Challenges facing financial services systems and ways forward

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Looking at some challenges facing financial services systems and ways forward to help address some of these challenges whether it’s banking, insurance, wealth and asset management, pensions or Fintech, the banking industry should rising up to meet the changing needs and expectations of customers through simple regulation, effective services and drive innovations within the financial institutions.The banking industry, like many other industries today, is facing unprecedented change as it moves toward digitalization. Though most bankers have started to embrace the technological revolution while others are still crawling behind with distant, nevertheless, there are still challenges that need to be overcome in the operations.

The future of banking will require new ideas and methods for accomplishing tasks on a greater scale. And, perhaps most significantly, the customer will be at the forefront of the future. For instance, today’s banking customer expects more, demands faster access, and expects better results than in the past. Banks and financial institutions those are unable to compete with these expectations will likely struggle to maintain viability in the long run. The banking industry is being challenged in many ways, but there are six that stand out that needed attentions:

  1. Consumer expectations.

The customer experience is at the forefront of the challenges facing the banking industry today. In many ways, traditional banks are not delivering the level of service that customers are demanding, especially when it comes to technology. For example, if more customers are using mobile devices for transactions like rightly reported, that 50 percent of banking customers use their smartphones or other mobile devices. But customers still expect in-person customer service as well due to lack of trust. Sometimes ago, it was reported that 25 percent wouldn’t be comfortable opening an account with a bank that didn’t have a local presence.

  1. Increasing pressure from competition.

Young consumers especially are open to change in their financial services desire. In a recent report, Accenture found that 31 percent of banking customers would consider banking with Facebook, Amazon or Google if they offered the same type of services they currently enjoy with the established banks. Already, financial technology (fintech) startups like Robinhood or Acorns are taking advantage of this mindset by offering apps that support investing and other innovative financial services.

  1. Investor expectations.

Despite all of the news about banking profits, banks and other financial institutions are not meeting their shareholders’ expectations for return on investment or equity. There was a saying that part of the reason for this is the lack of accurately understanding customer expectations, which translate into lower customer enrollment and retention rates couple with multiple charges involving services renders.

  1. Regulatory conditions.

Some investors like shareholders and industry watch complaints about regulations in the banking and financial services industry which is continue to escalating. The regulator should allow banks to spend a large part of their discretionary budget on compliance. Using their cash reserve with apex to build a robust systems and processes that are able to keep up with regulations and industry standards require resources on every level.

Traditional banks especially are experiencing these types of challenges, forcing them to constantly evaluate and improve their operations to keep up with the swiftly changing tide of consumer and stakeholder expectations, technology and industry regulations. Financial services companies now are facing a new set of factors as they contemplate how to generate sustainable growth. Banking and other financial services companies need to secure a controlled strategy to innovate and help refine the consumer engagement model in a digitally native world.

  1. Impacts of Productivity.

Being unbanked is generally associated with a lack of labour force participation, lower levels of education, and being among the poorest 40% of the population. Also unbanked is associated with a lack of skill and determinations which underscores the challenges facing so many people in Nigeria with respect to participating equally and fully in business and in the economy.

For instance, if you are unbanked there is a high likelihood you are living on the edge of poverty, exclusion and vulnerability. If you struggle to attain or maintain a secure, well-paying job, you probably do not have a bank account or access to financial services. And, should you or a family member experience a serious illness or another unexpected financial burden, you could quickly fall deeper into poverty and despair as a result of the condition.

  1. Impacts of internet.

Inclusive financial systems provide a high share of individuals with greater access to resources to meet their financial needs, such as saving for retirement, investing in education, capitalizing on business opportunities, and confronting shocks. Inability to use these financial services can contribute to persistent income inequality and slow economic growth. And if you are completely reliant on cash, which is unsafe and hard to manage due to fear of, manipulate technology on your account or regular transactions it will impact on inclusive level.  

Ways Forward:

There are many opportunities to increase account ownership. Over 80% of the unbanked in Nigeria and West Africa have a mobile phone. Providing these mobile users with internet access or digital financial services could be key to expanding financial inclusion.

For governments, fully switching or shifting from cash to digital payments transactions can reduce corruption and improve efficiency. Making government, private sector and others payments directly into accounts would go a long way to attracts more people into banking services. For instance, moving public sector pension payments into accounts would reduce the number of unbanked adults in the country by up to 20 million, including political holders.

Technology has a huge role to play. Digital payments – such as receiving payments or transfers directly into an account, making payments over a mobile phone or using the internet, paying utility or fees directly from accounts – can drive financial inclusion, as many countries are also experiencing major advances in digitalization.

Financial services must be used responsibly, nonetheless. As such Nigeria need to ensure greater financial literacy among citizens and provide consumer protection safeguard. Financial services should also be tailored to the needs of financially underrepresented groups such as women, SMS, the poor and first-time users.

The financial inclusion can help Nigeria and other West Africa countries address these challenges because access to financial services facilitates people’s investment in their health, education and businesses, thereby promoting development and reducing poverty.

Financial inclusion can help boost growth and play an important role in addressing many of the region’s long-term challenges of cash movement across the border. The Financial Institutions should encourage even more toward account ownership which is the first step into the formal financial system, making it easier to get wages, receive money from friends and family, and collect government payments. It also encourages both saving and borrowing.

Lack of trust in financial institutions process can be a major concern for people, which is consistent with low levels of formal savings, Low interest rates and the prevalence of informal borrowing throughout the country. It was reported that Gender inequality in account ownership also persists with women represent 58% of all unbanked adults in the country financial system.

To significantly increase the number of bank account holders in the country, the report argues that governments can play a critical role by moving routine payments into bank accounts and abolish multiple charges. Such payments would include public sector workers’ wages, distribution of public pensions, agricultural payments and other benefits like social benefits transfers to people in need. Creating training centres that could enhance knowledge of local people in digital technology and greater use of mobile phones in financial process also present major opportunities for governments as way expand financial inclusion and boost economic growth in the country across the six geo-political regions.

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