Nigerian banks are charging customers beyond regulatory limits and charging unreported fees, hampering the country’s efforts to reduce financial exclusion, according to a new report.
The report by the Innovations for Poverty Action and Inclusion for All initiative, Measuring Fees and Transparency in Nigeria’s Digital Financial Services, released on Thursday, contains the results of a study that looked at levels of compliance with existing fee structures, the compliance with price transparency requirements, the reliability of transactions and the consistency of information available from customer service channels – highlighting a series of obstacles that affect consumer confidence in financial services.
Nigeria’s digital financial services ecosystem has evolved rapidly over the past decade due to increased broadband and mobile phone penetration and digital payments, which are boosting financial access in urban, rural and difficult to access across the country.
These advancements are providing underbanked populations with greater access to digital banking products, mobile payments, savings and credit facilities, transforming the landscape of financial inclusion. However, between 2018 and 2020, financial exclusion in Nigeria only decreased by 1 percentage point, from 37% in 2018 to 36% in 2020.
The report indicates that the cost of financial services remains a major barrier to access for price-sensitive consumers, particularly within marginalized, vulnerable and low-income segments of society. Furthermore, any lack of transparency on product pricing, deviations from regulated pricing and limits trust between customers and service providers.
A new collaboration between Innovations for Poverty Action and the Inclusion for All initiative aims to address challenges and understand the ease of access to accurate pricing information from providers and their level of compliance with revised pricing guidelines.
During the virtual launch of the report, Rashida Monguno, Director of the Consumer Protection Department of the Central Bank of Nigeria (CBN), praised IPA and Inclusion for All for the study, saying, “This research revolutionary provides new evidence and information on one of the most critical aspects of consumer protection, namely price transparency.Consumers’ right to easily access and understand the cost of the services they use is one of the most fundamental consumer rights. The research provides a baseline for future audits and identifies several areas that need improvement. I hope the results will be instrumental in exploring new conversations that will result in change tangible in the digital financial services market.
The government regulator, the Central Bank of Nigeria (CBN), has recognized the impact of product pricing on financial inclusion outcomes and revised pricing guidelines in 2019, issuing lower pricing caps for products. electronic banking transactions as of January 2020. In addition, the CBN has encouraged financial service providers to restructure transaction fees and limits. The action supports the adoption of digital financial services in Nigeria, which has increased during the covid-19 pandemic, where government responses such as lockdown restrictions have led to the temporary closure of bank branches, boosting access digital.
Outlining key findings from the digital financial services audit, the IPA revealed several areas where improvements may be needed to enhance the consumer experience and ensure compliance with existing regulatory frameworks. Drawing on the new research, William Blackmon, Financial Inclusion Research Manager, IPA, said: “Most providers don’t list their prices on their website – contacting customer service can take a few hours. . Limited price transparency wastes consumers’ time and has a high cost that low-income customers simply cannot afford.
Without accurate and accessible information, consumers cannot make informed decisions about the services they want to use; this reduces competition in the market. During the panel, Adedotun Ifebogun, Head, Retail & SME, Wema Bank, highlighted the need for a more holistic approach to price transparency that ensures changing customer needs are met across all platforms and locations. favourites.
“We are committed to understanding consumers’ preferred information points and the quality and ease of access to statements, especially for last mile communities. Customer service has been identified as a preferred platform for consumers to obtain information. We see the need for training in this area to ensure good customer service because the competition between banks and mobile money must be about the provision of services and not necessarily about the price, which is regulated. The solution will be a collaborative effort,” he said.
Speakers also exchanged views on market events such as price fluctuations and promotions that affect price reliability. Jay Alabraba, President of the Association of Licensed Mobile Payment Operators (ALMPO), said: “While there are challenges with price transparency and reliability, we must recognize that transparency and reliability are already at the heart of the industry. And speaking of serving consumers better, business sustainability is key. To move forward, sufficient dialogue between industries and telecommunications operators is essential. »
Leading the debate on the reliability of transactions and the impact of infrastructure on the ecosystem of financial service providers, Gbenga Adebayo, President of the Association of Licensed Telecoms Operators of Nigeria (ALTON), said: “Many consumers are connected to Nigeria’s 2G and 3G networks which offer less reliable data access. Naturally, this impacts access to better network coverage and the ability of customers to transact. Additionally, pricing on USSD has not been transparent historically; this is a legacy issue that impacts customer trust. »
Among other key findings, the Innovation for Poverty Action and Inclusion for All study found that:
Across all transaction types, less than 50% of customer service representatives provided fees identical to what our auditors observed.
Auditors were able to find price lists on only 2 out of 29 suppliers included in the study.
Only 14% of providers offered toll-free lines, and the median cost of airtime for non-toll-free lines was 123 naira.
Depository banks provided more inconsistent fee information than mobile money providers.
Mobile money providers were more likely to provide free information.
60% of attempted transactions in the study were successful, while 40% failed.
Transactions with depository banks had more than 20 percentage points higher chance of success than mobile money transactions.
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