Financial institutions in Nigeria are now looking up to their regulators due to the economic boom experienced by financial technology firms globally.
The speedy growth of fintech firms in their online activities is starting to counter the banking sector’s online operations, Bloomberg reports.
Banks are pressing regulators to charge customers separately through end-user billing; mediate the conflict between the banks and the pricing of USSD transactions; as well as fix a flat fee of N6.98 per transaction, with banks collecting the charges.
Scholars at Lagos Business School, in their recent report published before the COVID-19 pandemic, said, “Regulators largely protect Nigerian lenders from financial institutions’ foreign competition, and they control 94 per cent of their domestic market.”
However, an analyst at Stears Business, a Lagos-based Fintech consultancy company, Abubakar Idris, said, “Some might claim there is pushback from traditional banks and their regulatory ally to restrict financial innovation.
“Banking generally is shrinking rapidly, such that every traditional bank out there is thinking about how it can keep up. If the largest telcos get a banking license, they could undercut the banks.”
This means there is a risk for 60 million Nigerian citizens who lack access to any banking services to miss out on all the benefits of the financial-technology boom that has put much of Africa at the cutting edge of the revolution in mobile money.
Managing Director of Guaranty Trust Bank, Segun Agbaje, is in the final stage of obtaining regulatory approval for a fintech unit, which he plans to start in the second half.
Agbaje said, “Ultimately, we are going to go with end-user billing. You are going to see more migration from USSD to mobile banking because the USSD will become an expensive channel.”
With their core lending businesses stagnant and investment flooding into fintech startups, the need for banks to move is increasingly urgent.
Agbaje said he is pushing to create a separate payments business with a mobile wallet in Nigeria and three African countries, including Ghana and Cote d’Ivoire.
While banks have rolled out digital products mainly by partnering with technology firms, they want a separate license to control the payment infrastructure.
Chief Executive of Access Bank, Herbert Wigwe, while emphasising payments, noted that “payments and remittances are critical and makes sure you have full control over the infrastructure.”
Flutterwave’s CEO, Olugbenga Agboola, however believes banks and fintech companies have their roles to play. According to him, “Fintechs build bank-level features like loan, savings or investment apps off collaborations with banks.
“We started Flutterwave because we realised there were lots of efficient niche payment methods that we needed to connect into one reliable infrastructure.”
About a month ago, banks in Nigeria had a dispute with one of the Telco companies, MTN, to reduce its USSD commission to 2.5 per cent.
Flutterwave, with a valuation of $1bn, is the second largest Fintech startup in Nigeria, after Interswitch.
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