Fintech vs. Traditional Banks: Why are Fintech Transactions Faster in Nigeria?
In Nigeria, the speed of transactions on fintech platforms like OPay and Moniepoint compared to traditional banks is a frequently discussed topic. The common perception is that banks are slower due to outdated “batch systems,” while fintech platforms offer instant transfers through “liquidity pools.” However, the reality is more complex when examining the flow of money within the Nigerian financial system. The speed difference stems from the infrastructure used, how fintech companies and banks integrate with this infrastructure, the architecture of their internal ledgers, and the overall user experience they provide.
The Role of NIBSS Instant Payment (NIP)
The NIBSS Instant Payment (NIP) system is central to understanding transaction speeds. NIP is Nigeria’s real-time credit transfer scheme. When a payment is initiated from one financial institution to another, the receiving bank or wallet provider receives immediate instructions to credit the beneficiary. This explains why recipients often see the money reflected in their accounts instantly. However, it’s important to note that NIP does not settle each transaction individually in real-time. Instead, it employs a deferred net settlement approach. This design is intended to optimize efficiency and reduce processing overhead.
In conclusion, while the perception of faster fintech transactions in Nigeria holds true for the end-user experience, the underlying reasons are multifaceted. It’s not simply a matter of outdated bank systems versus innovative fintech solutions. Instead, it’s a combination of strategic integration with the NIP system, efficient internal ledger management, and a user-centric approach to transaction processing that contributes to the perceived speed advantage of fintech platforms.
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