Tech Upgrade Gulps N460bn in Seven Banks in 2024
Seven top Nigerian banks have recorded a combined spending of N460billion on the information technology upgrade in 2024, Daily Trust reports.
An analysis of the financial statements of Access Holdings Plc, Guaranty Trust Holding Company (GTCO) Plc, United Bank for Africa (UBA) Plc, Zenith Bank Plc, First City Monument Bank (FCMB), Stanbic and Wema bank showed an aggressive push in their digital infrastructure.
Access topped the chart with a record 193.5 billion ($120.5 million) on technology infrastructure and electronic business in 2024.
GTCO reported a 48% rise in IT expenses to 88 billion ($56.8 million), Zenith doubled its budget to 67.3 billion ($43 million), while UBA grew its spend by 107% to 48 billion ($30.5 million).
Tech push of Stanbic, FCMB and Wema bank respectively gulped N33.5bn, N26.3bn and N5bn.
Inflation amplified by exchange rate volatility, major upgrades to its core banking software Flexcube, cybersecurity enhancements, and expansion into Tanzania, Namibia, and Hong Kong, were some of the drivers of surge in the tech spending.
Following the huge investment, Access Holdings recorded drop in its fraud-related losses dropped sharply by 73%.
TechCabal quoted Access Holdings as saying that its moves were necessary to support its growing digital customer base and fend off competition from fintech companies like Opay, PalmPay, and Moniepoint.
“Our technology spend reflects a deliberate balance between capital investments in new capabilities and operating expenses that support existing systems, such as subscriptions and service licenses,” Access Holdings said in an email to TechCabal, adding that “Approximately 80% of our operational IT costs are tied to licensing, 15% to support services, and the remaining portion to consultancy and professional services.”
Access’s aggressive tech push leaves competitors trailing. GTCO reported a 48% rise in IT expenses to 88 billion ($56.8 million), Zenith doubled its budget to 67.3 billion ($43 million), while UBA grew its spend by 107% to 48 billion ($30.5 million).
However, fraud losses in the sector showed the impact of these investments. GTCO saw fraud losses fall slightly to 159.1 million ($99,421) from 198.8 million ($ 123,881). Zenith, however, recorded a spike, from 383.4 million ($238,914) to 5.26 billion ($3.3 million), underlining the urgent need for better fraud prevention tools.
The rise of digital payments in Nigeria has led to an increase in financial transactions, which has been accompanied by a growth in fraud cases within the financial system.
In the first half of 2024, Nigeria’s financial institutions and other sectors were rattled by at least 586,130 cyber attacks from various threat actors, according to a report released by Cybervergent, a foremost technology company providing automated cybersecurity solutions.
Of the 586,130 cyber threats detected, 226,103 were resolved by Cybervergent through automation; 19,920 endpoints were protected by Cybervergent, while the firm’s Security Operations Centre (SOC) analysed 304,522 events.
A report by the Financial Institutions Training Centre (FITC) noted that fraud-related losses in Nigeria rose to 10.1 billion across 19,007 cases in the third quarter of 2024, up from 1.18 billion across 12,066 cases in the same period of 2023.
However, on a quarter-on-quarter basis, the total amount dropped from 42.8 billion, suggesting some recent gains.
According to the latest report by the Nigeria Inter-Bank Settlement System (NIBSS), financial institutions in Nigeria lost N52.26 billion to fraud in 2024.
This represents a significant increase of N34.59 billion compared to the N17.67 billion recorded in 2023.
The NIBSS Fraud Report documents fraud activities, whether attempted or successful, and related metrics identified by local financial institutions or agencies.
According to the report, the amount lost to fraud has increased by 196% over the past five years, in parallel with the growth of financial transactions in the digital payments sector.
Although the annual fraud count reported decreased by 31%, from 101,624 in 2020 to 70,111 in 2024, the amount lost to fraud grew by 350%, rising from N11.61 billion to N52.26 billion within the same period.
The report indicated that the ratio of total reported fraud value to the total value of transactions recorded over the last five years showed a decrease from 0.0053% in 2020 to 0.0022% in 2023, followed by an increase to 0.0040% in 2024.
The report also highlighted a 338% increase in attempted fraud between 2023 and 2024, attributing this rise to system vulnerabilities at certain institutions.
Compared to the previous quarter, fraud activity increased in 2024, with attempted amounts and actual losses rising significantly in Q2 and Q3 before declining in Q4.
In 2023, a total of 80,658 unique customers fell victim to fraud, which is 4% less than the 84,130 customers recorded in 2022.
NIBSS emphasized that this decline does not diminish the severity of the issue and urged the financial industry to remain vigilant, enhance security measures, and collaboratively address the persistent challenges posed by fraud.
According to NIBSS, individuals aged 40 and above continued to be the primary targets for fraudsters in 2023, mirroring the trend observed in the previous year.
How upgrade, technical hitches left bank customers frustrated
In 2024, bank customers for many weeks struggled to access their funds due to the network disruptions that accompanied the core banking applications.
GTBank, Zenith, Access, First among others took part in the system upgrade.
Zenith Bank faced similar challenges, with customers experiencing login issues for three days following an October 1 system update.
FirstBank customers encountered even longer delays, unable to access digital services for six days due to their upgrade.
A bank customer, Adesegun Michael, said , “Bank glitch is something that is frustrating at times and even time wasting.
“One will even wonder why savings due to inability to access one’s account. Another headache in the country’s banking system is deductions which they call charges.
“I hope we will get it right one day.”
On her part, Tife Adebola said, “My experience with GTB is that at times, somebody will send me money and I will not receive it, when I go to the bank to lodge my complaint, there won’t be any solution and there was also a time I had some change in my account and everything was deducted without performing any transaction with no valid reason for that, I went to the bank to lodge my complaint instead of rectifying the issue, they will tell me to wait for seven working days, bla bla bla, I just had to abandon it.
“My experience with UBA is that my ATM card stopped working before the expiry date and my mobile app stopped working as well even after the upgrade and maintenance struggle, it is still the same thing.”
Tech upgrade yielding positive results – Experts
The CEO, Nupat Technologies, Nnamdi Ugwu said the upgrade carried out by banks in 2024 has yielded better outcomes in improving consumers’ digital banking experience.
“Although many customers faced downtime during the upgrade carried out by banks, we were unable to access our banking applications due to that upgrade.
“Actually, the banks required that to improve on their Application Programming Interface (API) cloud storage systems and other back end improvements,” he said.
He added that it has positioned the country’s banking ahead of other developing countries, acknowledging the efforts of the banks.
“Presently, we have seen a robust banking infrastructure. Nigeria banks are moving on a fast plane in tech compared to other developing countries and it,” he said.
Kelvin Omozokpia, Chief Technology Officer, (CTO) Cartinary Limited stressed that digital banking has witnessed smooth improvement since the upgrade, highlighting the innovative features in banking applications.
“The whole digital banking experience is a lot smoother. There are also innovative features that I have come across.
“The transactions are faster, but I can’t speak too much to security,” he said.
However, he raised concerns on network reliability, blaming it on network providers.
He stressed the need for banks to improve on their security infrastructures to protect against online fraudsters.
“I think that there are areas of improvement because the banks cannot do it alone for us to have a very good digital banking experience.
“There needs to be network reliability, so sometimes these problems come from the network provider. They need to ensure that fraud and scams are checked.
“I also believe staff in the IT of the banking sector has experienced an overall increase in their payment grade,” he said.
