Nigerian banks are losing ground in the digital payments race, with revenue from electronic business channels declining by 3.7 percent in the first half (H1) of 2025, highlighting fintechs’ rising dominance and the lingering problem of service downtime.

BusinessDay’s analysis of seven listed banks’ half-year earnings shows a mixed picture. Some lenders like FCMB Group, Zenith Bank, Guaranty Trust Holding Company (GTCO), and United Bank for Africa (UBA) reported declines, while First HoldCo, Stanbic IBTC Holdings Plc, and Sterling Financial Holding Company recorded growth in e-business income.

The banks collectively reported N223.8 billion in H1’ 2025, compared to N232.4 billion in the same period of last year.

Analysts attribute this uneven performance to a combination of prolonged network disruptions, regulatory pressures, and competition from fintech players.

Olumide Sole, head, Financial Institutions Research, Renaissance Capital Africa, said that during the period of system upgrades, some banks experienced downtime on their e-banking apps.

“At those moments, customers quickly migrated to fintech platforms, which were available and reliable. Fintechs didn’t smuggle themselves in; they simply offered a better experience.”

Decliners

Data gathered by BusinessDay show that FCMB Group, GTCO, Zenith Bank, and UBA declined the most by 30 percent, 12 percent, 11.8 percent, and 5.2 percent, respectively.

The dip in e-business earnings raises questions about how prepared banks are to compete in a rapidly digitizing economy.

E-business has historically been a strong revenue line for banks, often helping to cushion pressures from interest income. A sustained decline could squeeze profitability further, especially in a high-cost operating environment, experts say.

“The future of payments in Nigeria is being contested. Banks still dominate in terms of transaction value, but fintechs are rapidly outpacing them in transaction volume and customer stickiness,” said Sole.

However, banks like FirstHoldCo (25.1 percent), Stanbic IBTC (4.65 percent), and Sterling HoldCo (2.78 percent) benefited from the Central Bank of Nigeria (CBN)’s new withdrawal charges.

The CBN said the changes were part of broader reforms to align transaction costs with operational realities, according to a circular signed by John S. Onojah, acting director, Financial Policy and Regulation.

Downtime takes toll

In the third quarter (Q3) of 2024 and the first quarter (Q1) of 2025, many Nigerian banks, including GTB and Wema, undertook significant core banking software upgrades to modernize their operations and enhance customer experiences.

System upgrades in Nigerian banks often lead to glitches due to unrealistic deadlines set by CEOs aiming to reduce costs, according to a senior information security official at a major Nigerian bank, who asked not to be named to speak freely.

“These tight schedules make it difficult to avoid errors and vulnerabilities, and prolonging the upgrade makes it more expensive for them.”

Daba Omoregbee, an X user on September 20th, lamented her frustration on a bank’s platform, asking the financial institution to “go and fix your customer service.”

The X user complained that transferred funds from the bank’s app were not delivered, and the bank did not bother to inform customers that there was downtime.

The CBN has repeatedly expressed concern over frequent downtimes on banks’ platforms. Customers have often faced failed transfers, delayed reversals, and inaccessible mobile app experiences which undermine confidence. Each downtime episode translates to lost transaction volumes and, ultimately, shrinking e-business income.

“Service reliability has become a key differentiator. Whenever banks go down, fintechs like Opay, PalmPay, and Moniepoint are the immediate alternatives for customers. People no longer wait; they switch,” said a Lagos-based payments consultant.

Fintech seen winning the payment race

According to the Nigerian Interbank Settlement System (NIBSS), the value of mobile money transactions grew by 20.3 percent to N20.7 trillion in Q1’25 from N17.2 trillion in Q1’24.

For millions of Nigerians, fintech apps have become the default for everyday transactions, from bill payments to peer-to-peer transfers. This trend is reflected in the financial statements of several top fintechs.

Kuda Technologies, Nigeria’s digital bank, revealed that it processed N14.3 trillion worth of transactions across more than 300 million dealings in Q1 of 2025.

Babs Ogundeyi, company’s CEO, broke down the numbers as they related to retail and business banking platforms.

According to him, N8.5 trillion was generated from retail banking users, while business clients contributed N5.8 trillion.

Transfers, which remain largely free for users, continue to dominate activities on the platform, with business banking alone accounting for N1.5 trillion in transfers. Notably, the bank reported more paid transfers than free ones, signaling that Nigerian users are increasingly willing to pay for convenience when sending money.

Banks’ fintech arm, GTCO HabariPay and Access Hydrogen, also took large slices of fintech revenue.

In Q1’ 2025, Access Hydrogen’s after-tax profit surged by 466 percent to N283 million, up from N50 million in the same period of 2024.

On the other hand, GTCO’s HabariPay increased its profit 12-fold in three years, reaching a record N4.02 billion in H1 2025 from N322.9 million in H1 2022, according to GTCO’s six-month financial statements. (BusinessDay)