As the future of finance evolves more digitally, EHIME ALEX writes that a stronger tie between the banks and fintechs will help to meet the needs of the unbanked
Financial institutions have huge roles to play in the future of finance, no doubt. While this will require banks to adjust to the threats from the financial technology companies, it will also require them to strengthen collaboration and take financial services to the unbanked.
According to a recent report by the World Bank, more than 42 million adults in rural areas of Nigeria lack basic banking services. A 2021 survey by the Enhancing Financial Innovation and Access on trends in access to financial services in Nigeria shows that many gaps remain.
While 71 per cent of urban adults have bank accounts, only 40 per cent of those in rural areas have a formal account, the EFinA study shows, and that more than 60 per cent of rural communities surveyed do not have a bank branch, agent or Automated Teller Machine.
It also disclosed that mobile money has not proven to be a widespread option as only four per cent of adults report having such accounts, less than six per cent, according to 2017 Global Findex database survey.
The newly-appointed Regional Manager for West Africa at Backbase, Emmanuel Onyeje, is of the view that traditional banks have a huge role to play in the future of finance, if only they could adjust to fintechs’ threats by focusing more on customer experience.
Onyeje, in an interview with CNBC Africa, said the traditional banks have so much work to do.
“Many things are changing so rapidly. The banking services have gone beyond trying to deposit and make payments to fixing some other specific and customised needs of customers. It is about meeting the exact needs that consumers want right now.”
The need for the banks to focus more on helping their customers become financially healthy cannot be over-emphasised. As the ecosystem gets more digitised, customers are asking for services that can help them save and invest better, he also noted, even as they desire to do better savings in the global financial ecosystem.
These are some of the opportunities the fintechs leverage, which the traditional banks could key into, Onyeje said. “We need more inclusion banking. Payment should be more frictionless.”
According to him, the smartest banks and fintechs are leveraging partnerships to succeed in the financial ecosystem. “What we are seeing in Europe and Asia is more of that collaboration between the banks and fintechs,” he added. “That is the most important winning strategy. You have to leverage local innovation to succeed in the market and bring products to your customers in a much timelier manner.”
At the 10th Standard Bank West Africa Investors’ Conference, the Chief Executive Officer of Stanbic IBTC Capital, Funsho Akere, said the future of Nigeria’s unbanked population lies in collaborations between the fintechs and banks. “I think the future for the unbanked is really where you have a collaboration between fintechs and banks to democratise access to financial services.”
Financial inclusion comes with its cost. But Akere believes that bringing down the cost of financial inclusion is at the heart of democratising financial services. It is making sure that everyone, who is unbanked, has unfettered access to the many possibilities that exist in financial services, he added.
The Stanbic CEO noted that although access to financial services seems uneven in the rural areas, compared to the urban centres, the adoption of the Unstructured Supplementary Service Data, use of smartphones and agent banking are there to ease the difficulties faced in accessing financial services in the remote areas.
For him, the innovations taking place in the financial ecosystem are steps in the right direction. The banks and fintechs are collaborating and focusing on using apps and other digital offerings to provide financial services.
He added, “That ecosystem is coming together to democratise access to financial services.”
