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The new FX policy in Nigeria has sparked new rivalry between banks and remittance firms

Jul 21, 2023 | Business | 0 comments

Nigeria’s unified Currency rate may change digital remittance businesses’ tactics. With conventional banks making a return, how can Nigerian fintechs win cross-border payments?

International transaction restrictions and a complex foreign currency (FX) system make sending and receiving money from abroad difficult for Nigerians. These restrictions and conventional firms’ inefficiencies allowed digital remittance entrepreneurs to provide immediate, no-fee cross-border transfers. Nigeria’s single Currency rate may increase competitiveness for these remittance businesses.

Lendsqr founder Adedeji Olowe told TechCabal that the unified exchange rate pits banks against digital remittance firms. “Banks with branches overseas may target Nigerians and offer to assist them move money straight to a bank account in naira at a particular rate,” he added. Local media said that Diaspora Nigerians sent $168.33 billion to the nation in the last eight years. Banks naturally want a greater slice. Access Bank partners with American online remittance provider Remitly. Wema Bank raised its ALAT card’s $20 limit to $500 last week.

Despite banks’ new products that prove they can compete with startups, many analysts think startups will triumph. Digital remittance businesses provide convenience and better customer service than many banks. Startups may develop their offers faster than banks due to their focused focus.

Charles Odogwu, a digital payments specialist with banking expertise in Nigeria, says digital remittance businesses may innovate to improve user experience, cut transaction costs, reach underserved regions, and employ blockchain for quicker and more secure transactions. “They may provide savings, investing choices, or digital wallets,” Odogwu said.

Fintechs are moving fast. Nigerian students may now use Naira to pay foreign tuition using Endowd and Flutterwave. Paga announced naira remittances the same week.

Digital remittance firms exchanged dollars, euros, and British pounds at the parallel market rate, sometimes 30% more than the Central Bank. Unifying currency rates, the Central Bank abolished artificial pegs in June. The revised central bank guidelines allow diaspora remittance recipients to receive Naira at the current currency rate. Traditional banks and fintechs have quickly adopted the new regulation.

Trust is an issue. Unlike fintechs without branches, customers trust conventional banks. Fintechs gained credibility amid the cash shortage early this year when Nigerians relied on Chinese-backed upstarts Opay and Palmpay. One digital remittance specialist told me clients care more about good service than who provides it. Fintechs may dominate the remittance sector due to their trust and dependability.

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