The internet was shocked to learn that Sterling Bank had announced it was removing transfer fees on all local transactions. For many Nigerians tired of paying extra for every bank transfer, this sounded like a much-needed win. But behind the feel-good headlines is a deeper question: can Nigerian banks afford to keep transfers free, and if so, for how long?
A System Built on Fees
Transfer fees, though often less than ₦100, generate massive income for commercial banks. In a country where digital payments are growing rapidly, the cumulative effect of these charges is massive. For years, banks have relied on these small payments as a steady revenue stream, especially in a challenging economy with rising inflation, foreign exchange instability, and shrinking profit margins.
Sterling Bank’s decision disrupts this quiet pattern. By offering free transfers, they’re taking a bold step toward customer-centric banking, at the risk of their own finacial stability.
How Will They Gain?
So, why would a bank willingly give up a reliable source of income within an unreliable economy? In Sterling’s case, the answer may lie in customer acquisition and digital dominance.
In today’s competitive fintech environment, banks are no longer just competing with each other. They now battle mobile money apps, digital wallets, and fintech startups that already offer cheaper alternatives that are sometimes even free. For instance, Opay and PalmPay have made a sizable market by offering minimal fees and user-friendly interfaces.
Sterling may be casting their lot on the hope that free transfers will attract younger, mobile-first users who value affordability and convenience. More customers could mean more deposits, more transactions, and eventually, more opportunities for monetization through premium services, partnerships, or data-driven financial products.
The Risks of No Fees for Banks
This prospective strategy is just that, prospective, and without any of these ideas realized, the risks are major for Sterling. Removing transfer fees might bring in more users, but it doesn’t guarantee profit. Banks operate in a tightly regulated ecosystem, and without clear revenue substitutes, zero fees could hurt smaller banks that lack multiple income sources (thought Sterling doesn’t fall into this category)
Nigerian banks already face tight profit margins and rising operational costs. Unless they can scale fast or introduce new value-added services, maintaining a free model may not be financially sustainable long-term.
Will Other Banks Follow?
Sterling’s move is bold, but surprisingly, it’s not the first bank to experiment with fee reductions. The difference this time is the scale and permanence of the decision. Other banks might feel pressured to follow, especially if customers begin migrating en masse.
However, industry-wide adoption will have risks for Sterling Bank as well. If all banks decide to circumvent transfer fees, then Sterling Bank loses its competitive edge, putting most financial institutions at the same level of loss, but a loss all the same.
Conclusion: The Zero-Fee Policy and Long-term Change
In the end, the need for free transfers in Nigeria speaks to a broader need in customers. Consumers want transparency, speed, and affordability. Banks that fail to adapt risk losing relevance to fintech alternatives, and yet if everyone adapts, then there is a risk of major financial loss for bank owners.
Sterling’s move could be the start of a turning point. It will either be a successful model that others copy or a cautionary tale of what happens when Banks innovate in risky ways where benefits cannot be matched. What’s clear is that Nigerians are watching closely.
What do you think of Sterling’s choice? Let us know down below.
