The processing cost that is applied to transactions completed through NIBSS Instant Payment (NIP) has been lowered.
On the first of July in 2023, the price of immediate transfers will change to 3.75 yen, down from 5 yen previously.
Reports say that the drop in fees was the consequence of commercial banks asking for a reduction in the costs associated with transactions. According to the source, the reduction will not have any effect on the transaction costs that banks charge their respective consumers.
Experts in the field of financial services are in agreement with this position.
According to comments made by Adedeji Olowe, founder of Lendsqr, “The truth is, the impact would be nothing except the Central Bank compels banks to reduce pricing.” The CBN is the only institution that has the authority to force banks to lower their transaction costs, thus Olowe’s statements ring true.
At the moment, banks levy a fee of 10 for every transaction that is less than 5,000, 26 for any transaction that is between 5,000 and 50,000, and 50 for any transaction that is greater than 50,000.
Read also: NIBSS to cut electronic transfer fee from July
Would there be an impact on transfer costs for clients due to the reduction in NIBSS?
Abubakar Idris, a business journalist, stated that “every kobo counts” for financial institutions and fintech companies. “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.
In addition, transaction fees are an essential source of revenue for banks in Nigeria. The total amount of money produced from fees and commissions in 2022 by Access Bank, Zenith Bank, Ecobank, and UBA was as follows: 145.7 billion, 132.8 billion, 200.9 billion, and 128.2 billion correspondingly. Due to these data, fees and commissions were the most significant or second-most significant sources to the banks’ non-interest income. This helps to understand why the banks harbour the expectation that the CBN will not request that they lower their rates.
Orders from CBN
In an effort to maintain stability and broaden access to financial services, the Central Bank of Nigeria (CBN) in December 2019 ordered banks to lower their costs. Some financial institutions were hesitant as a result of worries regarding their profit margins. They were given fines in response to their hesitation.
However, Charles Odogwu, who is in charge of expansion at NowNow, is of the opinion that this discussion is not black and white. According to him, a reduction in the transaction fees that banks charge can “stimulate increased transaction volume” if the banks do this. He went on to say that this might open up new prospects for revenue for banks, particularly in the event that the banks already hold a major portion of the market for electronic payment services. On the other hand, he indicated that there could be an effect on the profit margins of banks if transaction fees were lowered. If the price cut is substantial, the bank may see a fall in the money they receive through transaction fees, which may have an effect on the bank’s overall profitability.