- From Empty ATMs to Soaring Digital Transactions: Nigeria’s Cash Crunch Reshapes Financial Landscape
CEM REPORT, FINANCE | A new report from KPMG paints a startling picture of Nigeria’s financial landscape in 2023, revealing a dramatic shift in consumer behaviour driven by a persistent cash shortage. Weekly ATM usage plummeted from 70% in previous years to just 40%, while agency banking and digital payments witnessed a meteoric rise.
Empty ATMs Fueling the Shift
The “In Pursuit Value” report, based on a survey of Nigerian and Ghanaian bank customers, attributes the ATM decline to the widespread unavailability of cash.
“Empty ATMs have become the norm,” lamented one survey respondent.
The report confirms this frustration, finding that the regular lack of cash has pushed Nigerians towards alternative channels. Notably, agency banking, which leverages bank agents for cash transactions, witnessed a significant rise, with six in ten customers using these services weekly. This highlights the continued demand for cash but with a preference for readily available options.
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“Currently, four in ten customers report weekly ATM usage, a notable decline from the previous seven in ten over the last few years. This decline in ATM usage coincides with a significant rise in agency banking usage, with six in ten customers frequenting bank agents every week”
Digital Payments Boom
The report also highlights a 52% increase in digital payments between January and October 2023, according to NIBSS data. This surge is attributed to the Central Bank of Nigeria’s naira redesign policy, which aimed to regulate cash circulation. “The cash crunch triggered a digital payments revolution,” the report notes, adding that the initiative “overwhelmed Tier-1 banks” but “fintechs like Opay, PalmPay, and Moniepoint rose to the challenge.”
“Consequently, digital payments surged, marking a notable 52% increase in total NIBSS Instant Payment (NIP) transactions by October 2023 compared to January of the same year. This was triggered by the Central Bank of Nigeria’s initiative to overhaul the Naira, aiming to regulate cash circulation and reduce reliance on physical currency”
Fintechs Gain Ground
This digital wave has led to a remarkable shift in customer preferences. 58% of respondents expressed a willingness to switch banks or consider fintechs, a significant jump from the 15% in 2022. Moreover, 13% of retail banking customers now rely primarily on fintechs, compared to just 4% in 2022.
Nigeria’s cash crunch has ignited a digital revolution, pushing consumers to embrace cashless transactions and explore new financial frontiers. As fintechs continue to innovate and provide reliable services, they stand poised to further disrupt the traditional banking landscape. The future of Nigerian finance appears increasingly digital, and the question remains: will ATMs become relics of a cash-driven past?
