Business
E-business: Banks turn the tables against fintechs
By AYOOLA OLAOLUWA
After years of unrivalled dominance of the nation’s financial technology space, financial technology firms’ stronghold on the sector is waning, with Deposits Money Banks (DMBs) gradually regaining lost market from their fierce competitors, Business Hallmark findings can reveal.
According to analysis of the financial statements just released by 10 banks quoted on the Nigerian Exchange (NGX) by BH, the banks generated a sum of N77.01 billion from electronic business in the first quarter of 2022, growing revenues by 11.7% compared to N68.92 billion recorded in the corresponding period of 2021.
Traditional banks, it would be recalled, had for over a century, dominated the Nigerian banking space with the provision of banking services like loans, cash withdrawals and deposits, among other services to customers.
However, the banks gradually became complacent, with many customers sharing their bitter experiences while banking.
Some of the challenges mentioned by dissatisfied customers included long period spend on queues trying to withdraw or deposit money, lack of access to proper products and services, poor customer support, as well as outrageous charges imposed on them by their banks.
Taking advantage of the loopholes and poor services rendered by banks, fintechs had from 2002 started creeping in to bridge the gaps, first with the entry of Interswitch into the Nigerian banking sector.
Interswitch immediately addressed the challenge of delay in getting money from banking halls with the introduction of the Nigeria interbank Settlement System, NIBSS, which led to automation of all banking processes, followed with Automated Teller Machines (ATMs) in and outside banks branches.
Within the spate of 10 years, fintechs had totally disrupted the traditional methods of banking with the creation of smooth and easy financial services and solutions for customers with technology.
Checks by BH showed that that over 400 fintechs fiercely competing with traditional banks for the control of the loan and payment market.
The entry of mobile network providers, Airtel, Glo, 9Mobile and MTN Nigeria, into the electronic banking market also made the situation more difficult for deposit money banks who were still grappling to wade off the onslaught from fintechs that have grabbed a large chunk of their retail market.
However, the banks refused to roll over and surrender to the new operators. Though belatedly, the responded to the disruptive threat posed by fintechs by adopting innovative technologies as well as introducing more customer-oriented and digital experiences to their clients.
Banks also improved on the services to their customers through relevant product recommendation and insights to make informed business decisions.
For instance, some banks, through cookies and other IT tools that monitor customers activities online, are now able to recognise customers urgent wants and needs.
All the commercial banks, findings revealed, also have digital channels that do not rely on internet. These innovative channels include agency banking (POS), SMS and USSD banking.
Also, Terragon’s data-driven MarTech platforms deployed by banks have been able to target un-banked consumers, based on their device type, location, interest, spend power añd others.
With the device, banks are now able to engage with customers through SMS to recommend mobile banking channels, closest ATMs or bank agents, and relevant products.
Meanwhile, banks embracing of technology seems to be paying off. This is evident in the good showings they recorded in e-business in the last two years.
The ten analysed banks listed on the NGX, namely Access Bank, Zenith Bank, First Bank, UBA, GTbank, Union Bank, FCMB, Wema Bank, Stanbic IBTC and Sterling Bank, recorded strong showing in the first quarter of 2022 by posting N77.01 billion from their electronic businesses.
This represents about 30 percent of the aggregated Profit After Tax (PAT) of N276.31 billion generated by the 10 banks in the period under review.
The appreciable revenues from the banks’ e-business channels were realised from USSD charges, Point of Sales (POS) payments, mobile applications, internet and agency banking, as well as Automated Teller Machines (ATMs) charges.
Expectedly, top on the list is Nigeria’s biggest bank by customers size, Access Bank, which earned the sum of N20.13 billion from its electronic business, out of the total N57.39 billion PAT generated in Q1 2022.
The amount represents 26.1% of the total amount generated by the ten banks under review. According to financial experts, Access Bank benefitted immensely from the ICT structure it inherited from the now defunct Diamond Bank Plc.
“Despite its size, Access wouldn’t have performed this well without the ICT infrastructure built by Pascal Dozie’s son, Uzoma, while he was serving at Diamond Bank, first as executive director and then managing director.
“The tech savvy Uzo built the foundation Access Bank is now leveraging on”, a source in the bank who did not want his identity revealed told our correspondent.
The bank, checks revealed, had also come top of the list of 2021 best performers in e-business, generating a total of N66.28 billion in the full year.
Following closely on Access Bank’s heels is the United Bank for Africa (UBA), which generated the sum of N15.11 billion in the period under review.
This figure is an improvement in the Q1 2121 revenue of N12.48 billion (21%). Meanwhile, the bank’s profit after tax jumped by 8.8% to N41.49 billion.
Coming third and fourth are Zenith and First Bank, with N14.78 billion and N12.19 billion realised from their e-business channels respectively.
Others are GTBank N4.05 billion; FCMB N3.14 billion; Union Bank – N2.05 billion; Sterling Bank N1.89 billion; Stanbic IBTC N1.27 billion and Wema Bank N788 million.
A top staffer in one of the nation’s top generation banks while giving reasons for the banks’ remarkably performances in e-business, said banks identified some opportunities, especially in the CBN’s financial inclusive programme, and had keyed into them.
“A recent report by a media and research data analytics organization, Dataphyte, said a total of N26.17 trillion in transactions happened outside of traditional banking systems in 2021.
“That means there is a huge gold mine outside there to be mined. Already, we had fully keyed into the CBN’s plan of targeting 38 million Nigerian adults (36% of the population) who are financially excluded.
“As you must have noticed, we now have our kiosks and pay points in all the nooks and crannies of major cities and towns of the country. We also have them in the rural areas but not as much as we have in the cities.
“No one can be an island on his own. So, we are cooperating with fintechs and mobile network providers to reach out to un-banked Nigerians.
“They too need us as most Nigerians are not yet aware of opening wallets with the firms to send or withdraw money. The fintechs have the technology and we have the market.
“What we have now is like the national electric grid system where gencos generate power but rely on the transmission company to deliver the power to the discos and the end users.
“We are getting there one step at a time. It will take time, but we will get there”, declared the bank staffer.
According to a professional services firm, KPMG, to ward off the threat posed by fintechs, banks must sit up and offer an experience that is more customer-oriented and digital.
“As organisations respond, we are beginning to see patterns that differentiate digital leaders from others; patterns that take root in the experience consumers have across the digital touch-points with which they interact.
“We are seeing an acceleration of growth, enhanced engagement, and stickiness with the players that have intentionally invested in user experience.
“It is in this light that we have performed a series of user journey-centered assessments culminating in the Digital Channels Scorecard for leading retail banks in Africa.
“We observed that digital leaders are intentional about personalised services, 24/7 reliability and availability of the digital channels, and real-time customer care.
“They have a relentless focus on simplifying user journeys, can on-board customers end-to-end on most channels, and empower customers through robust Self-Service programmes.
“Late starters are still grappling with convoluted and disjointed user journeys, inability to on-board customers digitally end-to-end, unstable channels and unresponsive contact centres.
“Retail banks are not there yet. To attain these maturity levels, they will need to be more intentional with product design, journey optimisation, data analytics and building resilient digital channels,” noted Boye Ademola, Partner and Lead, Digital Transformation at KPMG.
