In early January 2025, PalmPay, a fintech platform, announced its integration of blockchain technology to improve transaction reliability, setting a new standard for digital finance. The company, which serves over 1.2 million agents and merchants, claims that adopting Zone’s blockchain-powered infrastructure boosts its transaction success rate to 99.5%, a move echoed by major Nigerian banks like First Bank, United Bank for Africa, and Zenith Bank, who have also embraced blockchain to enhance their operations.
The shift to blockchain comes as banks grapple with the pressures of increasing digital payment volumes, which exceeded N1 quadrillion in 2024. However, infrastructure issues and transaction failures have led to user frustration, causing many to turn to fintech alternatives. These fintechs, which have grown substantially in recent years, provide faster, more reliable services compared to traditional banking, especially with systems like NIBSS, which have struggled to keep pace with the surge in transactions.
The NIBSS, established in 1993, plays a crucial role in Nigeria’s banking infrastructure, facilitating interbank transfers and digital payment services. However, its current limitations and susceptibility to fraud have become more apparent, leading to concerns from industry players about its ability to handle growing transaction volumes. In response, the Central Bank of Nigeria (CBN) has issued a second Payment Terminal Service Aggregator (PTSA) license to Unified Payments, attempting to address these infrastructure gaps and reduce reliance on a single aggregator.
Blockchain technology, with its ability to provide decentralized, transparent, and secure transactions, is seen as a promising solution to Nigeria’s banking challenges. The World Bank notes that blockchain could potentially increase Nigeria’s GDP by $29 billion by 2030. Major global financial institutions are already exploring its benefits, and Nigerian banks are starting to adopt blockchain for various financial services, such as secure real-time payments and reduced fraud risks.
Despite its clear advantages, the adoption of blockchain in Nigeria faces significant hurdles. Regulatory uncertainty, lack of skilled professionals, and resistance from traditional banks are among the challenges slowing its progress. To address these issues, industry leaders advocate for clear regulations, the creation of regulatory sandboxes, and collaborative efforts between banks, fintech companies, and regulators. These efforts are essential for ensuring the compliance, scalability, and future success of blockchain technology in Nigeria’s financial sector.
SOURCE: BUSINESS DAY