Nigerian Banks And Challenge Of Seamless Systems Upgrade

In recent months, Nigerian customers have voiced growing frustration with their deposit money banks, also known as commercial banks.
The usual complaints of delays in transactions, difficulty accessing online banking services, and outright system `downtimes’ have become more frequent, as nearly all major commercial banks embark on simultaneous system upgrades.
On October 11, Guarantee Trust Bank (GTBank), sent a notice to its customers about its branches nationwide closing to customers early.
“Our digital services will be unavailable from 10 pm, Sun, 13th October to 9 am, Mon, 14th Oct. due to a scheduled transition.
“During this period, we encourage you to take advantage of our secure and convenient digital channels for your banking needs,” it said.
Earlier, Zenith Bank embarked on a similar exercise, with customers complaining about inaccessibility to their accounts.
Before then, Sterling Bank carried out a similar process, again causing service disruptions for days.
Access Bank, which was supposed to embark on its system upgrade, recently announced the postponement of the upgrade which was initially meant to commence on October 12, 2024.
In an email sent to its customers, the bank said a new date for the upgrade would be communicated in due course.
In all the cases, the banks claimed that they were transitioning to a new and robust core banking application system.
Nigeria’s banking industry is transiting rapidly from analogue to digital. This has lots of implication for internet infrastructure which is needed to support the transformation.
According to the Nigeria Interbank Settlement System (NIBSS), cashless transactions rose by 84.37 per cent to N572.63 trillion between January and July 2024.
But it has also come with disturbing challenges which make regular upgrade inevitable. Fraud losses have also risen by 496.96 per cent over the past five years, fuelled by the rise of electronic payments, says NIBSS in a report.
“The amount lost to fraud has increased over the past five years, along with the growth of financial transactions in the digital payments sector,” the NIBSS said.
While these upgrades are often presented as necessary for improving service quality, the sheer number of banks carrying them out at the same time raises questions about the overall health of the country’s financial sector.
Mr Michael Oreola, a UK-based fintech expert, said that system upgrades in the banking sector are important.
“Indeed, system upgrades are critical for any bank striving to remain competitive, especially in an era where digital banking and fintech solutions dominate the financial landscape.
“Nigerian commercial banks, like their counterparts globally, are under pressure to meet increasing customer demands for faster and more seamless transactions.
“Moreover, regulatory pressures, the need for enhanced cybersecurity measures, and efforts to integrate emerging technologies like AI and blockchain into their systems have become imperative,” he said.
However, some financial experts said several factors may have prompted the current wave of simultaneous upgrades.
They said many Nigerian banks are still operating on legacy systems that struggle to cope with modern digital banking demands.
“As fintech companies continue to disrupt the market with agile, tech-savvy solutions, traditional banks are left scrambling to modernise.
“Also, the Central Bank of Nigeria (CBN) has been pushing for more robust security protocols, especially in light of the increasing cyber threats and fraudulent activities in the banking sector,” one expert said.
Therefore, some stakeholders argue that system upgrades are part of these efforts to ensure banks meet new regulatory standards.
As Oreola said, conventional banks are also facing more competition, as the rapid rise of fintech, with companies offering seamless payment solutions and digital wallets, has pressured banks to invest heavily in their digital capabilities.
Deposit money banks therefore argue that upgrades are necessary to remain competitive and keep up with customers’ expectations for speed and reliability.
Another point raised by industry watchers is that many Nigerian banks have partnerships with international financial institutions, which require them to adopt global best practices in banking technology and cybersecurity.
This often means large-scale system overhauls, especially in preparation for Nigeria’s expanding role in global finance.
However, despite these upgrades, questions remain about the financial health of Nigerian commercial banks.
Also, the experience with Sterling, Zenith and GTBank suggests that customer confidence has been eroded by frequent system downtimes and poor service delivery, further putting pressure on banks.
However, some stakeholders say the ongoing system upgrades, which are capital-intensive, could signal that the banks are investing in their long-term viability.
Nevertheless, the strain on services in the short term suggests that many banks may be operating under tight financial conditions, juggling infrastructure investments with maintaining liquidity and profitability.
For the average Nigerian banking customer, the past few months have been anything but smooth.
Customers have experienced difficulties accessing their funds, with mobile apps and ATMs often being out of service for hours, or even days.
There have been widespread reports of failed transactions, with payments not reflecting immediately, causing inconvenience and financial losses for businesses that rely on efficient payment systems.
Many customers feel that banks have not adequately communicated the reasons behind these challenges or provided clear timelines for when services will improve.
A civil servant who banks with GTBank but craved anonymity expressed frustration that the bank has not been sincere with customers about its update exercise.
“After saying the exercise would last a few hours, by Monday the bank sent another message postponing when customers would have access to their accounts by a few more hours.
“As I speak to you, I still don’t have access to their services; all the transfers people have done to me since Sunday are pending. Yet, the bank claimed it had completed the system update.
“I called their customer service line yesterday and the agent admitted to me that the process had not been completed, four days after the bank said it would only take hours,” she said.
One expert said with system upgrades come heightened cybersecurity risks, and customers are worried about the potential for breaches during this vulnerable period.
As banks work through these upgrades, customers are understandably frustrated.To avoid being stranded by a single bank’s system failures, customers can open accounts with multiple banks or utilise mobile money platforms such OPay and Paga as alternatives for payments.
Given the risk of glitches or transaction failures, experts say it is important for customers to regularly check their bank statements and account balances to ensure all transactions are accurate.
“If a transaction fails or there are any anomalies in an account, customers should report these issues to the bank immediately, preferably through multiple channels – social media, email, or in-branch visits.
“Banks typically provide updates on their websites, social media pages, or via SMS about upcoming downtimes or maintenance. Customers should stay informed to plan their transactions around these disruptions,” a financial expert said.
He also said, in the face of banking downtime, fintech companies like Flutterwave, Paystack, and others offer reliable payment solutions, which can be a good alternative for customers and businesses alike.
Many believe that the current challenges in the Nigerian banking sector are part of a broader transition towards modernisation and digital efficiency.
While system upgrades are necessary to position banks for the future, the simultaneous nature of these upgrades has created significant inconveniences for customers.
The CBN has given Nigeria’s commercial banks a clean bill of health. However, the question remains whether they have the financial resilience to withstand constant changes without eroding customer trust.
While the upgrade is crucial interaction between banks and their customers on the exercise needs to improve.
Economic and financial analyst, Dr. Olayemi Babalola, was quoted by the media as emphasing the need for banks to communicate better with their customers during such transitions.
“What we are seeing is a failure in managing customer expectations. It’s not uncommon for technical upgrades to cause temporary service disruptions, but the scale and persistence of these issues are concerning.
“Banks need to have more robust contingency plans in place to minimise downtime and ensure that critical services remain accessible,” he was quoted as saying.
As customers navigate this period of uncertainty, banks must improve their communication and prioritise minimising disruptions.
Bank customers said these upgrades should lead to better services, but the short-term cost is something Nigerian banks need to manage carefully to avoid long-lasting damage to their reputation. NAN.