NIBSS cuts instant transfer fees, but banks will not lower customer transaction fees

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NIBSS cuts instant transfer fees, but banks will not lower customer transaction fees


Nigerian Inter-Bank Settlement System (NIBSS), Nigeria’s largest payment infrastructure, has reduced the processing fee for transactions on its platform. How does that affect you?

According to documents seen by TechCabal, NIBSS has reduced the processing fee for transactions on NIBSS Instant Payment (NIP). The new ₦3.75 pricing for instant transfers—down from ₦5—will take effect on July 1, 2023. An anonymous source at NIBSS told TechCabal that the reduction resulted from commercial banks asking for a reduction in the cost of transactions. The source added that the reduction would not affect the transaction fees banks charge their customers.

It’s a position that financial services experts agree with. Adedeji Olowe, the founder of Lendsqr, told TechCabal, “[The] truth is, the impact would be nothing except the Central Bank compels banks to reduce pricing.” Olowe’s comments ring true, as only the CBN can instruct banks to reduce their transaction fees. Currently, banks charge a ₦10 fee for transactions under ₦5,000, ₦26 for transactions between ₦5,000 and ₦50,000, and ₦50 for transactions above ₦50,000.

Would the NIBSS reduction affect transfer fees for customers?

Abubakar Idris, a business journalist, told TechCabal that for banks and fintechs, “every kobo counts”. “A reduction in NIBSS fees won’t necessarily trigger any decrease in customers’ payment fees,” he said. Idris added that for fintechs, the cost of serving customers is not decreasing. “Server fees are in dollars, compensation for talent has become competitive, and rising inflation and devaluation mean businesses are already struggling to stay afloat”, he said.

Additionally, transaction fees are a critical revenue source for Nigerian banks. In 2022, Access Bank, Zenith Bank, Ecobank, and UBA made ₦145.7 billion, ₦132.8 billion, ₦200.9 billion, ₦128.2 billion, respectively, from fees and commissions. These figures made fees and commissions the largest or second-largest contributors to the banks’ non-interest income. It explains why the banks hope that the CBN doesn’t ask them to reduce their fees.

In December 2019, the CBN, in a move to offer stability and improve financial inclusion, compelled banks to reduce their fees. Some banks hesitated due to concerns over their profit margins. Their hesitance was met with fines.

But Charles Odogwu, the growth head for NowNow, believes that it’s not a binary conversation. He says that if banks lower transaction fees, it can “stimulate increased transaction volume”. He added that this could translate into more revenue opportunities for banks, “especially if they have a significant market share in electronic payment services”. On the flip side, he said that reducing transaction fees may impact banks’ profit margins. “If the price reduction is significant, banks may experience a decline in transaction fee revenue, which could affect their overall profitability”, Odogwu said.

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