Neobanks vs. Traditional Banks in Nigeria: Who is winning?

Neobanks attract millions of users through mobile apps. Platforms such as Kuda and Moniepoint count over 5 million downloads each, while OPay, PalmPay, Carbon, FairMoney and others cross 10 million downloads apiece on the Google Play Store.

PalmPay alone claims some 35 million registered users and roughly one million small‑to‑medium business clients. Moniepoint processes more than 800 million transactions monthly, with a cumulative value exceeding $17 billion. This is evidence of mass adoption.

Neobanks’ appeal lies in low fees, rapid onboarding, and a relentless focus on underserved segments.

Yet, traditional banks remain formidable in reach. First Bank reportedly serves over 42 million customers nationwide, backed by more than 500 physical branches and an agent network of over 233,500 outlets.

Wema Bank’s ALAT alone onboarded over 250,000 customers in its first year, accumulating ₦1.6 billion in deposits early on. Polaris Bank and FCMB each maintain hundreds of branches and long legacy operations, often deeply embedded in corporate and SME segments.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) in January this year revealed that the volume of active accounts in the Nigerian banking system rose to 311.65 million as of December 2024.

But only 39% of adults use formal banking systems. Fintech apps fill part of that gap. They attract tech-literate users in urban areas, while traditional banks lean on physical presence, legacy clientele, and agent networks to reach broader demographics.

Neobanks lean heavily on digital distribution and agent networks to extend reach. Agents conduct cash deposits, withdrawals, and card issuance on behalf of digital platforms in underserved regions.

Moniepoint, for example, now reportedly serves over two million SMEs through terminals, business accounts, and working capital loans. That positions these firms not as competitors to elite banking segments but as platforms for financial inclusion among informal traders and smallholder producers.

Traditional banks continue to dominate in asset size, trust, and corporate services. Access Holdings is the largest Nigerian bank in terms of assets, with an asset size of $24.9 billion as of Q1 2025. In 2024, the bank posted a net income of $473.9 million.

As of Q1 2025-end, Access Bank had a loan book of $7 billion with customers’ deposits of $14.8 billion. This is followed by Zenith Bank with an asset size of $20.8 billion.

The long-standing reputations of these traditional banks matter in a market where security and brand stability still carry weight, especially among older or rural populations.

This split reveals a transformative shift. Neobanks scale quickly in digital ecosystems and ride smartphone penetration estimated at tens of millions across Nigeria. Traditional banks rely on physical infrastructure and institutional depth.

Regulators such as the Central Bank have licensed digital-only microfinance banks, helping bridge the gap, but consumer trust and financial literacy continue to influence adoption.

Interest rates, fees, and financial products

Neobanks outpace traditional banks on interest rates and low or zero fees, thus enticing customers who prioritise value.

In Kuda’s case, users benefit from up to 12 % annual interest on fixed‑savings products, and automated “Spend+Save” features offer returns of around 8 % for flexible savings.

Pricing remains transparent.

Kuda provides 25 free transfers to other banks monthly and imposes a minimal ₦50 quarterly maintenance fee, significantly lower than average bank charges. Meanwhile, its savings interest contrasts sharply with the 3‑month deposit rate of 11.19 % and general savings rate of about 7.5 % posted by traditional banks in March 2025.

Moniepoint does not publish interest rates for personal savings, but it focuses on business loans, working‑capital facilities and POS‑based cash distribution to rural merchants. Neobanks like Carbon, FairMoney and PalmPay similarly offer quick loan access, although interest rates vary heavily depending on user risk profiles.

Traditional banks lag in both interest and fee flexibility.

The MPR of 27.5 %, held steady in May 2025, sets a high baseline for lending. But actual consumer deposit interest remains modest.

Even the 3‑month bank deposit rate of 11.19 % remains thin relative to inflation approaching 24 %. Banks also impose fees for account maintenance and transfers, which can reach ₦50–₦100 per transaction, though some waive these for premium tiers.

On trust, security, and growth prospects

Trust remains a clear gap for neobanks. Only around 41% of Nigerians express confidence in microfinance or digital-only banks, compared with 72% who trust commercial banks.

Cyber threats amplify the issue: Nigeria ranked fifth globally for cybercrime in 2024, raising concerns about fintech security.

Against this, Kuda’s managing director, Musty Mustapha, warns that insider threats and phishing are undermining trust in digital payment platforms, and urged industry-wide adoption of multi‑factor authentication and real‑time fraud detection systems.

“Cyber fraud, phishing attacks, and insider threats are undermining trust in digital payments. We need industry-wide security standards to safeguard Nigeria’s fintech ecosystem,” Mustapha said in 2024.

Neobanks counter security concerns through technical safeguards. Platforms like OPay now use facial recognition for large transactions via a Large Transaction Shield feature, and fintech entities conduct regular security audits and encryption to safeguard users. Kuda’s privacy policy confirms the collection of biometric data, device identifiers, SMS logs, and location data to validate user identity and monitor credit risk.

Yet, traditional banks still hold a trust advantage.

Customers reference older institutions for stability, partly due to history and existing infrastructure. Data from EFInA shows higher trust in legacy banks over newer digital options. However, these banks lack the agile security posture of fintech firms. Many institutions still depend on legacy infrastructure and slower fraud detection, and some fail to communicate promptly during data breaches.

Yet, growth projections favour neobanks despite trust issues.

Analysts note that digital banks will expand offerings into insurance, investment and AI‑enabled tools to widen their appeal. Traditional banks may counter this trend through ZTA (Zero‑Trust Architecture), an advanced approach emphasising continuous user verification, strict access controls, and real‑time threat analytics, aligning with global best practice.

The future may favour a hybrid model.

Fintech companies may turn trust deficits into opportunities by offering transparent policies, faster customer support, and proactive security communication. Traditional banks may lean into digital-first advisory services while retaining physical outlets. Both stand to gain from regulatory clarity and consumer education.

So, who’s winning between Neobanks and Traditional banks?