Banks, fintech and sustainable payment system

Just at the clique of a button, notwithstanding the geographical location, with real time connectivity, a financial transaction worth millions is consummated today. Even the Near Field Communication (NFC) system is fast gaining ground. These are changing the global payment system landscape and Nigeria is part of the frenzy.

NFC is a short-range wireless connectivity standard that uses magnetic field induction to enable communication between devices when they’re touched together, or brought within a few centimeters of each other. Internet connectivity has no barrier to this.

But coming with the seamless payment system, in no particular order, are challenges of fraud, network infrastructure for some, costs, customer-centred product offerings and level of awareness on the part of users. These are cases against financial inclusion and Nigeria is also in the middle of it.

The Committee of e-Banking Industry Heads (CeBIH) at its yearly conference in Abuja, which gathered banking and electronic payment experts, recommended that banks should adopt the strategy of increased investment in innovative payment solutions. They should also increase collaborations with financial technology (fintech) companies to sustain customer loyalty and remain profitable in the new global payment order.

Fintechs are companies that use new technology and innovation to leverage available resources in order to compete in the marketplace of traditional financial institutions and intermediaries in the delivery of financial services. They drive financial services with their technologies.

Getting the best for banks’ customers and remaining on the path of sustainability, the conference tagged: “Disruptive Technology and the Future of Payments, showed how banks and other stakeholders in the e-payment system can position themselves to fintech innovations or lose out.

Director, Non Traditional Channels West Africa, Mastercard, Uwa Uzebu, admitted that fintechs are one of the forces driving the exponential growth in digital payment.

“In 2015, digital payments accounted for eight per cent of total global retail payment of $16 trillion, adding that this is projected to grow to 24 per cent in 2020 when global retail payments would have increased to $21 trillion. The number of FinTech Start-Ups has tripled and funding has grown seven times over the last decade,” he said.

Quoting a study by Accenture, the Managing Director/Chief Executive, SystemSpecs, owners of Remita, John Obaro, said: “A total of $5.4 billion was invested in fintech companies globally in the first quarter of 2016 alone, while global investment in 2015 stood at $22.3 billion.

“Fintech inventions have the potential of altering existing financial systems, and revising the known roles and significance of banks,” he noted.
CeBIH Chairman, Dele Adeyinka said: “It is becoming evident that the key to success in this digital world is to evolve continuously to remain competitive and relevant to consumers.

“The way in which individuals and businesses accept payment is quickly becoming the next battleground of innovation. Consumers are now surrounded by a wealth of technologies.

“The payment industry has recently witnessed the entry of diverse non-bank digital players- both technology giants and start-ups who are presenting increased competition for banks.

“While these categories of entrants have generally not been major threats to the banking and payments industry in the past, the aggressive nature of the digital players, prominence of smartphones as a channel and rapidly evolving customer expectations have all made a difference in recent past.

“To maintain the customer relationships and stay relevant, there is a need for all stakeholders to respond to these changes with new strategies, capabilities, and operating models.”

The Chairman of First Bank of Nigeria, Mrs. Ibukun Awosika, said banks must embrace the change represented by fintechs. “Change is here and disruption is real. No institution will survive without making the change to embrace digital innovations.”

She said that one of the ways banks can do this is to create specialised funds to finance young minds to create innovative payment solutions.

Supporting the investment proposal for digital innovations, Technology and Digital Leader, West Africa, Akintola Williams Deloitte, Oluwole Oyeniran, said: “Payments technology is evolving at an unprecedented speed. Contactless cards, online payments, mobile payments, are all becoming more prevalent.

Keeping pace with those technologies will require major investment from banks. “They have to contend with the fact that their new competitors already have an edge in digital technology. Banks will need to ramp up their investment to be able to make most of the opportunities that exist in payment technology,” noted

Chief Executive Officer, Interswitch Group, Mitchell Elegbe, stressed while it is necessary for banks and other payment service providers to adopt disruptive technologies, it is not a sufficient condition.

“You will also have to create your own monopoly, remain flexible and ready to adopt, after all you should expect to be disrupted. And beware of activity trap. Do not work so hard climbing a ladder only to discover it is resting on the wrong wall”.

For the Managing Director of E-Transact, Valetino Obi, banks should not be perturbed by the emergence of disruptive technologies, but focus on how to use them to add value to their services and to the financial ecosystem.

Disruption, he noted has become the global norm and “there’s a major global shift in consumer behaviour. People across many diverse countries and cultures are evolving a digital lifestyle.

In the near future, consumers will need banking services, but they may not turn to a bank to get them. Obaro of SystemSpecs and the Digital Director of Etisalat, Adia Sowho, reiterated the need for collaboration.

According to Obaro, while most banks consider fintechs as a threat, they can both collaborate to make a fortune. “Fintech has the capacity to once-and-for-all address many of the challenges banks’ customers encounter and thereby increase easy and safe access to money; and improve banking experience; as well as reduce transaction fees. Banks are the custodians; technology is the enabler.”