Digital banking expanding rapidly despite doubts – PalmPay MD, Nwosu

Although some Nigerians are still skeptical about fintechs, the penetration of smartphones is rapidly expanding digital banking, the Managing Director of PalmPay, Chika Nwosu, tells HENRY FALAIYE in this interview

What inspired the creation of PalmPay, and how has the company’s vision evolved since its inception?

The idea of transferring money through mobile apps in Nigeria was practically unheard of before 2019, and at that time, the failure rate for such transactions was as high as 10 per cent. This presented a significant gap and opportunity in the market, and as a company, we saw the potential to tackle this problem. We believed that if we could find a solution to reduce the failure rate, we could establish a strong presence in the Nigerian market. The first step involved developing a user-friendly app, building robust systems, and ensuring the necessary infrastructure to address the challenges of digital payments. Another important factor that influenced our decision was Nigeria’s large, youthful population, many of whom rely on smartphones for various daily activities, including banking. With the growing smartphone penetration, the market for digital banking and mobile money transfer services expanded, making it the ideal time to invest in and develop a solution that could transform the financial landscape in Nigeria.

What are the primary challenges PalmPay has faced in the Nigerian market, and how have you overcome them?

The main challenge facing fintech companies in Nigeria is building trust among the public. Many Nigerians remain skeptical of digital finance platforms, feeling wary about investing in services they cannot physically see or touch. This caution is amplified by memories of past Ponzi schemes that left people with significant financial losses, fostering a general distrust toward any online financial service.

To counter these concerns, we have taken comprehensive measures to earn and secure public trust. Firstly, we are fully licensed and regulated, and our funds are protected under the Nigeria Deposit Insurance Corporation, ensuring financial security for our clients. We also prioritise customer data protection, implementing strict privacy policies and robust cybersecurity measures to safeguard against fraud and criminal activity.

Additionally, we understand that trust is built through education. To address this, we have organised wallet safety workshops and financial literacy programmes to educate users on secure digital practices, equipping them to handle transactions safely and confidently. Our efforts to promote transparency, provide robust security, and educate the public are all aimed at fostering trust, building lasting customer relationships, and ensuring that our clients feel secure and informed when using our services.

How do you see the fintech landscape in Nigeria evolving over the next five years, and what role will PalmPay play in that evolution?

From my perspective, the evolution of digital payments in Nigeria is evident through the data. In March 2023, PalmPay led the market in both transaction volume and value. However, after the government reversed the cashless policy, we saw a sharp decline in digital transactions. Despite the dip, the market quickly rebounded, showing a clear trend that Nigerians were increasingly adopting digital banking and payments. The convenience of transacting through digital platforms, as opposed to handling physical cash, was a major driving factor. Over the next five to 10 years, the informal sector, which still relies heavily on cash, will undergo a significant transformation. As financial inclusion initiatives progress, more people especially those in rural areas, including older individuals will embrace digital banking. USSD technology will play a crucial role in this shift, enabling even those without smartphones to send money, make payments, and participate in the digital economy, helping to bridge the gap between traditional cash-based transactions and modern digital solutions.

What measures does PalmPay take to ensure the security and privacy of its users’ data?

Our app, for instance, now includes robust security features designed to protect our customers’ accounts and personal information. To prevent unauthorised access, we have introduced automatic logouts: after you use the app, it will automatically log you out within 20 seconds, ensuring no one else can access your account if you leave your device unattended. We have implemented advanced biometric security measures, including face verification and fingerprint recognition, making it harder for anyone but you to gain access. In addition, we use multiple layers of two-factor authentication, such as one-time passwords also known as OTPs, providing an added layer of security. These features work together to create a highly secure environment, giving our customers peace of mind and protecting them from potential breaches. Your safety and data privacy remain our top priorities as we continue to strengthen our app’s security.

What strategies does PalmPay use to drive customer acquisition and retention?

One of the major strategies we are using is our word-of-the-mouth. Word-of-mouth has been the cornerstone of our marketing strategy, accounting for up to 80-100 per cent of our customer acquisition. This organic approach is incredibly effective, as satisfied customers become our advocates, sharing their positive experiences with family, friends, and colleagues. Referrals play a crucial role in this process. We incentivise our customers to refer new clients by offering rewards or discounts in exchange for successful introductions. This not only builds trust but also creates a cycle of growth, where each new customer potentially brings in more customers. The power of word-of-mouth is amplified by the genuine recommendations of people who have firsthand experience with our product or service. It fosters credibility, as people are more likely to trust recommendations from those, they know rather than traditional advertising. Ultimately, word-of-mouth and referrals help us create a loyal customer base, expand our reach, and ensure sustained growth without relying heavily on conventional marketing methods.

What trends are you observing in customer behaviour and preferences within the Nigerian fintech market?

