cash-based methods.
A new report by Zone, in partnership with TechCabal Insights, sheds light on how Nigerians have transitioned from ATMs as the primary means of conducting financial transactions to online transfers. In 2012, at the commencement of the CBN’s Payments System Vision (PSV2020), ATM transactions in Nigeria totaled ₦1.98 trillion, while online transfer payments for the same period were valued at ₦31.57 billion. The following decade witnessed an explosion in online transfers. As of 2022, ATM transactions were valued at ₦32 trillion, while online transfers soared to ₦783.6 trillion, marking an astounding 2610.15percent overall increase and a 43.78percent year-on-year growth.
Data from the report reveals that 36percent of Nigerians above 15 own a debit card, with one of the largest card payment companies, Verve, claiming to have issued around 35 million active payment cards as of 2022.
Here are five key insights from the Nigerian Payments Report 2024:
Surge in online transfers driven by digital adoption
The total transaction value for online transfers grew from ₦545.03 trillion in 2021 to ₦783.66 trillion in 2022, marking a substantial 43.78percent year-on-year increase. The total volume of transactions similarly increased by 36.26percent, from 10.32 trillion to 14.06 trillion within the same period. This growth indicates an improved digital payment infrastructure, enabling businesses to actively promote online payments and reflecting increased consumer trust in digital platforms for e-commerce, bill payments, and peer-to-peer transactions.
Decline in ATM transactions attributed to increasing smartphone penetration
Although the total transaction value of ATM transactions increased by 53.78percent year-on-year, from ₦21.23 trillion in 2021 to ₦32.64 trillion in 2022, there was an 8.55percent decline in volume, from 4.45 billion in 2021 to 4.07 billion in 2022.
There has been a noticeable evolution in ATM usage over the years. As of 2010, Nigeria had about 7,100 ATMs, rapidly growing to over 11,000 in 2011 due to the CBN mandating banks’ removal of offsite deployment. In the following decade, the number of ATMs doubled peaking at 22,600 in 2021, which has remained as of December 2023. However, there’s still a demand for ATMs, with an estimated 60,000 ATMs required to meet up with its growing population. This has led to an increasing adoption of alternative banking channels.
This shift underscores a trend towards digital payments, such as POS terminals, mobile wallets, and online transfers, signalling increased smartphone and internet usage. POS transfers experienced a 17.00percent increase in total volume, rising from 982.83 million in 2021 to 1.14 billion in 2022.
Mobile app transfers, with a total volume of 831.54 billion in 2021, increased to 1.86 trillion in 2022, reflecting a 123.85percent change in transaction volume. The total transaction value for mobile app transfers increased from ₦53.20 trillion in 2021 to ₦111.12 trillion in 2022—a noteworthy 108.84percent year-on-year growth.
Smartphone penetration in Nigeria is growing and is projected to hit 60percent by 2025, with over 143 million Nigerians owning smartphones. The uptick suggests confidence in the security provided by digital payment platforms, showcasing progress toward financial inclusion.
Mobile money operators witness remarkable growth
Mobile money (MMO) transfers in Nigeria witnessed a 151.18percent increase in total volume, rising from 248.5 million in 2021 to 714.5 million in 2022. Concurrently, the total transaction value rose from ₦8.06 trillion in 2021 to ₦19.4 trillion in 2022, marking a significant 140.73percent year-on-year increase. The convenience and accessibility offered by mobile money services, particularly in remote or unbanked areas, have been key drivers of this growth.
NIBSS Instant Payment (NIP) gains traction
Transactions via the Nigeria Interbank Settlement System (NIBSS) witnessed a 47.99percent increase in total volume, rising from 3.47 billion in 2021 to 5.14 billion in 2022. The total transaction value surged from ₦271.95 trillion in 2021 to ₦387.07 trillion in 2022, representing a 42.33percent year-on-year increase.
Regulatory initiatives driving payment system evolution
An emphasis on the role of regulatory initiatives in driving the evolution of Nigeria’s payment system plays prominently. The CBN’s PSV2020 and PSV2025 have been instrumental in promoting digital payments and financial inclusion. Through NIBSS, the CBN provides the framework for Real-Time Gross Settlement (RTGS). The growth of payment methods and channels, such as online transfers, NEFT transfers, and NIP transfers, is a testament to the effectiveness of these initiatives.
(BusinessDay)
