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FinTech and New Face of Banking

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fintech - Investors King

Banking has evolved with technology. The rise and adoption of Financial Technology (FinTech) in tandem with the boost in the subscription level of mobile phone users in the country has helped to redefine the banking ecosystem. LUCAS AJANAKU reports that this rapid development can bring the unbanked into the banking sector in line with the financial inclusion and cashless policy of the Central Bank of Nigeria (CBN).

Mr Aderemi Esan is very excited about the development in banking in the country.

According to him, he now pays virtually for everything on his mobile phone, a development that has taken him away from the long queues both at automated teller machine (ATM) points and the banking halls.

“I pay for evrything, including my son’s school fees within the comfort of sitting room. I also transfer money to my aged parents tresslessly on my phone,” he said.

Over the past four years or thereabout, there has been a dramatic change in the face of banking in the country. The lenders have continued to innovate with short codes to do almost everything on the go.

Executive Director, Lagos Business Directorate, Wema Bank, Folake Sanu, captures this development during the unveiling of the lender’s ALAT Digital Bank in Lagos.

She said: “With the shift to all things mobile, ALAT powered by Wema Bank, could not have come at a better time. Over the last decade, we have witnessed how technology has revolutionised the financial sector. Indeed, many products out there in the financial market claiming to redefine the customer’s banking experience are simply making things more cumbersome.

“At present, there isn’t that product that really captures the need of the millennial – the digitally savvy generation (Generation Y as they are fondly called) that are becoming the fastest growing segment in the world and in effect impacting economies and industries across the globe.

“The millennials live in a digital world and are used to digital channels and social media to meet their digital lifestyle. They are in constant need of a 24-hour banking service that would fit into their lifestyles; a bank they can take with them, one without borders that offers them the opportunity to transact business anytime, anywhere and any day.”

Why banks should change

Founder, CWG Plc & Entrepreneur in Residence at CBS, New York, Austin Okere asked why after centuries of conservatism in receiving deposits and making loans, banks should change.

He said there are two main issues stirring the yearning for change: The first being that it is a very difficult club to join, and hence the large population of unbanked adults. Secondly, even for the members of this elite club, the relationship is acutely skewed in favour of the banks; naturally so, as they have carried on as protected monopolies with no serious challenge or competition, resulting in no significant innovation over the decades.

Banks biggest threat

Centuries of relatively significant higher returns, even in the midst of economic downturns that adversely affect the real sectors has engendered an attitude of invincibility and pomposity, characterised by a loss of touch with their customers. Considered too big to fail, they take it for granted that they will be bailed out with taxpayers’ money in the event of any missteps – a perfect prey for disruption, he added.

FinTech – new kid on block

Today, there has emerged a powerful force of challenge from financial technology companies or FinTechs, as they are more popularly referred to. The promise of FinTech is great. It is shaking up a stodgy banking system and helping to build a more efficient one, especially for consumers and small businesses.

Emerging markets show way

Okere who also serves on the World Economic Forum Global Agenda Council on Innovation and Intrapreneurship, said for years, emerging economies have looked up to developed countries for ideas about how to manage their financial systems. When it comes to FinTech though, the rest of the world will be studying the experience of the emerging markets, embodied by the widely successful MPESA mobile money system, championed by Safaricom in Kenya. MPESA has made it possible for a large swathe of the population to gain financial inclusion by providing the opportunity to transact financial services vide the mobile phone, on a continent where typically 70 per cent of the population is unbanked. MPESA today has more than 60per cent of Kenya’s 33 million mobile users; not bad for a service which was only launched in 2007. Similar applications have metamorphosed across Africa.

In Nigeria the Yello Mobile Account, jointly offered by ICT giant CWG Plc and GSM major MTN, added over 6million accounts to an early adopter, Diamond Bank, within the first year of launch. Mobile Money services are today generating 6.7 per cent of Africa’s gross domestic product (GDP).

China leads in FinTech

According to him, by just about any measure of size, China is the world’s leader in FinTech. It is by far the biggest market for digital payments, accounting for half of the global market, according to the Economist Magazine. A ranking of the world’s most innovative FinTech firms gave Chinese companies four of the five top slots in 2016. The largest Chinese FinTech company, Ant Financial, has been valued at about $60billion, on par with UBS which is Switzerland’s biggest bank. Today, digital payments account for nearly two-thirds of non-cash payments in China, far surpassing debit and credit cards.

Peer-to-Peer (P2P) lenders in China grew from 214 to over 3,000 in 2015, and P2P loans increased 28 fold from 30billion yuan in 2014 to 850b yuan in 2016. Alibaba’s four year old Yu’e Bao fund with $165.6billion has emerged as the world’s largest, overtaking JPMorgan’s US government money market fund, which has $150billion.

