The Central Bank of Nigeria (CBN) has identified the rising influence of Financial Technology (FinTech) firms in providing financial services to consumers as a big threat to banking.
CBN Governor Godwin Emefiele stated this in Lagos during the Chartered Institute of Bankers of Nigeria (CIBN) investiture of Uche Olowu as its 20th President/ Chairman Council.
Digital financial technology, or FinTech, and particularly the global spread of mobile phones, has facilitated access to financial services by hard-to-reach populations and small businesses at low cost and risk.
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.”
The CBN boss, represented by CBN Deputy Governor, Economic Policy, Joseph Nnanna, said the apex bank would look into the threats posed by the FinTech to lender’s operations.
“The institute must not relent in bridging the knowledge gap among commercial, microfinance and mortgage banks. This is the time banks and the economy are facing cyber insecurity. The CBN will partner with CIBN to ensure that financial transactions are secured,” he said.
He called on CIBN to be at the forefront of sensitising bankers on the threat by FinTech. Emefiele 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.”
Olowu said the industry is contending with some challenges triggered by regulations, disruptive models and technologies.
He sees competition from FinTech and telecommunication firms as part of the issues the banking industry has to contend with.
“It’s a new dawn for banking in Nigeria because we are playing at the global stage.
‘’Findings by Nigeria Interbank Settlement System (NIBSS) showed that banking halls are getting less attractive to customers. Huge transactions now happen outside the banking halls, courtesy of rising influence of FinTech in taking financial services to customers.
‘’The NIBSS provides the infrastructure for automated processing, settlement of payments and fund transfer instructions between banks and card companies.’’
NIBSS Managing Director, Adebisi Shonubi, said banks-branch transactions had dropped by 25 per cent in the last one year, as more customers embrace electronic payment, especially Unstructured Supplementary Service Data (USSD) technology platforms.
Banking transactions are moving towards zero human interactions, saving cost and time for customers. The USSD is a Global System for Mobile (GSM) communication technology now deployed by banks to offer transfer services to their customers using Android phone.
Platforms that have taken chunks of banks’ businesses and profitability are: Facebook, Twitter, LinkedIn, My Space, Tumblr, Instagram, Alibaba, Jumia, Konga, Supermart, Amazon, Square, Cellulant, Apple, Google, Visa and MasterCard.
Companies, such as Uber, Taxify and Airbnb, have developed radical business models that continue to surprise many institutions.
Secure online payments systems, such as PayPal and mobile payments and transfer solutions, are changing the ways in which payments for goods and services are made.
These firms are helping consumers to make payments, secure credits, and do things that banks consider impossible. They satisfy customers’ thirst for speed and variety, leaving banks struggling for customer loyalty.
Technology is rapidly reshaping financial services operations. Banks and FinTech companies have identified a shift in consumer behaviour towards digital channels. Rising acceptance of FinTech start-ups’ services by banks’ customers threatens lenders’ control of market space.
