Nigeria Fintechs Grapple With High Inactivity Amid Aggressive User Growth

Nigeria’s fintech boom has been marked by explosive sign-ups, yet industry data indicate a troubling trend: a high rate of inactivity among fintech wallets. Despite aggressive marketing and referral programs, many users engage only once before abandoning their accounts. A report highlights that three out of every five mobile money accounts in Nigeria are inactive or dormant [1]. This issue is not confined to startups—Nigeria’s government-backed eNaira initiative shows similar challenges, with just 8% of wallets seeing weekly transactions [1].

Leading fintech platforms, such as Kuda and PalmPay, have reported impressive user counts. Kuda claimed seven million customers by early 2024, while PalmPay boasts 35 million registered users. However, app usage data tell a different story. Sensor Tower analytics for Q2 2024 revealed that OPay’s active weekly user base reached only around three million (out of tens of millions of downloads), and PalmPay’s active base ranged between 1.7 and 2 million [1]. These figures underscore the disparity between user acquisition and sustained engagement.

The root of the problem lies in promotional-driven sign-ups and one-off usage. Kuda and OPay employed aggressive growth tactics such as free transfers and large referral bonuses to attract users. While these strategies drove downloads, they failed to convert users into regular participants. Once the incentives ended, the accounts went dormant. As one analysis noted, such tactics were “only a way to get into the market” [1].

Industry voices stress the importance of analysing customer data to discern churn patterns and improve retention [1]. Many users download fintech apps to claim a bonus or perform a single transaction—such as a money transfer or bill payment—before abandoning the app. Word-of-mouth and referral programs drive installs, but without sustained engagement, these strategies fall short.

The issue is compounded by a lack of trust. Numerous reports highlight problems with failed transfers, frozen balances, and slow customer support, all of which undermine confidence in fintech services [1]. In a cash-oriented society, small glitches can prompt users to treat wallets as temporary tools for transactions rather than long-term financial solutions. KYC and verification bottlenecks further erode patience, often leading to drop-offs. Failed transactions are worsened by poor network quality, which is a persistent issue in parts of Nigeria [1].

Additionally, Nigeria’s financial reality plays a role. Many Nigerians live paycheck to paycheck and require immediate access to their money. Apps that promote savings or lock funds for incentives often clash with this reality. Informal systems, such as alajo savings circles, offer more flexibility and community trust, making it harder for fintech platforms to compete [1].

Misinformation also exacerbates the problem. A fact-check report found that fintech brands are frequent targets of fake loan scams and fraudulent apps, further deterring adoption [1]. Dormant fintech wallets are not just a result of user behavior; they reflect deeper issues with trust, usability, and alignment with local financial habits.

This pattern is not unique to Nigeria. A 2023 GSMA report found that only 26% of mobile money accounts worldwide are active monthly, with 74% going unused [1]. In Sub-Saharan Africa, the situation is even more pronounced—64% of mobile money accounts are dormant, according to a 2017 CGAP analysis combining GSMA and Findex data [1]. Uganda’s central bank reported that around 45% of mobile money accounts were inactive for over 90 days, while in Kenya, nearly 60% of 68 million accounts were dormant as of December 2021 [1].

Dormant accounts signal weak engagement and low retention, raising concerns about fintech sustainability. Acquiring new users is often 5–7 times more expensive than retaining existing ones, making dormancy a costly problem [1]. However, it also presents opportunities. Many providers are now shifting focus from sign-ups to driving transactions through services like bill pay, microcredit, savings goals, and reward programs [1].

Globally, about 44% of mobile money providers offer credit, with savings and insurance becoming increasingly common. These cross-selling opportunities can transform dormant wallets into recurring users [1]. The challenge for Nigeria’s fintech sector is to move beyond growth by numbers and instead cultivate meaningful, sustained user engagement.

Source: [1] Easy sign-ups, early exits: the tale of dormant fintech wallets in Nigeria (https://coinmarketcap.com/community/articles/68a3736e799f21195a47cc92/)