CEM REPORT, FINANCE | Digital financial transaction increased in an unprecedented volume during the cash crunch consequent of the naira redesign and distorted circulation. The increase meant more attention on digital payment systems provided by commercial banks and fintech companies.
Palmpay Limited which is one of the fintech companies acquired 22 million new users within the first quarter of 2023, shooting its users to 24 million in the quarter from just 2 million in the last quarter of 2022.
The Chief Executive Officer (CEO) of Palmpay, Chika Nwosu, disclosed this at the maiden edition of the Executive Roundtable Discussion organized by Continental Economy Magazine to evaluate the entire electronic transfer space in Nigeria.
At the event titled “Capacity Evaluation of Nigeria Electronic Transfer System” held in Lagos and virtually transmitted, experts opined that the nation’s electronic payment system needs a thorough overhaul.
While they added that the system has been significantly improved from the early days of the cash crunch, more work still needs to be done to get the system to accommodate the Nigerian market.
Speaking on the subject, Chika Nwosu stated that Fintechs which are products of the CBN’s financial inclusion strategy became the saving grace in the days of the cash crunch, he revealed that palmpay now has over 24 million users on its platform.
He said that before the cash crunch, many Nigerians were not literate about the Fintechs hence the low patronage, adding that the need to transact in a cashless economy led to the discovery of the benefits of the fintechs.
Explaining how the fintech was able to withstand the pressure, he stated that the fintechs were better prepared for such an influx than the conventional banks, noting that the fintechs already built a system capable of accommodating the Nigerian market which the commercial banks did not have.
He stated that fintech operates a wallet system of banking leveraging technology that allows users to own an electronic wallet which can be used to transact cash.
Discussing how the fintech was able to edge over many commercial banks in the transfer business, Nwosu said the fintechs bank with various commercial banks making transactions seamless for the payment system providers.
This implies that the fintechs operate accounts with the commercial banks from which it is debited when the fintech customer initiates a transaction to such bank.
What this means, is the fintech owns an account with Bank A. When it customer initiates a transaction to credit Bank A the fintech account in Bank A is debited and the credit customer is credited. The fintech customer actually initiated a transaction to the fintechs account in Bank A.
Nwosu stated that in the cash crunch days, the fintechs served the financial inclusion agenda by reaching the deep rural areas where banking was alien.
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Speaking on the subtlety of the fintechs to fraud, the MD/CEO said the fintechs are as protected as the commercial banks account noting that the application provides different levels of security to ensure funds are safe and account details protected.
He explained that the Palmpay app offers two-factor authentication for all transactions which makes it difficult for criminal elements to gain access to funds. He added that a pin is required to access the application and another is required to make transactions.
He added that the fintechs are in a continuous handshake to expand and better strengthen the system.