James is a diligent remote worker. He lives in Port Harcourt but was recently hired by a company over 6,000 miles away in the US. After many days of working, the salary week finally arrives.
James is excited to get his first foreign currency payment. However, he needs a cross-border solution since he is in a different country from his employer. But he doesn’t have a USD account - he has never needed one until now.
Like most other people would do, he jumps on his phone in search of solutions. If you’re like James, or you need a USD account for business or other reasons, keep reading.
This article explains what a USD account is. It also touches on the types of USD accounts. Finally, it covers the differences between major providers of account services.
Overview of USD Accounts
- A USD account is an account which is denominated in US dollars. It is commonly issue by a bank or financial services.
- You can either create a USD account for yourself or for your business.
- You would need to provide some identity document when creating a USD account.
- It easier to open a USD account with an online financial service than with a physical bank.
What is a USD Account?
A USD account is an account which is denominated in US dollars.
This means that all funds held in such accounts are in US dollars. Transfers to a USD account may be made in any currency of choice. However, the funds will be converted to USD before being deposited.
Types of USD Accounts
There are two types of USD Accounts. It might sound strange, but they are classified as physical and virtual. The physical accounts are sometimes called ‘domiciliary accounts’ or ‘DOM accounts’.
Physical or Domiciliary USD Accounts
Physical/domiciliary USD accounts are the basic type of USD accounts. Think of it like a naira account - but one that holds US dollars instead.
These accounts are directly created and maintained by banks. For instance, what would you do if you wanted a new naira account today? You’d simply choose a preferred bank, walk in, and request to open an account.
The same goes for a physical/domiciliary USD account. You’d have to be in a location where you can access a bank in person. No intermediary is accepted for this process.
If it will be your account, you must request the account and provide all relevant info yourself.
Another factor is the infrastructure behind a physical/domiciliary USD account. Accounts in this category are managed in a ledger operated by a bank. Each ledger represents a single account for one owner (business or individual).
Virtual USD Accounts
Virtual USD accounts are USD-denominated accounts, like their physical counterparts. So you may be wondering what the point is. What makes a virtual USD account special? What makes it different?
One is how they are created.
A fintech platform collaborates with a bank capable of issuing USD accounts. The institution has a physical USD account with the chosen bank in this arrangement. Numerous other accounts are specially permitted under this account.
Every new fintech customer can get one of these underlying accounts.
When you request a virtual USD account from a platform or app, it is created as one of the several accounts under the institution. The idea is that this institution is approaching a physical bank on your behalf.
Difference Between an Individual USD Account and a Business Account
There are both individual and business USD accounts. In this section, we analyze the difference between the two.
Individual USD Accounts:
An Individual USD account is a USD account registered/owned by one human person. That’s it. The classification focuses on owner type.
A person can open this type of account. However, they must ensure that it is for personal purposes. Utilizing this account for business transactions is unrecommended.
That brings us to the topic of USD account limits. Individual USD accounts have greater limits than business USD accounts. These limits are on daily transfers, online spending, and withdrawals.
Thankfully, users can lessen the limits on their accounts. It takes clearer and increased documentation or transaction volume or frequency to remove/lessen these limits.
Business USD Accounts
Business USD accounts, on the other hand, are accounts created/owned by businesses. It doesn’t matter whether they are USD-denominated, naira-denominated, or whatever. Once it is a business account, it means that a bank manages the account on behalf of a business entity.
Registration of a business USD account involves a list of processes. The issuing bank must be able to confirm that a business representative is opening the account. Also, continuous monitoring must be carried out.
The reason for this is that large amounts flow through business USD accounts. This could serve as an avenue for money laundering.
Requirements to Open an Individual USD Account
In this section, we assume the creation of a domiciliary or virtual account. The requirements to open an individual USD account, therefore, include:
- Individual’s full name
- Identification document
- Proof of address
- Passport photograph
Individual’s full name
Consider this basic info or requirement. If you want to open an account, you must provide a name. Be sure to provide your name correctly or write it as it appears in your officials IDs such as Internation Passport, National ID, or Driving License.
