Financial technology (fintech) is a novel idea alread having a rippled effect on the banking and financial services landscape across the globe with immeasurable opportunities for early adopters and absolutely inevitable for emerging economies like Nigeria. The foregoing amongst others, were the major concerns of different stakeholders at a recent workshop in Lagos, reports Ibrahim Apekhade Yusuf
Technology, yes technology remains one of man’s many inventions regarded as a creature comfort of some sort. Whether at home, offices, places of worship, rendezvous and fun spots, technology has since taken over every sphere of life. This is particularly self-evident in the ever-evolving banking and financial services sector where hi-tech products and services get churned out on a regular basis for the benefit of the customers.
Enter fintech revolution
For the few discerning mind, the advent of financial technology, also known as fintech is an idea whose time has come. But what really is fintech all about, a novice may wont to ask?
Financial technology is broadly defined as any technological innovation in financial services. Those engaged in the industry develop new technologies to disrupt traditional financial markets.
Fintech companies utilise technology as widely available as payment apps to more complex software applications such as artificial intelligence and big data.
Various start-ups have been involved in the process of creating these new technologies, but many of the world’s top banks including HSBC and Credit Suisse have been developing their own fintech ideas as well.
The financial technology (fintech) industry is thriving globally and received $17.4 billion in investment last year alone.
According to EY’s Fintech Adoption Index, a third of consumers worldwide are using two or more fintech services, with 84 percent of customers saying they are aware of fintech (up 22 percent from the previous year).
But users are often unaware that the financial services applications they use count as “fintech”, or may not know what exactly fintech and its accompanying jargon means.
Fintech gaining momentum in Nigeria
Though Nigeria cannot be classified as early adopters of fintech but the idea is also gaining traction in nation’s financial ecosystem where it is disrupting the traditional and more conventional approach to banking services.
Aware of the dynamic nature of this fast pace technology, alot of stakeholders are beginning to give the whole thing which first came as a fad many thought would fade away the right attention it deserves.
One of such occasions to get the issue on the front burner of public discourse was at the Nigerian Stock Exchange Data Workshop which held in Lagos recently.
Tagged: ‘Digitisation, Disruption and Financial Inclusion’, the event helped in no small measure to put in proper perspective the thinking of many stakeholders, especially their sentiments as well as cautious optimism and possible fears about fintech.
In his welcome address, Oscar Onyema, the CEO of the NSE noted that ”Over the past few years, the finance industry in Nigeria has experienced tremendous transformation caused by disruptive technologies. In recent years, the Nigerian customers have become accustomed to the digital experience offered by firms such as Google, Amazon & Facebook.”
He however impressed on stakeholders the need to see the limitless possibilities fintech has to offer and such many should follow the trend of event as far as the innovation of fintech is concerned.
In her keynote address at the event Acting Director-General of the Securities and Exchange Commission Mary Uduk noted that the regulatory body was determined to serve as an enabler for innovation and technology, that will drive financial inclusion in the country.
She said SEC Nigeria was working towards setting up a regulatory sandbox ; offering a ‘safe space’ for start-ups & other businesses to test innovative capital market products/services/business models without all the necessary regulatory requirements.
“When financial systems become more inclusive, they help broaden financial markets and make policies more effective. By bringing more sections of the population into the formal sector, the effects of market-deepening initiatives are better expanded, “ Uduk said
Uduk also stressed the need for partnership which according to her is critical in promoting financial inclusion. She was of the view that the partnership should include investors, policymakers and fintechs.
The SEC boss who noted that the world is concerned about the operationalisation of fintech recalled that at the recent World Bank/IMF meeting in Indonesia, the Bali Fintech Agenda outlined 12 pillars for policy framework by countries.
Among these pillars, she said was the need to fostering fintech to encourage financial inclusion, access to finance, proper regulatory framework.
