Business
Nigerian Bank’s Decision To Block Transfers To Neobanks: Unveiling The Reasons
By Tambaya Julius
Fidelity Bank, one of Nigeria’s prominent commercial banks, recently made a substantial decision to halt fund transfers to neobanks such as Moniepoint, OPay, Palmpay, and Kuda.
This move has sparked significant interest and discussion within the financial sector.
A week ago, customers using the Fidelity Bank app noticed that these neobanks were no longer listed as approved financial institutions.
While the bank initially cited an app upgrade as the reason for these changes, multiple sources with direct knowledge of the situation have offered an alternative explanation.
According to at least five sources closely associated with the matter, Fidelity Bank initiated these restrictions approximately two weeks ago due to escalating concerns about fraud and customer verification.
These digital financial services, including Moniepoint, Kuda, OPay, and Palmpay, remain unavailable for selection on Fidelity Bank’s mobile app at the time of this writing.
One of the primary issues driving these restrictions is a growing concern about fraud losses in the Nigerian banking sector.
In recent times, both traditional banks and fintech companies have faced substantial losses due to cyberattacks and fraudulent activities.
According to an industry expert, “The issues are due diligence and KYC (Know Your Customer).
Until they get their house in order, they will continue to experience issues like being blocked by banks.”
While Fidelity Bank has not publicly disclosed specific KYC concerns, neobanks are actively working to address these issues.
The landscape of KYC practices is evolving.
Traditionally, neobanks rarely underwent rigorous KYC processes when dealing with traditional banks.
However, the surge in fraud cases has led to a shift in this approach.
Traditional banks are increasingly requesting KYC verification for neobank users and, at times, for the customers themselves.
Some neobanks, such as OPay and Moniepoint, rely on third-party verification companies to collect and verify customer information using digital documents and biometric verification.
While this method offers speed and convenience for customers, traditional banks have reservations about its sufficiency.
Experts argue that the issue is not exclusive to neobanks. Traditional banks, too, may fall short in their own KYC practices.
“It’s just a case of a kettle calling a pot black,” one expert noted.
“While neobanks may be lax about their KYC, traditional banks might not always conduct rigorous verification, especially when documents are updated.”
Aside from anti-fraud measures, questions have arisen regarding the legality of a bank unilaterally restricting transfers to other banks.
The CBN Customer Due Diligence Regulations 2023 does not specifically address this matter.
Existing regulations require banks to have a risk management framework in place to identify and mitigate risks.
It remains unclear whether Fidelity Bank communicated with the Central Bank of Nigeria (CBN) before imposing these restrictions.
Sources indicate that the bank likely acted independently, and some experts suggest that in such situations, banks tend to act swiftly without regulatory consent.
In closing, Fidelity Bank’s decision to block transfers to neobanks reflects the evolving dynamics of the Nigerian banking sector.
As the industry grapples with issues related to fraud and KYC, this move underscores the need for a more robust and coordinated approach to address these challenges and ensure the security of financial transactions.
Sterling Bank has announced the removal of transfer fees on all local online transactions.
The move was confirmed by the bank on Tuesday in a press release.
The development makes it the first major Nigerian bank to eliminate the contentious charges for digital banking.
The statement noted that the bank reaffirmed its commitment to customer-centric banking, declaring that the zero-transfer-fee policy is real and effective immediately.
The initiative is expected to bring significant relief to individuals and small business owners who conduct frequent transactions.
The bank’s Growth Executive in charge of Consumer and Business Banking, Obinna Ukachukwu, described the decision as a values-driven approach aimed at ensuring fair and inclusive banking.
“We believe access to your own money shouldn’t come with a penalty.
“This is more than a financial decision—it’s about redefining banking to put customers first,” he stated.
Under the new policy, Sterling customers will not be charged for local transfers conducted via the bank’s mobile app.
Ukachukwu emphasised that the bank’s decision is about more than just competitive strategy.
He said, “We’re not yet the biggest bank in Nigeria, but we’ve been the boldest.
Sterling fearlessly believes in the future of Nigeria, and this is us backing Nigerians with more than words.
The Central Bank of Nigeria dismissed a report claiming it had introduced N5,000 and N10,000 banknotes to facilitate cash transactions as false.