Consistency in the arrangement and spelling of your name will ensure your registration process is completed in time.
For instance, assume your name is Mr. A B C. Your best bet is to write it exactly that way. If you wish to write it another way, or insert a name that does not appear in most of your documents, frist confirm if you’re allowed to.
Identification document
A proper means of identification is always required for registrations like this one. There are three popularly accepted IDs. These are your voter’s card, NIN, or driver’s license.
Submission of any one among these three will normally be sufficient. However, in some cases, you might be required to issue two or more.
Proof of address
A proof of address is an official document showing your address. It must be a trustworthy and verifiable document. It usually comes in the form of a receipt for utility payment, since such payments are made to your residential or home address. An example of a utility payment receipt is your bill from PHCN for a month’s power consumption. The bank uses such documents to confirm that the address details you provide are correct. The issuing company must have likely verified your address.
Passport photograph
One or more passport photographs are needed in this process. Be careful to note the required passport background color (red or white).
Requirements to Open a Business USD Account
In this section, we assume you are creating a domiciliary or virtual account. The requirements to open a business USD account, therefore, include:
- Business name and details
- Name of business representative
- Purpose of the account within the business
Available Options for Opening a USD Account
There are only two available options for opening a USD account in Nigeria. There’s the fintech option and there’s the bank option.
Fintech Options
- Chipper Cash
- Cleva
- Grey
- Palremit
Bank Options
Most commercial banks in Nigeria offer USD account services. This means nearly every Nigerian bank will make this list. Go ahead, think of your favorite bank and have your USD account created.
The Benefits of Using a Bank vs a FinTech for Opening a USD Account
Banks and Fintechs can both provide USD account services. That begs the question of what option is more beneficial. We provide the answer in this section.
| Fintechs | Banks |
| No opening balance required. | One-on-one customer service which is more effective in many cases. |
| Account registration charges are lower compared to that of a bank. | Enhanced security due to extensive KYC process. More information is collected and processed making it difficult for account manipulation. |
| Fast account creation process. Steps such as KYC are made easy, and brief. | |
| Quick account availability. The time between user registration and having an account ready for use is very short. |
With Fintech:
Some of the highlights of getting your USD account through a fintech include:
No opening balance: With banks, you might have to deposit to get your USD account operational. This could be as low as $10 or as high as $100. It all depends on the type of account, chosen bank, etc. Opening balances are a challenge for many new customers. Thankfully, this problem is eliminated with fintech. They don’t require any amounts outside the account creation fees.
Low account registration/opening charges: Talking about account creation, fintech stand out with low registration charges. Many of them charge between $1 and $3. What is interesting is that this is a one-time fee.
Quick account creation due to brief KYC process: Fintech aim to cut the time and stress associated with customer processes. A big part of that is the mandatory know-your-customer (KYC). By offering easier KYC, account creation is kept short and simple. Banks unfortunately fall short here. A customer will typically complete a fintech-based KYC in under 5 minutes. They may take over 30 minutes to do the same at a bank, especially since they might have to wait in a queue.
Immediate availability of account for transactions: Fintech-based USD accounts are immediately available for transactions once created. Businesses find this very important.
With Banks:
It’s a different story creating USD accounts through a bank. Here are the benefits:
Preferred and reliable customer service: Banks have more reliable customer service than many fintech-if not all. The reason? Fintech usually make use of chat automation. In addition, the ticketing and support process is often long and slow. You don’t want this, especially if you’re encountering a serious problem such as a hack.
Enhanced account security and KYC process: Users get additional security when opening a USD account right in a bank. Why? Because the registration process includes paperwork. This delivers a unique form of security over digitally stored records which can be accessed and altered remotely.
Moreover, the KYC process in a bank is also more intense than that on fintech apps. The result is that customers are well-identified. Advanced measures are then put in place to keep away black-listed or suspicious users.
Furthermore, using a bank allows for proper and fool-proof live verification. Many fintech try to implement this on their apps and websites. However, verification software has been known to fail on several occasions.
This could lead to historical problems.
Conclusion
A USD account is the only way Nigerians can make and receive USD payments.
