Fintech, short for financial technology, is transforming the financial landscape, rapidly changing the ways that financial services are provided to businesses and customers.
Amid the chaotic situation in which the nation has found itself over the cashless policy implementation, traditional banks must step up their game to remain at the forefront in the provision of financial services in Nigeria. With both fintech and telecoms out in full swing to attract users, the traditional financial institutions must effectively and practically position themselves as the top choice in this three-way race.
The growth of Nigerian fintech is perfect proof of the untapped potential in African economies. Fintech startups have enjoyed success and growth in Nigeria due to certain factors, including the low penetration of banking services, a youthful population making good use of an explosion in smartphone ownership, and the recent regulatory changes that have increased the number of cashless transactions.
A chief information officer in one of the banks, who spoke to The Guardian on the condition of anonymity, said the crises caused by the implementation of the cashless policy and Naira redesign were compounded by shortage of technology-skilled workforce in the banking sector. The situation has reiterated the need for aggressive investment in the e-payment space of the banking sector, if they can withstand the wave of takeover from the fintech as majority of bank customers are currently opening accounts with fintech companies to aid their day-day business requirement.
“In most cases, it’s around 2am that some of the credit alerts would come in. Sometimes the transactions bounce back and I will not be credited, yet my goods would have gone. I have given someone my goods and later discovered that the transfer the person made didn’t go through. Asked whether she feels comfortable and safe with the app, she said: “I normally use the online bank to receive or make payment during the day, but once I got home at night, I move the money to my normal bank account. I’m scared of what happened during the MMM ponzi scheme. I don’t want to lose money. So, I don’t leave huge amount of money in the PalmPay account. I always move the money into my United Bank for Africa account.
Also, the data from Shared Agent Network Expansion Facilities revealed that the number of PoS terminals rose from around 155, 000 to 1.1 million as of April 2022, while the number of active banking agents is over 1.9 million. These digital infrastructures have been overstretched by the 45 per cent banked population across the country.
The Association of Corporate Affairs Managers of Banks had, in a statement on the naira redesign, revealed that from Internet banking to mobile apps, ATMs, PoS merchants, mobile wallets, USSD codes, agents and digital franchises, among others, not less than 80 per cent of Nigerians now enjoy one form of digital or cashless transaction or another, powered by investments of over N100 billion by banks.
“Since we are now on cashless economy now, it’s easier for me to operate through my smartphone. At least, the smartphones work very well with these online financial apps. The apps’ networks are more reliable than the banks’ networks. That is why you see most banks’ customers opening a digital account.”
Some stakeholders are of the opinion that the endgame of banks investing in startups may cause confusion.