The resolve by banks to enhance technology driven services may pose threats to conventional banking such that it will reduce physical expansion and loss of man power while it will increase efficiency.
To those who are technologically savvy, investment in technology is seen as the only way to go because it will bring about efficiency while banks will make profit, run smarter, faster and lean.
Godwin Emefiele, the Governor, Central Bank of Nigeria (CBN), alluded to this new thinking in banking while unveiling his five year agenda. He said the payment system in the country will witness technological improvement for efficiency.
His words: “Given Nigeria’s large size, and the cost involved in building bank branches across the country, the payment system department would support the spread and utilisation of digital modes of transactions, so that every Nigerian will have access to financial services. “A strong emphasis will also be placed on improving speed and efficiency of payments channels, while working to ensure that digital channels are safe and secure. This will help to build confidence in our nation’s payment system.
“In order to improve utilisation rate, we will continue to ensure that payment channels are interoperable, which will enable individuals with digital devices to transact across different banks or payment modes. “Through measures such as the cashless initiative, USSD, Mobile Banking, agent networks and Payments Service Banks, Nigerians can expect to see significant improvements in the payment systems infrastructure over the next five years”.
Aside moves by banks to embrace technology which is gradually reducing banks-branch transactions on a daily basis, there are strong threats with the advent of financial technology, otherwise known as FinTech, which will further disrupt banking, thereby taking it far deeper than imagined. Many experts are of the view that Fintech will further lead to job loss in banks ranging from low to high cadre workers.
The term Fintech refers to an evolving range of start-ups and companies leveraging technology to provide financial services. Technology models allow an ease of use that banks cannot yet match. FinTechs are redrawing the competitive Financial Services landscape and blurring the lines that define players in the sector. Their offerings range from competing financial services such as alternative lending, to additive solutions atop existing banking services, to enabling technologies for the banks themselves.
Capitalising on the latest mobile, cloud and digital technologies, Nigeria is increasingly becoming home to many Fintech firms who are trying to shake up and be accretive to the banking value chain.
Fintech players have found greater success when targeting segments that traditional banks have largely ignored. Yet it would be naive for Nigerian banks to dismiss this challenge.
According to Clayton Christensen, the originator of the theory of disruption, “Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality-frequently at a lower price.
Even if Fintech does not successfully disrupt the banking industry, it has created cost-effective models that also provide a superior customer experience, and the banks have taken note.
Wema Bank launched ALAT, a digital-only bank with a major feature -the ability to create and fund a savings account on your mobile phone, while Stanbic IBTC debuted their first digital -only bank branch and a web app for instantly opening a bank account.
At a function in Lagos, CBN Governor, Emefiele said: “Banking has a common threat. The enterprise risk posed by Fintech is real, and there is need to be at the forefront of sensitising the banking sector about the real threats posed by Fintech.” He called on Charter Institute of Bankers of Nigeria (CIBN) to be at the forefront of sensitising bankers on the threat by Fintech.
He said: “I also admonish the new president that you will remain focused, and avoid omission risk. Do exactly what your predecessor has done; he reached out, he was a superb bridge builder. Up your ante as far as advocacy is concern. Advocacy should be your major focus, in addition to providing solution to the threat pose by Fintech.” Companies, such as Uber, Taxify and Airbnb, have developed radical business models that continue to surprise many institutions.
To Mr. Jim Ovia, Chairman of Zenith Bank, with an operational FINTECH system in place, there would be more inclusiveness of all and sundry in the economy; transactions and payments will be done efficiently and transparently.
“One may not necessarily need a banking license to establish how payment systems are done – a rare opportunity to digitise the economy”, he said.
He explained that contrary to popular assumptions, Fintech is not a threat to the banking institutions, but rather a strategic partnership to better serve the needs of customers.