In a statement posted on its official X handle on Wednesday, the apex bank described the report as fake and urged Nigerians to disregard it.
“The content is not from the Central Bank of Nigeria. Kindly note that the official website of the CBN is cbn.gov.ng,” the statement read.
A statement from the CBN’s communications department further clarified, “The only official sources for releasing statements to the media are our website or statements from our department. There is also no Deputy Governor by such name. We are investigating the source of this fake content.”
The report quoted one Deputy CBN Governor, Ibrahim Tahir Jr., the move is aimed at reducing cash-handling costs and providing Nigerians with more efficient means of conducting large transactions.
“The introduction of these new high-value denominations aligns with global best practices and will enhance economic activities while reducing the stress associated with carrying large amounts of cash,” the Governor stated. The CBN said there is no such name in its leadership.
“The new N5,000 note will feature the portrait of Chief Obafemi Awolowo, while the N10,000 note will showcase Dr. Nnamdi Azikiwe, both in recognition of their contributions to Nigeria’s development.
“Additionally, the new notes will incorporate enhanced security features, including color-changing ink, holograms, and anti-counterfeiting technology, making them impossible to replicate,” the fake report stated.
The fake report also said the nationwide rollout would begin on May 1, 2025, with commercial banks instructed to start issuing the new notes via ATMs and over-the-counter transactions.
Mixed reactions have trailed changes in the management of the Nigerian National Petroleum Company Limited (NNPC Ltd.) and its board by President Bola Tinubu.
The President had on Wednesday reconstituted the board of the NNPC Ltd., removing the Chairman, Chief Pius Akinyelure and the Group Chief Executive Officer (GCEO), Malam Mele Kyari.
Tinubu removed all the board members appointed with Akinyelure and Kyari in November 2023.
The new 11-man board has Mr Bayo Ojulari as thevGroup Chief Executive Officer (GCEO) and Ahmadu Kida as Non-Executive Chairman.
Some experts have reacted to the development in an interview with the News Agency of Nigeria (NAN)non Wednesday in Abuja.
Mr Olabode Sowunmi, an Oil and Gas Expert described the development as a calculated effort to put some life and energy into the oil and gas industry.
Sowunmi, CEO, Cabtree, described it as a welcome development.
He said that the NNPC Ltd. was a limited liability company with the
Federal Government as its major shareholder.
“It is a calculated effort to put some life and energy into the industry.
“It is expected that this will mean new thinking, new focus and more results,” he said.
According to Sowunmi, even the proposed Initial Public Offer (IPO) which is targeted at listing NNPC in the stock market, will not have prevented Kyari’s removal, as he is a government appointee.
“The government can remove any government appointee at anytime,” he said.
Yushau Aliyu, an economic expert said the changes were timely, especially when the IPO was underway.
“However, the IPO must be professionally determined by relating to the development in the oil market as well as the willingness of the general public.
“Investment potential with the economic growth targets of Nigeria 2030 should also be considered,” he said.
He said that the President was empowered by the Petroleum Industry Act (PIA 2021) to dissolve both the NNPC Ltd. board and the CEO.
Another expert, Dr Sand Mba-Kalu, said that Nigeria’s oil and gas sector needed stability and predictability, along with strict adherence to legal standards, to attract sustainable investment and encourage transformation.
According to him, the move represents a bold initiative within the larger framework of aiming to meet our national production and refining targets in the energy sector by 2027 and 2030.
Mr Lawrence Nze, an Economist said that most of the policies introduced under Kyari never solved the challenges in the oil sector.
Nze said that the Naira for crude policy appeared not to be working since it had not resulted to any serious reduction in price.
According to him, Dangote Refinery was gradually achieving that with its slight reduction in ex-depot price which usually affects pump price, but suddenly, authorities in the oil sector cancelled it.
“To me, it looks like a sabotage against the people. Why can we not stop importation? It means that there is a deal that someone or group of people are benefiting from.
“It is not rocket science to get the energy sector working. Nigerians want cheaper petroleum products, is that too much to ask for?
“Only President Tinubu knows why he sacked Kyari, and whatever be the reason, Nigerians should have access to cheaper petroleum products, especially fuel.
“I will advise the president to ensure that the Naira for crude policy works in the country to enable local refineries operate on a cheaper scale,” he said.