Whereas their counterparts abroad are making greater investments in using digital platforms to improve customer interfaces and grow profit, many Nigerian banks are yet to fully catch in on the competitive advantages of technology retail banking. BY MARK ITSIBOR.
There are new tactics to improve customer interfaces while developing new capabilities that utilise artificial intelligence in the global banking system today. The blockchain and application programming Interfaces (APIs) are some of the new trends in town. As noted by Hilary Johnson of Treasure & Risk, the focus is purely to develop new business opportunities and maintain relationships with corporate clients, focus on cost management while answering the industry mandate of moving toward real-time payments. This has made technology to become the driving strategy.
In other economies, including that of the United States of America, financial institutions have the largest investment in Information Technology (IT) systems which experts say far enhances performance of banking institutions. It is a global trend that is fast gaining acceptability in the financial services industry.
But according to many technology and financial experts, most banks (in Africa) are not in tune or matching up with the requirements of efficient retail banking. Head of financial services strategy at CGI, Jerry Norton measures it when he point to the truth that there is a distinct difference between what corporates want and what banks are giving them. “That is the message we’re hearing. Corporates are saying ‘We want this,’ ‘We want that,’ but they’re not getting it from the corporate banking sector,” he said.
Nigeria and South Africa pride themselves as leaders in African continent both in trade and politics. There is strong debate between both countries on who actually has the largest or best performing economies in the continent. South Africa is a major rival to Nigeria in terms of economic growth and models.
Evidence has however revealed that in terms of technology banking services, South African financial sector safely plays the leading role or is a model for other African economies to follow as it stands. That throws a challenge at the laps of CEOs of Nigerian banks. Based on available data, South Africa’s financial sector arguably has the largest investment in technology manifested in rate of retail banking and other innovations, giving credence to the view that Nigerian banks are lagging behind. That alone highlights the bogus opportunity for ICT in Nigeria.
For instance, a report by the Frost & Sullivan entitled: ‘ICT Enterprise Spend in Banking and Financial Services, South Africa, Forecast to 2019’ disclosed that in 2016 alone, ICT spend within the BFS sector was an estimated ZAR 15.1 billion (about N406.63 billion). It is expected to grow at a CAGR of 2.0 per reaching ZAR 16.0 billion by 2019. That shows that the nation’s financial institutions are already far ahead of Nigeria’s. The major growth areas in terms of ICT spending and shaping IT strategy in the BFS sector in South Africa are cloud-based services, industry-specific technologies, and system integration.
A report by Juniper Research titled: Retail Banking: Digital Transformation & Disruptor Opportunities 2017-2021 that was published last year, indicates that about 3 billion users will access retail banking services via smartphones, tablets, PCs and smartwatches globally by 2021, up 53 per cent from 2017. There are no indications that Nigeria’s over 190 million population will have up to 4 per cent of that.
The report discovered that while traditional banks like those in Africa have so far remained a step behind in delivering innovation and maintaining their competitive edge against new financial technology (fin tech) players, the situation is fast changing elsewhere. According to the report, usage of tech devices for banking purposes will continue to rise as consumers increasingly opt for banks offering the convenience of rapid, multi-channel digital services. What that means is that will need to be dynamic to focus on providing a more frictionless digital experience to their customers, especially if they are to remain market leaders, adds the report.
“Technology is currently the big differentiator for all types of banks; including traditional banks and the so-called challenger banks. Investments in banking technology reached record levels in 2016 and traditional banks are expected to focus on digital transformation initiatives”, Juniper Research author Nitin Bhas explains. The prediction is that big banks would acquire challenger players including tech start-ups and digital-only banks in 2017, which was believed would further accelerate the rollout of traditional players’ digital strategy.
The 2016 Nielsen mobile shopping, banking and payment survey shows South Africa’s vast mobile adoption has made the country more receptive to making payments, doing banking and shopping on a mobile device.
The survey, which polled 30 000 people with online access in 63 countries, including South Africa, found that South Africans are outpacing global nations in terms of online mobile adoption. In the banking sector, local respondents were particularly responsive, with 67 per cent saying they use their phone to monitor spending and manage finances, compared to 32 per cent of global respondents.
George Kalebaila, IDC senior manager for telecoms, media and Internet of things in Africa, says: “South Africa’s banking industry is moving at pace with developed economies in terms of digital transformation, and we expect as the digital ecosystem matures, we will see more and more transactions and services move to the digital platforms, radically transforming the way we interact and conduct our lives.
“And mobility without a doubt is a key driver of this transformation, especially when applied in conjunction with other emerging technologies, such as the Internet of things, analytics, augmented/virtual reality and social media.”
On the contrary, the Nigerian financial sector is yet to fully embrace the potentials of technology banking. Nigeria has a lower record of investment in technologically driven retail banking, which many say signals the undermining of the future of banking in the African most populous nation. In 2017, only nine major banks in the country reportedly spent about N54.19billion on IT services from the N40.11 billion spent in 2016. The total figure for the banking industry was put between N66 billion and N73 billion for the year ended 2017. On the average, there was however about 38.4 per increase in financial commitment to technology banking in the year.
According to reports, financial institutions in the banking, insurance and pension sub-sectors are yet to fully catch in on the advantages of technology banking. Although the Nigerian banking and financial services sector is facing a number of domestic challenges including cyber security, many believe the banks are still sleeves down in terms of readiness to move with modern pace of technology savvy world of today.
From the overpriced nature of indiscriminate charges on every point of sale or cash withdrawal to the unreasonable deductions for every mobile transfer and duplicate statements, it is common to find customers complaint about the poor services of the banks.