Also speaking at the event, the Senior Special Assistant to the President on ICT Mr Olarenwaju Osibona lauded the NSE for hosting the Market Data workshop, which was geared towards harnessing the possibilities of deploying technology and innovation for the markets.
He assured stakeholders that the federal government was working assiduously to reposition Nigeria, as a strategic nation utilising the fourth industrial revolution that is driven digital technology.
Osibona also shared that through the digitisation strategy of the government, about 32 million Nigeria now have unique identification numbers.
Echoing similar sentiments, Mr. Bola Adeeko, Head, Shared Services Division, NSE, who spoke on ‘Digitisation: A proven game-changer,’ said the future of investing in the world of digitisation has come to stay and requires that everyone joins the train and not be left behind.
According to him, alot of things have changed in banking over the years. Time was when people talked about tally numbers in banks but that era is gone for good. “One of the things that has affected banking in more ways than one is mobile revolution. Mobile is so ubiquitous that everything you want to do is almost on mobile. You can order food, pay bills, and much more and that’s what some people especially those we call the digital natives have known all their lives.”
Fintech’s world of possibilities
Mr. Agbe Ilusemiti, Technical Manager, West Africa, Thomson Reuters, whose presentation centred on blockchain technology and it’s disruptive nature said, fintech is the broad term for any kind of innovative solution which uses technology to make access to financial services more convenient, could mean anything from faster payments infrastructure, to a brilliant new app which shows all of your accounts in one place.
He was however quick to add that one way to be ahead of disruption of blockchain technology is to start learning about it. Businesses in particular, he stressed, need to look at the possible impact of the technology on their processes and business as a whole.
Waxing philosophical, he said, “The fear of disruption can be more damaging than the actual disruption itself. “
In her own submission, Dr. Yinka David-West, Senior Fellow, Operations, Information Systems, Lagos Business School, said both operators and regulators need to collaborate more as far as reaping the benefits of fintech to aid financial inclusion.
Risks fintech poses to banks
A lot of people believe that the threat of fintech are rather overrated.
In the view of Olayinka Oni, Chief Information Officer, Sterling Bank, the known threats to the banks posed by fintech generally hinge on a lack of understanding of the roles of fintech in the scheme of things.
“At Sterling Bank we take a view that we can’t do the business of banking alone and that’s why rather see fintech as a threat we decided to partner with them and see them as a veritable tool to achieve efficiency in the area of digital economy leveraging fintech. We identified different stakeholders and decided to bring them on board.”
Experience abroad
Like Nigeria there have been issues bordering on the possible outcome of fintech which may not be palatable.
The U.S. Securities and Exchange Commission has recently charged the founder of a fintech company with fraud after it was allegedly able to defraud investors and misappropriate funds. The amount raised by the company was $55 million.
Greed is the motivating factor of course for both fraudster and victim. Every investor is looking for something for nothing but deals that seem too good to be true usually are. When the dollar signs flash, caution may be abandoned just when it is most needed.
He has held senior compliance roles in asset management, banking, insurance, as well as at the Financial Services Authority
The Bank of England itself says the UK banking sector has underestimated the threat of fintech. Back in November 2017, as part of its stress test of the major banks, the BoE found “Britain’s banks may be overstating their ability to stop ‘fintech’ firms stealing customers and eating into profits,” Reuters reported at the time.
The Bank of England Governor Mark Carney even admitted that fintechs could disrupt the “stability of funding of incumbent banks” – potentially forcing the central bank to “ensure prudential standards and resolution regimes for the affected banks are sufficiently robust to these risks,” as reported by the Telegraph.
Opportunity, not threat
In a document on the HSBC website, Peter Wong, deputy chairman and chief executive at HSBC Asia-Pacific writes (pdf): “Fintech complements rather than threatens banking institutions. In my experience, banking has always been about technology, so today’s fintech innovation boom represents evolution rather than revolution for traditional banking. It is supplementing and diversifying the existing financial system – not replacing or disrupting it.
