Crashing the Cost of Banking: The Bitter Sweet Experience

The Central Bank (of Nigeria, if you really want to know) has been at the fore-front of financial inclusion, and oh, at the forefront of cashless economy.

Obviously they decided to mash the two together.

Kudos can be given to CBN for forcefully yanking our sorry backside from comfortable banking to make things really cashless. Considering that government and regulators are not known for speed or innovation, this is extremely commendable.

So, the CBN started the cashless thingy, did a million road shows and I guess the people we hardly see, the real banking customers, complained about the cost of everything. CBN came back and said, “From December 17^, 2012, thou shalt not demand for N100 when your customers use other banks ATMs again!”

What?

You see, the N100 from ATM is almost synonymous with N20 collected by Askaris. You can’t dodge it. But then it cost money, I mean real money – mostly in Benjamins, to make the ATMs and other e-things work. Nothing goes for nothing.

The NCC came around and said, “From February 2013, thou shalt not collect more than N4 from SMS sent within Nigeria.” That is going to hit the pretty backside of SMS alerts. That itself is a story for another day.

Well, the CBN is not done yet – there wouldn’t be any minimum balance any minimum balance anymore. By this time, bankers are looking around bewildered.

Ok, so where do this all lead to? Simple English: Financial Inclusion.
The reality is, the cost of banking could be a barrier to quite a number of customers. Better put, most customers. Take the annoyances – COT, minimum opening balance, minimum balance, ATM fees, transfer fees, bla bla. Customers simply run for the gates. By crashing the fees, CBN is making sure no one has a real excuse for not having an account.

I can see this game evolving over time – I expect that CBN might banish some other fees, put a max on interest that can be charged on loans, a minimum percentage that must be lent to SME (wait, what happened to that 10% of PBT to be invested in SMEs?). Some even think the days of COT are numbered.

The take from everyone is this – in the short term, there would be a dip in revenue but with rapidly growing number of customers flocking to the banks and e-channels, the revenue and potentials will pick-up. This happened in telecoms, I hope and sincerely pray it happens in banking.