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    Innovation Village | Technology, Product Reviews, Business
    You are at:Home»Banking»The Hidden Costs of Banking: Why Transfer Fees Should Have Been Scrapped Long Ago

    The Hidden Costs of Banking: Why Transfer Fees Should Have Been Scrapped Long Ago

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    By Smart Megwai on April 3, 2025 Banking, Digital Bank, Financial Inclusion, Opinion

    For years, Nigerian bank customers have been quietly bleeding money, not from reckless spending, but from routine transactions. The charges attached to online transfers—sometimes as little as ₦10 or as high as ₦50 per transaction—may seem insignificant at first glance. However, when multiplied across millions of daily transfers, the numbers quickly add up.

    This is why Sterling Bank’s recent decision to scrap transfer fees is a watershed moment. More than just a strategic move, it is an overdue correction of an unfair norm that banks have long profited from at the expense of their customers. While some may argue that these charges are necessary for operational sustainability, the truth is that Nigerian banks have long made billions in profit from interest rates, hidden service fees, and regulatory arbitrage. Eliminating transfer fees should not be seen as a revolutionary act—it should have been the standard all along.

    A History of Unjustified Charges

    The average bank customer has been subjected to numerous charges beyond just transfer fees. From card maintenance fees to SMS alert charges and even stamp duty deductions, banks have found multiple ways to extract revenue from customers who often have little say in the matter.

    Transfer fees, however, have been one of the most contentious. In a digital world where banks no longer have to manually process transactions, why should sending money online come at a cost? The infrastructure to facilitate digital transactions has long been established, and many banks even have internal payment processors, reducing third-party costs. So why should customers still be taxed for simply moving their own money?

    The Impact on Nigerians

    While banks may argue that transfer fees are a necessary revenue stream, the reality is that they disproportionately affect low-income earners and small business owners. Consider a market trader who makes multiple daily transactions to suppliers, or a freelance worker who receives payments from different clients. These transaction fees can gradually accumulate, significantly affecting their earnings.

    For instance, a colleague of mine who runs a dry cleaning business had to cancel SMS alerts for the daily payments made to his business account. He receives transfers from an average of four customers each day, which results in ₦16 in SMS alert charges daily and ₦96 weekly. Excluding maintenance costs and other monthly fees, he faces a total of ₦384 in transaction charges every month.

    For many, banking is no longer a luxury—it’s a necessity. The widespread adoption of digital banking means customers are practically forced to pay these fees with every transaction. The cumulative effect of these charges over time is not just a dent in personal finances, but also a deterrent to financial inclusion. Many people, especially in rural areas, still avoid formal banking due to hidden costs. For instance, a typical market woman may ask you to use the POS service to obtain cash, thereby avoiding banking transaction fees.

    Sterling Bank’s Move: A Wake-Up Call

    Sterling Bank’s announcement to eliminate transfer charges is a rare, customer-centric decision in an industry that has long prioritised profit over people. By removing these fees, Sterling has set a new precedent that other banks must now contend with.

    It’s no surprise that the decision was initially met with skepticism, with many assuming it was an April Fool’s Day prank. That alone speaks volumes about the level of distrust Nigerian customers have developed toward banks over the years. However, as the news spread, the overwhelming public reaction made one thing clear: Nigerians have had enough.

    Will Other Banks Follow?

    Now, the spotlight is on other banks. Will they follow Sterling’s lead, or will they continue to justify fees that no longer make sense in a digital-first economy? With increasing pressure from social media and growing public awareness, banks may soon realise that maintaining these charges could cost them more in customer loyalty than they stand to gain in revenue.

    In an era where fintech startups are offering seamless, low-cost banking solutions, traditional banks can no longer afford to take their customers for granted. The longer they resist, the more they push customers towards alternatives that don’t punish them for using their own money.

    A Call for Transparent Banking

    Beyond just removing transfer fees, this moment should ignite a larger conversation about transparent and ethical banking practices. If banks are serious about customer satisfaction, they must reconsider other hidden charges and create fairer policies that do not exploit users.

    Banking should be about trust, convenience, and accessibility. Sterling Bank has taken a bold step, but the real change will come when every Nigerian bank stops treating digital transactions as an opportunity for revenue extraction and starts focusing on making banking truly fair.

    It’s time for Nigerian banks to put their customers first, not just in words, but in actions. And the first step? Eliminating transfer fees once and for all.

    Related

    Banking Industry Commercial Banks Digital Banks Online Transactions Sterling Bank USSD transactions
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    Smart Megwai
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    Smart is a Tech Writer. His passion for educating people is what drives him to provide practical tech solutions which helps solve everyday tech-related issues.

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