Tier-2 Banks’ Commission from Customers Up 14% to N219.77bn Amid Severe Competition

Kayode Tokede

Amid severe competition from Fintech companies, six banks operating in Nigeria generated a sum of N219.77billion fees and commission for the year ended December 31, 2022 representing an increase of 14 per cent from N192.22billion reported in 2021.

The six banks investigated include; Stanbic IBTC Holdings Plc, FCMB Group Plc, Fidelity Bank Plc, Sterling Bank, Wema Bank Plc and Unity Bank Plc.

The banking sector witnessed renewed competition in electronic transactions in 2022, given the Central Bank of Nigeria (CBN) Payment Service Bank (PSP) license to Airtel Africa Plc and MTN Nigeria Communication Plc.  

The six banks fees and commission income were generated from account maintenance charges, commission on electronic -banking activities, Commission on travellers’ cheque and foreign bills.

Earnings from electronic banking include fees charged to customers for the use of digital channels, such as debit cards, mobile applications, (Unstructured Supplementary Service Data) channels, POS, and other related online banking services.

Data released by the Nigeria Inter-Bank Settlement System (NIBSS) showed that bank customers in Nigeria transferred a total of N19.4 trillion over mobile in 2022, representing an increase of 142 per cent increase compared to N8 trillion worth of transactions in 2021.

The NIBSS data also shows that the volume of mobile inter-scheme transactions rose by 151per cent year on year from 284.5 million recorded in 2021 to 609 million in 2022.

THISDAY analysis of the NIBSS numbers revealed that Stanbic IBTC Holdings reported N96.4 billion fees and commission in 2022, representing an increase of 9.15 per cent from N88.32 billion reported in 2021, while Fidelity Bank reported N34.42 billion fees and commission in 2022, a growth of 17 per cent from N29.41billion reported in 2021.

For FCMB Group, it reported N44.03 billion in 2022, up by 24 per cent from N35.59 billion in 2021 as Sterling Bank reported N20.65 billion in 2022, an increase of nearly seven per cent from N19.36 billion reported in 2021.

In addition, Wema bank announced N16.6billion fees and commission in 2022 from N13.42billion in 2021 as Unity Bank announced N7.69billion in 2022, an increase of 26 per cent from N6.12billion reported in 2021.  

Despite the six banks growing fees and commission income in 2022, Fintech companies like Paystack, Palmpay, PiggyVest, Kuda Bank, among others have introduced innovating past traditional institutions by making digital financial services like lending, savings, or investing readily available to customers.

Also, other Fintech startups have fuelled the growth of alternative lenders which offer both higher yields to investors and faster, cheaper, more convenient loans for borrowers compared to traditional banks.

Startups like Carbon, Fairmoney, Branch, Palmcredit offer lower loan rates than banks and this is mostly because fintech companies are not subject to the operational costs involved in running a traditional bank with multiple branches.

Analysts said that the entrance of telecommunications into the financial services space heighten competition especially with banks and Fintech companies currently operating in the country.

They expressed further that, competition is necessary to drive financial inclusion through the provision of diverse and convenient financial services to the unbanked population.

Speaking, Vice President, Highcap Securities, Mr. David Adnori said through the recent impact of technology and financial literacy, the word ‘Bank’ now connotes different reactions to different people.

According to him, “Personalised financial growth, opportunities for business collaborations, access to foreign investment opportunities, transferable generational wealth, and financial security all on one’s terms are some of the prevailing thoughts for customers.”

President, Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, expressed that the PSP licenses to telecommunications had less impact on banks fees and commission due to the number of unbanked Nigerians.

According to him: “So many people were excluded from the financial inclusion and with mobile companies involved in payment services, it will expand the scope and increase number of people in the financial affairs of the country.”

He said that the mobile money payment sector going to witness competition with banks, given the outreach telecommunication companies have across the country.

He added, “I think telecommunication companies are going to compete with banks and it may drive down cost and bring about efficiency in the sector. Once we have serious competition, we may have a reduction and customers will be looking for better price settlement.”