Banks earn 216 billion naira from online banking revenues amid threat from competing banks – Nairametrics
Nigerian banks raked in naira 216.52 billion from their e-commerce revenues in the year 2020 as Tier 1 banks generally knowm as FUGAZ (First Bank, UBA, Access Bank, GT Bank and Zenith Bank) topped the list of highest incomes.
Digital channel income is also classified as e-commerce products or banking income by the majority of commercial banks. Nairametrics gathered this research from the audited financial statements of 12 of the country’s major banks. The same banks reported 217 billion naira in revenue from digital channels in 2019 slightly plunging 0.24%.
- Banks attribute the reason for the decline in 2020 compared to 2019 to the revision of commissions and fees for wire transfers by the central bank in early 2020.
- January 1stst, 2020, the CBN inaugurated a new banking fee regime. While these primarily affected things like card maintenance fees, fees for hardware tokens, they also affected the amount that could be paid for electronic transfers.
- For example, a graduated fee scale for electronic transfers replaced the current flat rate of N50, so that transfers below N 10,000 are now billed at a maximum of N 10; and transfers greater than 50,000 N, 50 N.
- The USSD fees were also reduced a few months later, announcing that customers will pay a flat fee of N 6.98 per transaction each time they use USSD services starting Tuesday, March 16, 2021.
- The Covid-19 pandemic also played a major role in the performance of banks as it affected the expansion of digital deployment plans earlier in the year. However, the pandemic will tip in their favor as Nigerians increasingly rely on mobile banking for transactions while avoiding bank halls for fear of contracting Covid-19.
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Banks and digital channels
Nigerian banks are increasingly using income generation from digital channels such as their mobile apps, USSD channels and online banking targeting Nigerians from all walks of life. Efforts to increase revenues from digital channels have been strongly supported by the Central Bank through initiatives such as BVN, POS and other banking policies promoting financial inclusion.
As apex bank’s policy aimed to reduce the number of unbanked people in the country, banks have seized the opportunity to offer a wide range of services that are increasingly an alternative source of income. According to the NIBSS, the total value of wire transfers for 2020 exceeded 158 trillion naira in 2020, a 50% growth from 2019. Transaction volume also reached 2 billion, up 77% from 2019. compared to 2019.
READ: Zenith Bank spends 20 billion naira on IT in 2020, up 122%
Rise of the challenger banks
Banks will face stiffer competition in 2021, as Challenger banks such as Kuda Bank and V-Bank are more capitalized after attracting significant funding in recent months. These banks are offering zero fees as an attractive selling point that they hope will influence customers of large commercial banks that have long since started monetizing their platforms.
Challenger banks usually make money from other sources such as providing bespoke services around savings and investments with their customers. So, rather than relying on the digital revenues generated by the fees and charges per transaction, they earn by engaging in banking activities, lending funds to depositors and investing their float.
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Here are the top earnings in 2020:
Apart from Access Bank, UBA and FBNH, all other banks recorded year-over-year declines. For example, Zenith Bank and GTB recorded a decrease of 36% and 25% respectively.
However, Access Bank and UBA both recorded increases of 56% and 14% respectively, topping 56 billion naira and 44.2 billion naira respectively. Access Bank is now the largest bank that makes money from e-commerce revenue, overtaking FBNH, which recorded N48 billion from e-commerce revenue, the highest in 2019.
Fifth position – GT Bank (11.77 billion naira)
Guaranty Trust Bank, the most capitalized financial institution listed on the Nigerian stock exchange generated a sum of 11.8 billion naira of its e-business unit, accounting for around 5.4% of total e-commerce revenue in 2020.
- Its e-business turnover fell sharply by 24.85% compared to the 15.66 billion naira recorded the previous year.
- The bank, however, posted an after-tax profit of 201.44 billion naira in 2020 (second only to Zenith Bank), an increase of 2.33% from the 196.85 billion naira recorded in 2019.
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Fourth position – Zenith Bank (27.08 billion naira)
Zenith Bank won a sum of N27.08 billion dollars from its e-business in 2020 to rank fourth on the list behind UBA.
- Its revenues from e-business represent 12.5% of the total revenues generated by the twelve banks. Zenith Bank’s e-commerce revenue fell a whopping 36.3 percent in 2020, compared to N42.5 billion recorded in 2019.
- However, Zenith Bank posted the highest profit of 230.6 billion naira during the period under review, increasing its after-tax profit by 10.4% from the 208.8 billion naira recorded in 2019.
Third position – UBA (N44.25 billion)
UBA retained its third place position with total e-commerce revenue of N44.25 billion, representing 20.4% of the total e-commerce income generated by banks on our list.
- UBA recorded a 14.14% increase in e-business revenue in 2020 compared to N38.8 billion recorded the previous year.
- UBA has also stepped up efforts to build on its 2020 success by launching a new mobile banking app, which aims to improve the ease of transaction by their customers.
- The Tier 1 bank posted an after-tax profit of 113.77 billion naira in 2020, an increase of 27.7% from the 89.09 billion naira recorded the previous year.
Second position – FBN Holdings (N48.68 billion)
First Bank lost its first position to Access Bank, slightly increasing its e-commerce revenue by 1.35% to reach N48.68 billion in 2020. Its e-business turnover represented 22.5% of the e-business income recorded by the twelve banks considered.
- Despite being one of the oldest banks in the country, First Bank has been at the forefront of the mobile banking revolution.
- The bank was one of the pioneers of the USSD platform which is used to transfer money through a text messaging application from a mobile phone. and continued to create products in the electronic space.
- For example, in November 2020, First Bank launched a next-generation ATM, called FastTrack ATM, designed to eliminate the need for physical interaction with the automated machine..
- This was due to the need to reduce physical contact with people and substances, due to the spread of covid-19 in the country.
First position – Access bank (56.09 billion naira)
Nigeria’s largest bank in terms of total assets toppled First Bank, Zenith and UBA to take the No. 1 position with e-commerce revenues of 56 N.09 billion in 2020.
- Access Bank was in fourth position in 2019, but catapulted to number one as it increased its e-commerce revenue by a whopping 55.64% of N36.04 billion recorded the previous year.
- This increase also translated into a 12.71% growth in after-tax profit. to be 106.01 billion naira in the examination period from N94.06 billion recorded in 2019.
- Access Bank mentions that its e-commerce revenue includes revenue from its channel business.
The increase of itThe e-commerce turnover is not a surprise as the Tier 1 bank spent a sum of N18.7 billion on IT and e-commerce related initiatives in the same year, against 9.7 billion naira incurred during the same year. the previous year and 11.39 billion naira in 2018, a movement that has clearly translated into an increase in e-commerce revenues.
According to a recent article Published by Nairametrics, Access Bank said it created 4 million digital loans during the year under review and disbursed 105 billion naira in loans through its digital lending platform., indicating 48% year-on-year growth.
- FCMB – 8.61 billion naira
- Union Bank – 7.04 billion naira
- Sterling bank – 4.97 billion naira
- Stanbic IBTC – N2.74 billion
- Wema Bank – 2.61 billion naira
- Fidelity Bank – 2.46 billion naira
- Jaiz Bank – 214 million naira
At the end of the line
The disruption caused by the covid-19 pandemic plunged into the revenue generated by Nigerian banks from their online businesses, however, they were able to offset this through their multiple revenue streams which resulted in an outstanding overall performance of the bank. sector. It should be noted that only Access Bank, UBA and First Bank recorded growth in e-commerce revenues during the period under review.