To understand how digital finance works is to think about the last time you bought airtime, paid a bill, or transferred money; chances are, you used your phone; that’s digital finance in action. But how does it actually work?

At its core, digital finance utilises technology such as mobile apps, USSD codes, or websites to provide financial services. These services range from banking and payments to savings, credit, and even investments. In Nigeria, where mobile access is high and formal banking access is still growing, digital finance is bridging a critical gap.

How Digital Finance Works: Behind the Screens

Let’s break it down into five simple steps to understand what happens when you “send money” or “pay with wallet”:

1. Creating a Digital Profile

Users typically start by registering on a platform like Figur using a phone number or email address. To ensure security, identity verification is required. This may include a Bank Verification Number (BVN), National Identification Number (NIN), or biometric data. This step is part of the “Know Your Customer” (KYC) process, which helps prevent fraud.

2. Adding Funds to Your Account

Once set up, users can load funds via bank transfers, debit cards, USSD codes, or through local agents. This becomes your digital wallet balance, which you can now use for a wide range of transactions.

3. Making Transactions

You can send money, buy airtime, pay bills, apply for microloans, or even invest in savings plans. The user experience is simple, but the transaction is powered by secure APIs (Application Programming Interface), cloud servers, and encrypted systems.

4. Processing and Confirmation

Every transaction goes through several checks: authorisation, fraud scanning, and real-time balance verification. Once approved, the system confirms the action, and users are notified via SMS or app alerts.

5. Tracking and Records

All transactions are logged in real time. Users can review their transaction history, generate digital receipts, or monitor spending habits, all from the app dashboard.

Why Digital Finance Matters

Digital finance has become a lifeline in Nigeria. Here’s why:

• Wider access: Even users without traditional bank accounts can now save, spend, and borrow.
• 24/7 convenience: Services work at any time, without the need for physical branches.
• Financial inclusion: According to the Central Bank of Nigeria (CBN), digital platforms have helped close the gap in underserved communities.
• Cost savings: Many services have little to no transaction fees, especially compared to physical banking.

The Technology Behind It All

Digital finance runs on several key technologies:

Mobile apps & USSD

APIs

Cloud computing

Encryption

AI and Machine Learning

These systems work together to deliver secure, scalable, and fast financial services to millions of users.

Digital finance is a shift in how people manage their money. In Nigeria, tools like Figur help individuals and businesses access essential services, save time, reduce costs, and gain more control over financial lifestyle decisions.