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COVID-19’s Impact on Digital Banking and the Informal Economy


The year 2020 will forever be remembered as the time when the world grappled with the unprecedented challenges brought about by the COVID-19 pandemic. As countries implemented lockdowns and social distancing measures to curb the spread of the virus, economies were disrupted, and societies were forced to adapt to a new way of life. Amidst this turmoil, the role of digital banking and the informal economy emerged as critical factors in navigating the uncertainties of the pandemic.

Global Effect of COVID-19 on Socio-Economy

The COVID-19 pandemic reshaped the socio-economic landscape on a global scale, impacting industries, businesses, and individuals alike. With lockdowns and restrictions in place, traditional modes of work, education, and commerce underwent significant transformations. Remote work became the norm, e-commerce thrived, and digital services witnessed unprecedented demand. Governments and organizations scrambled to adapt, accelerating digitization efforts to meet the evolving needs of society in the face of adversity.

The pandemic not only accelerated the shift towards remote work and digital services but also exposed and exacerbated existing inequalities within societies. Vulnerable populations, including informal workers, migrants, and low-income households, bore the brunt of the economic fallout, as job losses and income reductions pushed many into poverty. Moreover, disparities in access to healthcare, education, and social services became glaringly evident, highlighting the urgent need for inclusive and equitable responses to the crisis.

Impact on the Informal Economy

The informal economy, consisting of unregistered and unregulated economic activities, bore the impact of the pandemic. Marginalized/excluded groups such as informal workers and rural communities which often lack social protections and access to formal financial services, faced dire consequences as livelihoods were disrupted and incomes plummeted. With

restrictions on movement and commerce, street vendors, artisans, and daily wage laborers found themselves without work and recourse to government assistance.

However, amidst the challenges, the resilience of the informal economy shone through. Communities rallied together to support one another through mutual aid and informal savings networks. Informal workers adapted to the new reality by diversifying their income streams, exploring alternative livelihoods, and embracing digital platforms to market their goods and services. Despite facing immense hardships, the informal economy demonstrated its capacity to innovate and survive in the face of adversity.

Adoption of  Digital Banking Solutions  in Nigeria

In response to the challenges posed by the COVID-19 pandemic, Nigeria experienced a significant shift towards digital banking solutions. With social distancing measures in place, traditional brick-and-mortar banking transactions became increasingly difficult, prompting both consumers and financial institutions to embrace digital alternatives. This shift not only facilitated access to financial services but also highlighted the potential of technology to drive financial inclusion and empower underserved communities.

One notable example of this digital transformation is the surge in demand for Point of Sale (POS) as a remote banking service in rural communities and urban centres across the country. As individuals sought to minimise physical contact and reduce the risk of virus transmission, the use of mobile banking apps, online payment platforms, and AI-driven chatbots soared. For instance, major Nigerian banks such as Access Bank, Guaranty Trust Bank (GTBank), and Zenith Bank expanded their digital offerings to cater to the growing demand for remote banking services. These platforms allowed customers to perform various transactions, including fund transfers, bill payments, and account management, from the safety and convenience of their homes.

The adoption and integration of POS technology into the agent banking model played a pivotal role during and after the pandemic. Agent banking, which allows financial transactions through authorised agents instead of traditional bank branches, became a critical component in ensuring the continuity of banking services while adhering to social distancing measures. POS terminals deployed by agents in various locations facilitated a wide range of transactions such as cash withdrawals, deposits, fund transfers, and bill payments. This approach not only helped in minimising physical contact by reducing the need for customers to visit bank branches but also extended banking services to underserved and rural areas, thereby promoting financial inclusion. The synergy between POS technology and agent banking significantly contributed to the resilience and adaptability of the Nigerian banking sector during a period marked by unprecedented challenges.

Moreover, initiatives such as the Central Bank of Nigeria’s Cashless Policy played a pivotal role in accelerating the adoption of digital financial services. The policy, which aims to reduce the reliance on cash transactions and promote electronic payments, gained renewed momentum during the pandemic as consumers increasingly embraced digital payment methods. Mobile money platforms such as Paga, OPay, and Flutterwave saw a surge in usage as individuals turned to digital wallets and mobile payment apps to conduct transactions without the need for physical cash.

Furthermore, the National Identity Management Commission’s National Identity Number (NIN) registration drive provided a crucial foundation for enhancing financial inclusion in Nigeria. The initiative, which aims to provide every citizen with a unique identification number linked to biometric data, facilitates the verification of individuals’ identities and enables seamless access to financial services. By integrating NIN registration with digital banking platforms, financial institutions can enhance security measures, mitigate fraud risks, and expand access to banking services for all segments of the population.

Before this global shake-up, a lot of people were a bit wary of using POS agents for their banking needs. But as the pandemic made its impact, these very POS agents became unsung heroes in the world of finance, especially in Nigeria. The COVID-19 pandemic underscored the importance of financial inclusion and digitalization in Nigeria’s banking sector. 

