Nigeria's Neobanks Attract Users with 12% Savings Rates, Yet Trust Lags Behind Traditional Banks

Nigeria’s banking sector is witnessing a transformative rivalry between neobanks and traditional banks, with both leveraging distinct strategies to capture market share. Digital-first platforms like Kuda, Moniepoint, and OPay have surged in popularity, boasting over 10 million app downloads each and serving millions of small-to-medium enterprises (SMEs) and informal traders. Moniepoint, for instance, processes 800 million monthly transactions worth $17 billion, while PalmPay claims 35 million registered users and one million SME clients [1]. These neobanks thrive on low fees, rapid onboarding, and tailored financial inclusion initiatives, particularly in urban areas where smartphone penetration is high [2].

Traditional banks, however, maintain a dominant presence through physical infrastructure and legacy networks. First Bank, for example, serves 42 million customers via 500 branches and 233,500 agent outlets. Access Bank, Nigeria’s largest by assets ($24.9 billion in Q1 2025), also holds a significant edge in corporate services and trust [3]. Despite neobanks’ agility, traditional institutions dominate asset size, with Access Bank’s $7 billion loan book and $14.8 billion in customer deposits underscoring their entrenched market position [4].

Financial product offerings highlight divergent approaches. Neobanks outpace traditional banks in competitive interest rates and fee transparency. Kuda offers 12% annual interest on fixed savings and 8% on flexible savings, far exceeding traditional banks’ 3-month deposit rate of 11.19% and general savings rate of 7.5% [5]. Meanwhile, traditional banks impose higher fees for transfers and account maintenance, though some waive these for premium tiers. Moniepoint and other neobanks focus on SMEs and rural merchants through working capital loans and POS-based services, bypassing the formal banking system’s reach limitations [6].

Trust and security remain critical hurdles for neobanks. Only 41% of Nigerians trust digital-only banks compared to 72% for commercial banks [7]. Cyber threats exacerbate concerns, with Nigeria ranking fifth globally for cybercrime in 2024. Kuda’s managing director, Musty Mustapha, has flagged insider threats and phishing as systemic risks, advocating for multi-factor authentication and real-time fraud detection [8]. While neobanks deploy biometric verification and encryption, traditional banks rely on legacy infrastructure and slower fraud response mechanisms, though they retain an advantage in institutional stability [9].

Analysts predict a hybrid future, where neobanks expand into insurance and AI-driven tools, and traditional banks adopt Zero-Trust Architecture to enhance digital security. Regulatory clarity and consumer education could bridge gaps in trust, enabling both models to coexist. For now, neobanks dominate in user acquisition and innovation, while traditional banks leverage trust and scale to sustain their corporate and SME client base [10].

Source: [1] [title1] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[2] [title2] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[3] [title3] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[4] [title4] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[5] [title5] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[6] [title6] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[7] [title7] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[8] [title8] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[9] [title9] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/

[10] [title10] https://coinmarketcap.com/community/articles/68831e86b0543364aa5f6458/