The omen continues to deny Nigerian Banks the opportunity to compete for global brand-awards like The Banker Tech Projects Awards that recognizes the best innovation in financial technology across 14 categories. For a Tech Project to qualify for the award, it must illustrate the innovative, transformational and creative use of technology, regardless of size. Banks, technology providers and professional service firms all have a chance to be recognised by an international judging panel and celebrated by their peers.
Nigeria’s financial authorities including the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) in cooperation with Insurance and Pensions Commissions are aggressively seeking 80 per cent rate in financial inclusion by year 2020. Industry watchers have long dismissed the drive as rather overambitious, pointing to the poor level of internet penetration in the country; which partly shifts the problem away from the banks.
Internet penetration is relatively low in Nigeria. Poor internet infrastructure is a major challenge to companies operating in Nigeria despite government promises. There are common reports of Broadband services either not available or very expensive to many Nigerians. Nigeria’s Communication Commission (NCC) puts Broadband penetration in 2018 at 22 per cent; a figure expert say lacks merit and transparency. Executive Vice Chairman of NCC, Umar Danbatta describes the growth of internet users as enormous, while announcing that the number had gotten to 103 million in May 2018. World Bank says some 27.7 per cent of Nigeria’s 190 million population either had access or made use of internet in 2016. Most rural parts of the country are yet to have access to internet and banking services.
However, there seems to be a deliberate effort to change the tide. In its 2017 survey, FinTech, a technology company noted that in recent years, the Nigerian banking and payments sub-sectors have also experienced high level destruction with the surge of new technology-driven payments applications and process and the increased use of electronic devices to transfer money. What that means is that a good number of Nigerian banks are now recording visible successes in their resolve to give their counterparts abroad a run for their money. As a matter of fact, some of them have demonstrated great passion for retail banking and are committing funds to research, capacity building and the development of infrastructure to harness the vast potential in that segment, which experts say is the future of banking globally.
For instance, Nigerian based Pan-African financial services group, United Bank for Africa Plc was announced Africa’s best bank in the Digital category at the prestigious Euromoney awards in London earlier this month quantitative and qualitative data to honor institutions that have brought the highest levels of service, innovation and expertise to their customers. The Euromoney awards ceremony which was held on Wednesday, July 11, 2018 covers more than 20 global product categories, best-in-class awards and the best Banks in over 100 countries around the world, recognising institutions that have demonstrated leadership, innovation, and momentum in the markets in which they operate. UBA has in made impactful investment in cutting edge technology recently including the much talked about Leo, a chat banker that has disrupted banking across Africa.
UBA is not the online Nigerian bank pushing to expand the frontiers of technology based banking system with a focus to satisfy the budding, technology-savvy bank customers. First Bank Plc recently announced plans to launch its first digital lab in order to provide “faster and more efficient” banking products to its customers. According to the bank, the digital lab –the first of its kind — is designed to rapidly stimulate innovative solutions to real-life challenges. It is designed to serve as a platform for FirstBank to collaborate and advance with the rapidly evolving Financial Technology (FinTech).
Despite that, many believe the banks can improve on their feats. “Legacy IT systems are the bane of any large bank attempting to meet the new demands of customers and regulators,” Market, Arthur Wong said. In his view, most operating systems used by the major banks are installed on OS/2 and IBM mainframes (Os/390 and z/OS), which he said dates back to 1987. “The problem this causes in terms of development and hardware is that manufacturing core processing systems for banks can be costly: these systems once built for the sole purpose of processing account deposits and payments were only meant to be maintained, and never altered,” he added.
In the eyes of industry experts, the current wave of technological innovation, across all fields, leaves retail banks with only two options – either stick with the methods of traditional banking or play along the demands of the changing times. The first is an option if the plan is to become redundant and dispensable in the future. However, if the plan is to thrive, the second option is an obvious choice. Customers want and expect quick results. Financial institutions, in this case, retail banks, have to keep up with customer expectations at all times.
As it stands, retail banking faces obstacles such as ever increasing competition, employee productivity, the pressure to keep up with the current trends, cost management, the demand for quick results, and aggregation of customer expectations. Hence, the need for retail banking 2020, which provides an effective six- pointer plan for overcoming the above, mentioned challenges. While every retail bank has its own set of strategies, banks that keep these six priorities in mind and adopt methods to execute them, have a higher chance of succeeding.
According to reports, the Kenyan banking industry is undergoing much transformation from huge investments in upgrade of their ICT systems to enable them handle a wider variety of customer service functions — in a way almost equivalent to opening new virtual branches.
“Robust ICT platforms have enabled banks to roll out agency banking services where customers are able to carry out banking services such as deposits and withdrawals from a third party contracted by the bank. Such transactions are seamlessly posted into customers’ accounts on a real time basis.” a local media quoted Central Bank of Kenya (CBK) in the annual banking sector report released last year.
The news is that many banks in the country are now migrating from banking halls to technology based banking system. Co-operative and Equity are among lenders encouraging their customers to migrate from banking halls to agency services and mobile banking. Equity’s has set up its own mobile banking service dubbed Equitel, while Cooperative from last year started stationing agents inside its branches to familiarise customers with the agents and eventually woo them to this banking channel, reports say.
“We believe the future of banking is in digital. We are reimagining digital financial services to complement the traditional brick and mortar model that was in yesteryears the hallmark of banking,” said KCB Group CEO Joshua Oigara.
In the 2017 survey, FinTech advised that Nigerian’s financial companies need to identify the threats and opportunities that are most to their businesses, and build, acquire or enter into partnerships for the capabilities they lack.