“If we look closely, fintech is currently only focusing on a mere fraction of the financial services spectrum. To date, much of the focus of fintech has been on retail banking services – lending and financing along with payments-related products and services, where mobile and e-commerce has led to real demand from consumers.
Banks have a large customer base, stable infrastructure, assets and regulatory know-how. Startups provide outof-the-box thinking, technical expertise, and agility to adapt quickly to change.
“Together, they can be far more successful at improving the financial services and customer experience than if they compete against one another.”
Major players in Nigeria’s bourgeoning fintech ecosystem
From available information there are well over 56 fintech companies operating in the country currently.
Of these few have since maintained a large share of the market and could safely be adjudged the major drivers of the fintech industry.
Amongst those who stand out include: e-Tranzact. Launched in 2003, e-Tranzact was one of a number of firms that really kicked off the digitization of payments in Nigeria. Since then, they’ve spread their tentacles beyond their birthplace, and now operate in Cote d’Ivore, Ghana, Kenya, South Africa, Zimbabwe and the United Kingdom. They’re a major provider of epayments solutions for financial institutions (including ATM and internet payments services), and mobile services for individuals as well.
Like e-Tranzact, Interswitch is arguably one of Nigeria’s oldest and well known financial technology companies. Its longevity on the scene certainly helps its cause, as does its relationship with the banks. It provides and maintains ATM services for financial institutions, and enables online payments for individuals and merchants too. Quickteller, an Interswitch payments solution, facilitates the online purchase of mobile recharge, movie tickets, hotel bookings, bill payments and the transfer and collection of money.
Another fintech company is Remita, whose electronic platform is used to pay salaries, power bills, taxes and even school examination fees. Besides these, it lets its users view all their bank accounts from any bank on a single screen, and makes it possible for them to switch from personal to business accounts with ease.
Remita’s clients range from individuals and monopreneurs to large corporations and government agencies.
Besides there is ialso Paga, founded by Tayo Oviosu in 2009 in response to what he felt was the vastness of Nigeria’s financial inclusion problem at the time. Several million customers later, it’s making a dent in the numbers of the unbanked, as its agents begin to set up access points in semi-urban and rural areas.
Speaking with our correspondent recently, he said Paga does pretty much the sort of things you would expect of a typical online payments firm- bills, airtime, transfer payments. But it does have a model of its own, fit for the terrain. It has thousands of agents working across Nigeria, attending to the platforms’ users and operating quasi-banking services.
Although it’s the newest of all the companies on this list, Flutterwave has earned its place on it. Founded in 2016 by a team of entrepreneurs, former bankers and engineers, this startup runs with a mission to “power a new wave of prosperity across Africa.”
Flutterwave’s services include Barter, which makes it easy for startups to pay for cloud storage; Rave, a hassles-free way to collect payments from customers anywhere in the world; and Thrivesend, a secure means of making transfer payments.
Flutterwave does appear to be laying down strong markers of its forward looking intentions: in less than two years, it’s fixed up offices in Los Angeles, Lagos, Accra, Nairobi and Johannesburg; it has processed over $1.2 billion across 10 million transactions; and it’s sliding into the frontrow of fintech class.
KongaPay which is an arm of Konga, one of the leading e-commerce companies, manages the digital systems that undergird and support subscription services and recurring payments for many enterprises. Users can receive money on their mobile phone through it, even if they don’t have a bank account; they can also pay for airtime, data service and cable TV, and purchase things faster with QR Codes.
Renmoney is a licensed tech-driven microfinance bank with a strong online presence. It began operations in Lagos 2012, and presently has a number of other offices across the city. This institution’s services mirrors its status as something of a cross between a traditional bank and a full blown web based fintech applications system. It offers its customers collateral free loans of up to ¦ 4 million; it also gives school fees loans, helps customers with target savings, provides smartphone purchase finance, and other financial services. All of these can be accessed at the Renmoney website.