…as banks generate N104bn income from e-business transaction fees
By Elizabeth Adegbesan
Customers of leading 11 banks paid N74 billion as account maintenance fees in the first half of the year (H1’19) even as the banks generated N104 billion as income from electronic business transaction fees and commission during the period.
The banks includes: Acess/ Diamond Bank, Zenith Bank, United Bank of Africa (UBA), Guarantee Trust Bank, (GTB), First Bank of Nigeria (FBN), Ecobank, Fidelity Bank, FCMB, Heritage Bank, Wema Bank and Union Bank
The figure represents about 11 percent growth over N67 billion recorded in the corresponding period of 2018.
Almost half of the charges were born by Ecobank customers as they paid N36.34 billion during the period, followed distantly by Zenith Bank customers (N9.6 billion).
Wema Bank customers paid the least in account maintenance fees totalling N536.4 million, which was represented 18 percent decline against N653 million in H1’18.
Analysis of income portfolio of the banks show that with the expansion in cashless banking and adoption of digital banking, the bank’s fee income is now being dominated by electronic banking services.
Data obtained by Vanguard Money Digest indicate that income generated from e-business transaction fees and commission during the period grew 54 percent to N105.4 billion in H1’19 from N68.37 billion in H1’18.
Moreover, the e-banking income profile is now about 47 percent of the net fees and commission of the banks, the highest contributor to the portfolio.
Again the bank with the highest transactions fees income is Ecobank (N14.23 billion) up by four percent from N13.63 billion in H1’18.
Meanwhile, the value of Nigerian Interbank Settlement System (NIBSS) Electronic Fund Transfer (NEFT) declined by 20 percent to N11.6 trillion in five years.
Vanguard Money Digest analysis of data from NIBSS e-payment factsheet for 2014-2018 showed that the value of NEFT declined by 20 percent to N11.6 trillion in 2018 from N14.56 trillion in 2014.
Further analysis showed that value of NEFT transactions dropped by 10 percent to N13.09 trillion in 2015, down by eight percent to N12 trillion in 2016 and 0.42 percent to N11.95 trillion in 2017. The value of NEFT transactions further declined by three percent to N11.6 trillion in 2018 and stood at N11.59 billion as at first half 2019.
Commenting on the account maintenance fees , President, Bank Customer Association of Nigeria, BCAN, Dr. Uju Ogubunka said: “There are two possibilities for the rise in account maintenance fees. One is that in the financial inclusion initiative that is going on more people are coming into the banking industry. As they come in the banks will have to charge them for the various transactions they are doing including the rise that you mentioned in account maintenance fee. That could be one of the reasons.
But it needs to be verified, how many people are coming into the banking industry?
“The second one is that banks have been accused of overcharging their customers and that could also be part of the reason why there is rise in the income if they have been overcharging truly as have been accused.”
On e-business income generated by the banks, he said: “If everybody is making increased income from e-business, that augurs well for the economy. It means that transaction levels are increasing through the online banking platforms. We have less cash movement in the economy which reduces costs of printing naira notes and increases the means of people to fast track their transactions without necessarily going into the banking halls.
“So, I think it augurs well for all of us as long as they are done willingly and they don’t include all those fraudulent charges. So we are looking at genuine transactions.”
On decline in NEFT transactions he noted: “Some transactions that pass through NEFT are usually of high value. This tells you that businesses are having challenges, because if they are not having challenges, those high transaction values will continue to go through that channel.
‘‘But people are depending more now on transactions from the bank which are within those limit and what that is signifying is that the economy is having issues of growth and some businesses are having challenges using the application, perhaps. I think these two factors should be investigated to know where the problem is coming from.
“The trend will continue if we don’t up the games in the economy and probably be worse than that because already a lot of people are incapacitated with what is happening in the economy and the businesses are not thriving as well. If they are not thriving the volume and value of NEFT transactions will come down further.
‘‘It is only when your business is growing that you will have volume of transactions to pass through NEFT.”
On his part, Managing Director/Chief Executive Officer, Motion Yield Limited, Abiodun Oyelaja, said: “The decline in value of NEFT transactions can be attributed to preference for NIP (NIBSS Instant payment). NIP is instant transfer that is deposited into the receiver’s account within minutes while NEFT drops the fund the next working day (for transfers after noon).
“As customers prefer getting their payments instantly, they use NIP hence, the reduction in value of transactions processed under NEFT. In addition, the NEFT services are not available on weekends and holidays thus encouraging the use of NIP (which is available 24 hours).
“Presently, NEFT is mostly used for transactions involving many (usually more than 50) accounts. Example of this is the salary payment of government staff and large companies.
“The preference of customers for the NIP platform indicates that people are becoming more aware of the need to use the transfer services of financial organizations to get faster, safer and more convenient payments. The customers prefer to get their funds instantly instead of waiting till the following working day. The effect of this is that, more business transactions are done even on weekends and holidays.
“It is expected that, the value of transactions on the NEFT system will further reduce as the preference for NIP grows amongst the populace.”