The numbers speak for themselves. According to data from NIBSS (Nigeria Inter-Bank Settlement System), Point of Sale transactions rose to N13.67tn (46.7 % increase) in three years. The data showed that the aggregate PoS transactions between January 2019 and November 2021 was N13.67tn while total cheque transactions within the same period was N10.67tn.

In its ‘Instant Payments – 2020 Annual Statistics’, the NIBSS said, “The COVID-19 pandemic changed the e-payments landscape, accelerating the adoption of instant payments as more people transitioned to electronic channels for funds exchange in the wake of government imposed lockdowns.” In 2019, the value of cheque transactions in the nation was N4.48tn while the value of PoS transactions totalled N3.21tn. By 2020, during the hit of the pandemic, the value of cheque transactions dropped to N3.27tn while the value of PoS transactions rose to N4.73tn. This wasn’t just a temporary blip; the momentum kept going strong, showing that once people started using POS for their transactions, they found it pretty handy.

This shift wasn’t just about avoiding queues at the bank. It was a whole new way of thinking about access to financial services. For many, it was the first time using a debit card with a POS machine outside of a retail store. These transactions became a lifeline, enabling people to access their money safely and conveniently. Debit cards, paired with the widespread availability of POS agents, made a powerful combo. This transformation also shone a light on the crucial role of POS agents in extending financial services to areas where banks were miles away or non-existent. They bridged a significant gap, ensuring that more people could tap into the banking system, even from remote locations. This was a big deal for financial inclusion, bringing banking services to the doorsteps of millions who were previously seemingly underserved.

In essence, the pandemic pushed the fast-forward button on the adoption of digital banking solutions, with POS agents leading the charge. They went from being an option some were skeptical about to a trusted and essential part of how people manage their money. This trust has continued to build, proving that even in the face of challenges, innovation and adaptability can turn the tide, making financial services accessible and safe for everyone.

Does this Reflect on the Informal Economy Positively?

Digital financial services offer informal workers and businesses access to formal banking channels, enabling them to save, borrow, and transact electronically. Mobile money platforms, such as Paga and OPay, empower street vendors and artisans to accept digital payments, reducing their reliance on cash and enhancing financial security.

Cowrywise, a fintech platform known for its savings and investment services has significantly contributed to this digital finance landscape by deploying POS terminals to commercial transporters, an initiative that has changed the way daily trips are paid for (especially with mini-buses). This strategy not only aligns with the broader push towards minimizing cash dependency but also underscores the potential of fintech innovations in making financial services more inclusive. Through Cowrywise’s initiative, transporters have adopted cashless transactions, marking a pivotal shift towards safer and more efficient payment methods that cater to the needs of the commuting public. This deployment is a prime example of how digital financial services, through the integration of technology and innovative solutions like POS terminals, can transform informal sectors, offering them the dual benefits of enhanced financial security and operational efficiency.

The widespread adoption of digital financial services is not without its hurdles. A notable challenge is the lack of infrastructure to support contactless payments and other digital transactions. The success of digital financial platforms hinges on the availability of reliable internet connectivity, widespread distribution of POS terminals, and the general population’s digital literacy. To truly harness the potential of digital finance, these foundational elements must be strengthened.

Key factors that need to be promoted to improve adoption include enhancing digital literacy among informal workers and the general population, expanding the reach of necessary technological infrastructure, and ensuring the reliability and security of digital financial services. Public-private partnerships could play a crucial role in achieving these objectives, leveraging both the innovation of the private sector and the regulatory support of the government.


As we reflect on some of the positive impacts of COVID-19 on digital banking and the informal economy, there is a clear call to action  for a further expansion of these innovations and more to support marginalised communities in the country, drive financial inclusion and better the socio-economic context of Nigeria. To ensure that the benefits of digitalization are realised by all segments of society, concerted efforts are needed to address the digital divide and promote digital literacy among informal workers.

The government, through the Central Bank of Nigeria (CBN), has a critical role to  advocate for digital transformation, investing, and provide an all-round support for the development of the necessary infrastructure. Initiatives could include subsidies for internet access in underserved areas, incentives for businesses to deploy POS terminals, and programs to increase digital literacy among the population. By focusing on these infrastructural elements, the CBN can facilitate a more inclusive digital financial ecosystem, ensuring that informal workers and businesses can fully leverage the opportunities presented by digital financial services for economic empowerment and growth.

By leveraging digital platforms and innovative technologies, informal workers can expand their customer base, improve their marketing strategies, and manage their finances more effectively. The digitization of financial services also enhances transparency and accountability, reducing the risks of fraud and corruption in informal transactions.

By working together and embracing innovation, we can create a brighter and more equitable future for all Nigerians, ensuring that no one is left behind in the journey towards recovery and prosperity.

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