Traditional banks are launching a comeback to reclaim marketshare lost to Fintechs. The decision by the Nigeria Inter-bank Settlement System (NIBBS) to disconnect switches, super-agents, and payment solution service providers from from the NIBSS Instant Payment (NIP) has placed the Fintechs in a disadvantage position in fight for market control
Michael Stevens, 30, was leaving home for work when his smartphone beeped with a familiar Facebook message alert. It was a reminder for him to send monthly allowance to his 80 year-old mother living in Ijebu Ode, Ogun State.
His wife, Victoria, had reminded him the previous night of the allowance and how badly his mother needed the money to pay her medical bills.
Two payment options came to his mind. The first was to pay through internet banking platform of a commercial bank. The other two options were to use Quickteller or Paga network.
Few minutes later, he went for the Quickteller option. Quickteller and Paga are Financial Technology (Fintech) providing mobile money and digital payment services to consumers and are top competitors to banks.
As little as the N100 fee from the transaction seems, it represents one of the millions of revenue leakages banks are fighting back to reclaim.
Fintechs, such as Quick-teller, MoniDey, Baxi, PocketMoni, Unified Payments, Paga, Remitta and Cellulant, are now part of the financial system, offering banking services to both the banked and unbanked.
But that seems to have largely changed last week after the Nigeria Inter-bank Settlement System (NIBBS) directed that Fintechs be disconnected from its NIBSS Instant Payment (NIP) platform. The NIBSS Instant Payments (NIP) is an account-number based, online-real-time Inter-Bank payment solution developed in the year 2011 by NIBSS.
In a report tiled: Aggregation, Smiling Curve and Why Nigeria Is Disconnecting Many Fintechs from NIBSS’ Instant Payment Outward System’, by Prof. Ndubusi Ekekwe explained what the policy shift means for banks and Fintechs.
He said that Nigerian banking is under stress despite the “huge profits” they declare yearly and a large part of their lending funds are now with Fintechs.
“Those profits are vapour-profits, powered by mindless fees on customers and FX-anchored arbitrages. When it comes to real banking, which is interest-anchored banking, Nigerian banking has disappointed.
“And that disappointment is evident as there is no catalytic project in Nigeria which any bank can come and claim that it funded. In America, banks tell you dams, bridges, etc they financed and challenged Americans to support them so that they can finance the future for shared prosperity and progress,” Ekekwe wrote.
Other experts said banks are now competing with Fintechs and that retail banking and funds transfer have the highest likelihood of disruption at 92 per cent and 85 per cent respectively.
Banks are fighting back Fintech competition by digitally transforming their business model from being a ‘bank’ to being a ‘platform’.
The banks, they said are taking a ‘mobile-first’ approach to reach out to consumers, by designing their products and services with the aim of enhancing customer engagement via mobile.
The lenders are also doing social lending on Facebook where a large part of the youth population is active. The practice is dislodging Fintechs in that space where they previously use to lend to customers with poor credit scores or those unable to get loans from traditional banks.
Like Fintechs, banks are prioritising 24/7 access and offer services available via non-traditional channels such as social media, empowering customers to a great extent.
Wema Bank also introduced Alat, a fully digital platform to enable it capture the grassroots customers and the youths. Beyond the savings and investment options, Alat, mostly embraced by young people, offers complementary features that help improve and sustain saving habits.
FirstBank, Fidelity Bank and Union Banks once partnered with PayPal to enhance online payment for shoppers. The partnership enables the lenders’ customers to register for a PayPal account from their internet-banking accounts.
By linking their-issued debit, prepaid or credit cards to their new PayPal account, customers can then shop and pay on millions of websites around the world from their personal computers, tablets or smartphones, without having to share financial information with the seller.
