Contrary to the thoughts of some operators and analysts that Fintech and banks are competing for space in the financial market place, experts say the collaboration of both would deepen the financial inclusion, Udo Onyeka reports.
Many financial analysts and operators believe that the rise of FinTech has opened a world of possibilities for banks and even other financial institutions and even small businesses, even though some think otherwise.
Technologies afford businesses more space to offer services for a fraction of the price of what it would have cost before. New technologies, like machine learning, artificial intelligence, predictive behavioral analytics, and data-driven marketing, will take the guesswork and habit out of financial decisions.
Forward-thinking Entrepreneurs & Business Owners need to continuously keep up to date with FinTech developments as a vital part of their daily life.
Being aware of the latest opportunities and developments within the field will only improve businesses and help stay at the forefront of the market.
Speaking recently at the Centre for Financial Journalism (CFJ)-Association of Corporate Affairs of Managers of Banks’ (ACAMB) Business Forum held in Lagos, Executive Director, Systemspecs Limited, Mr. AdeRemi Atanda, described who described as a leading country in the Financial Technology (Fintech) space in the world, said the was no competition between fintech and banks but collaboration. He however said banks that are not able to add value to customers may lose some their customers to fintech.
According to him, many things have happened in the fintech landscape in Nigeria that have not happened elsewhere in the world.
However, he lamented that the success stories in this area has not been adequately captured and celebrated. This, he said, is because “we are not schooled in value narratives”.
He advised that we should “understand the paradigm that shape narratives”. This way, we can capture the successes achieved so far in the Fintech landscape.
He said despite the successes achieved so far, even well acknowledged by advanced countries, there is still a lot of room for improvement.
Mr. Atanda said that Fintech is part of the digital age which evolved partly as a result of revolution in mobile telecommunications. Dwelling on the theme of the Business Forum Fintech and Financial Services Delivery in the Digital Age, he said that Fintech which is driven by data, is transforming the ways financial and business transactions are now carried out.
He noted that pay-tech is just one aspect of Fintech, and virtually the only aspect that we are still dealing with now as there are many other aspects that are yet to be integrated into the entire architecture of Fintech. According to him, it is not only the banking sector that requires the services of Fintech providers. He said that insurance, pension schemes, medical services, oil and gas and even agriculture require Fintech to drive them. “There is huge potential yet untapped that can help to move the entire system forward to new stage of development”, he said.
He optimistically said that indeed Nigeria can really lead the entire world by being at the forefront of Fintech, providing veritable model for others to follow.
“Many things will still shape and re-shape the future we see before us. We should be ready to be part and indeed at the forefront of the global movement in Fintech space”, Atanda stressed.
According to PWC 2017 FinTech Survey Report, over 62 per cent of customers of banks and other business institutions will use mobile applications to access financial services within the next 5 years.
The word FinTech is a combination of the words “financial technology”. While the term has been around for several years, it seems that 2015 is really the year that this fledgling offshoot of the larger banking industry has finally come into its own.
According to experts FinTech, or Financial Technology, refers to new technology or innovation that disrupts traditional ways of conducting financial transactions. This includes digitizing processes that were previously handled with paper money and human interaction.
As the Nigerian customer evolves, banks are leveraging new technologies to improve the banking customer experience since more and more financial transactions are now conducted via digital channels. In February 2014, the CBN through the Bankers’ Committee and in collaboration with all banks in Nigeria launched a centralized biometric identification system also known as Bank Verification Number (BVN) for the banking industry. Today, all lenders depend on BVN in addition to other information for operating their lending models.
Many experts say Nigeria has an opportunity to establish itself as one of the hottest FinTech hubs.
Professionals emphasize significant FinTech opportunities in Nigeria that could potentially redefine the financial services landscape over the next five years.
The fast growing young population (115 million people below the age of 35), exponential growth of mobile phone lines (estimated at 150 million as at July 2016), huge financial inclusion potential (less than 50 million people with bank accounts in a population of 170 million people, based on Bank Verification Number [BVN] data) and relatively strong talent pool (buoyed by Nigerians in diaspora) are pertinent indicators of the FinTech huge opportunity in the country according to Mr. Boye Ademola, Partner, KPMG US.
Some of the important highlights on the opportunities in Nigeria’s financial services industry, as observed by industry professionals, include the following: Predominantly cash-driven Nigerian economy has been responding well to the FinTech opportunity. This is partly demonstrated by the exponential growth in mobile money operations from an average monthly transaction value of $5 million in 2011 to $142.8 million in 2016. The growing FinTech penetration is attributed to a surge in e-commerce and smartphone penetration.
Findings reveal that FinTech investment in Africa has increased significantly from $198 million in 2014 to $800 million in 2016, as investors are increasingly attracted to the industry’s potential to tap into Africa’s huge unserved/underserved population.
Investments in Nigeria and Africa as a whole have been primarily focused on payment solutions, as other FinTech segments such as lending and wealth management, are in a relatively nascent stage.
Apart from the above the payment space is one of the most attractive segments for FinTechs in Nigeria, and it has become a key source of revenue for banks and other payment service providers. As part of its Payments Systems Vision (PSV) initiative to reform the payment industry, the Federal Government of Nigeria launched the cashless Nigeria policy giving rise to several innovative payment systems propelled by changing consumer patterns, rising adoption of smartphones, increased internet penetration, and deployment of ATMs.
Also with the size of annual diaspora remittances to Nigeria estimated at $21 billion in 2015, this country is one area prone to disruption from digital currencies given the speed, efficiency and cost benefits of the latter. For instance, Bitcoin remittance firms charge fees in the range of 3 per cent compared to the 7-10 per cent commission charged by traditional players.
According to the Global Findex report, in Nigeria, 80 per cent of adults paid utility bills with cash, while 15 per cent made payments directly from a financial institution account. What’s more, another 1 per cent of users reported that they paid their utility bills both from a financial institution account and through a mobile phone—in all cases from a mobile money account.
Over the past few years, there has been steady progress in improving financial inclusion in Nigeria. It is estimated that about 40 per cent of Nigerians are still financially excluded as the 2020 target of the Central Bank of Nigeria (CBN) is 20 per cent.
Speaking at the 22nd African Securities Exchanges Association, ASEA Annual Conference in Lagos, with the theme: Champions on the Rise: Africa’s Ascension to a More Sustainable Future , the Vice President, Professor Yemi Osinbajo, disclosed that the Federal Government is in talks with the African Development Bank (AfDB) to create $500 million innovation fund for technology and creative sector.
According to Osinbajo the CBN will soon issue license for Payments Service Bank, PSBs, to further deepen financial inclusion in Nigeria and achieve the 2020 target.
“We are accordingly working with the AfDB to establish a $500 million innovation fund for technology and creative sector as this will support activity in these sectors. Given the size of our economy and the potential of technology and creative segment I am hopeful that capital market operators will work towards innovative financing solutions to lend further support to these two sectors,” Osinbajo said.