Reflecting on last year’s experiences with digital payments versus traditional cash, we observed that many people initially preferred having cash in hand, feeling that it provided a tangible sense of security. However, the brief reversal of the cashless policy provided people with the unique opportunity to experience both cash-based transactions and the efficiency of digital payment platforms. This experience allowed individuals to directly compare the two methods, assessing which one best suited their daily needs. For many, digital payments emerged as the clear choice, offering convenience, speed, and security that cash simply cannot match.

As more people have become comfortable using these digital platforms, the trend toward cashless transactions has grown significantly. We are witnessing an increased reliance on these platforms as individuals recognize the benefits of a streamlined, accessible payment process. This shift suggests a strong, sustained move towards a cashless, technology-driven financial ecosystem that meets the evolving needs of today’s consumers.

So how does your company stay ahead of technological advancement in the fintech space?

At our company, we place a strong emphasis on research and customer feedback to continuously improve our services. We actively engage with both local and international markets to gather valuable insights and compare our findings. By carefully analysing customer experiences, we can make informed decisions that directly enhance the user experience, driving customer satisfaction and loyalty. This focus on customer-centric improvements has been a key factor in our growth, helping us attract and retain more users.

One of the notable milestones we have achieved recently is being recognised as the number one app on the Google Play Store. This recognition reflects the positive feedback and high ratings from our customers, showcasing our commitment to delivering a top-tier user experience.

On the regulatory side, we understand the importance of compliance with financial regulations. To ensure we meet all requirements, we have developed a robust system for monitoring transactions in real-time. Our newly launched transaction monitoring tool helps us detect and prevent fraud, offering a high level of security for our users. We also adhere to the Central Bank of Nigeria guidelines, including Know Your Customer procedures, Bank Verification Number integration for various tiers, and address verification. By following these regulations, we maintain the integrity of our services and uphold the trust of our customers.

What steps does PalmPay take to ensure compliance with financial regulations?

Absolutely. Gradually, we are seeing that the average customer increasingly values the need for fast transactions that are 99.9 per cent reliable. Customers don’t want their transactions to be pending, and that’s exactly what most fintech companies offer. For many of us, especially compared to traditional banks where it might take a day or two to receive an alert, fintech enables you to get an alert almost instantly, often within seconds. That is exactly what everyone wants instant, reliable service.

With options like USSD and apps, fintechs cater to everyone, whether they use a smartphone or a feature phone. With these choices, more people will continue to adopt these services. Regulatory efforts are important here too, helping to mitigate risk and reduce fraud, but ultimately, more people are recognising the benefits of fintech. And, of course, financial inclusion plays a big role. There are still many people in the informal sector without bank accounts or BVNs, even though there are significant opportunities and resources in that sector. A lot of money circulates there unregulated.

Our mission, for example, is to use technology to enhance financial inclusion, not only in Nigeria but across Africa. We are working on products that will allow anyone, even in the most remote areas, to open an account and conduct transactions. Our agency banking network reaches rural areas across Nigeria, where people can open accounts and transact with local POS agents who are trusted community members.

The landscape is truly evolving. If you look at the data, financial inclusion rates have steadily improved from where they were in 2019. As of last year, the rate was around 69 per cent, and with support from the central bank, there’s a target to reach over 90 per cent. Fintech companies are key drivers in this, offering seamless platforms that are easy to use with reduced transaction charges, and even offering incentives to save. It’s a win-win situation for everyone involved.

Have there been any significant regulatory changes recently that have impacted PalmPay, and how has the company adapted?

PalmPay adopts a comprehensive and multi-layered approach to ensure full compliance with financial regulations, both locally and internationally. At the core of this strategy are its robust Know Your Customer and Anti-Money Laundering protocols. These processes involve thorough identity verification, where user details are cross-checked against official databases, as well as continuous monitoring of transactions to detect irregularities that could signal fraudulent activity or money laundering. By leveraging sophisticated algorithms and AI tools, PalmPay can quickly flag suspicious activities for further investigation, ensuring the platform remains secure for all users.

Furthermore, PalmPay works in close collaboration with key regulatory bodies such as the Central Bank of Nigeria  and other financial authorities to ensure strict adherence to Nigeria’s banking and financial regulations. This collaboration ensures that PalmPay is always up to date with any regulatory changes or new policies affecting financial operations within the country. Data security is a top priority for PalmPay, and the platform employs state-of-the-art encryption and cybersecurity protocols to safeguard users’ sensitive financial information from potential cyber threats or unauthorised access. Regular internal and external audits are conducted to assess compliance with both local and global standards, providing an additional layer of accountability.

In addition, PalmPay’s dedicated compliance teams are constantly evaluating and adapting to emerging regulatory frameworks, allowing the platform to remain agile in responding to new risks and maintaining its commitment to high standards of financial integrity. Through these combined efforts, PalmPay not only ensures compliance but also fosters trust and security among its users.