Future of banking

According to Austin, there are indeed five major forces at play in this space. They are the banks – traditional and established, best with cash and ancillary instruments; FinTechs – the new kid on the block, disrupter, mostly telecom roots, best with digital currencies and mobile services; regulators – central banks, regulating traditional banks; and communication commissions, responsible for telecoms regulation (and thus FinTechs); currencies – traditional, such as cash and cheques; or digital, such as bitcoin or other cryptocurrencies; and customers, and the weight of their new found voice. Typically, they clamour for whatever will give them convenience and lower costs.

Customers are the most significant force, and represented by the outermost sector of the concentric circles, he said, adding that they tend more towards a preference for digital currencies, the FinTechs will tend to assume a more prominent role in the new face of banking, and the regulatory regime will inadvertently tend towards the communication commissions under whose purview the FinTechs fall.

This will introduce a regulatory imbroglio, as future ‘huge banks’ may fall outside the regulatory ambit of central banks (as seems to be the case with the MPESA mobile money platform, through which Kenyans transacted $28billion in 2015, representing about 44 per cent of the country’s GDP. Safaricom, the telecoms promoter of MPESA ironically falls under the regulation of the Communications Authority of Kenya rather than the Kenyan Central Bank), Okere said.

He said if the customers however, maintain a strong appetite for traditional instruments of financial transactions such as notes and coins, cheques and others, then the current status quo will remain. The face of banking will thus be more of the same, and the regulatory authority will continue to be central banks. Between these two positions may be many variants, depending on the appetite and preferences of customers, and the pace at which they are willing to embrace change.

Retailers embrace financial services

FinTechs are not the only ones challenging traditional banks for turf. Retailers are also jumping into the financial services fray. For instance Amazon has launched Amazon Cash, a way to shop its site without a bank card. The service allows consumers to add cash to their Amazon.com balance by showing a barcode at a participating retailer, then having the cash applied immediately to their online Amazon account. This product is meant to appeal to the those who get paid in cash, don’t have a bank account or debit card, and who don’t use credit cards.

Google is also rolling out a new integration on mobile. Users of the Gmail app on Android will be able to send or request money with anyone, including those who don’t have a Gmail address, with just a tap.

Banking going mobile

In most emerging markets and developing countries, the current formal financial system only reaches a minority of the working-age adult population. Smallholder farmers, self-employed households, and micro-entrepreneurs have to rely on the age-old informal financial mechanisms such as rotating savings clubs, moneylenders, and pawnbrokers. These mechanisms can be unreliable and very expensive. In Nigeria for instance 84.6million people, accounting for 47 per cent of the population are unbanked. In sharp contrast, mobile phone penetration is very high at 94.5 per cent; a perfect set-up for the FinTechs to exploit in their mobile dominated financial services offering.

For policymakers from the global south, the digitalisation of retail payment systems and financial services has become an important economic development priority. It offers the prospect of reaching far more people at far lower costs with the broader range of financial services they need to build resilience and capture opportunities.

The 2015 yearly gathering of some 300 central bankers and policymakers from 90 countries who have formed the Alliance for Financial Inclusion, dedicated the bulk of the agenda to explore such innovations, which could deepen formal financial inter-mediation of their economies.

Imagine a world where all money is digital. Instead of carrying coins and notes in their purse, people would keep digital currency units in electronic wallets on phones, watches or other electronic devices. All of this could happen digitally the way cash is handed over today; in real time, irreversibly, with no additional fees.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

Social Media

Meta Celebrates As Threads Platform Records 275m Active Users Monthly

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Threads

Meta’s social networking platform, Threads has recorded a whopping 275 million monthly active users.

The platform, in its bid to rub shoulders with X (formerly Twitter), described the feat as a milestone and closure to its competitive dream.

Adam Mosseri, Head of Threads and Instagram, made this known while expressing gratitude to users and acknowledging areas for improvement on the platform.

Recounting how Threads has been faring in the social media market since it was launched by Meta in July 2023 as a competitor to X, Mosseri submitted that a whole lot of transformation has taken place.

He explained how the platform achieved impressive sign-ups, reaching 100 million users in less than a week, saying engagements have been rising ever since.

Recalling how Meta’s CEO Mark Zuckerberg reassured investors in April that Threads’ user growth was on track with his expectations, Head of Threads Instagram expressed optimism that the platform’s users would increase in months to come.

Zuckerberg also noted that the open internet server is a key feature in Threads and that it has contributed in making users accept the platform.

It would be recalled that in the months following its launch, Meta added various features to enhance the platform and address user needs.

The platform also got attracted to users through its concentration on integrating with ActivityPub and the decentralized protocol powering networks like Mastodon.

Investors King reports that Nigerians, known for their enthusiasm in embracing new ideas, especially those related to money and influence, are no exception to the increasing number of Threads’ active users.

Some of Nigerian users of the social media app have highlighted enhanced communication, creative expressions that the app’s features provide, opportunity for businesses and influencers to thrive, and empowerment of voices as merits of the platform which have contributed in endearing the app to more users across the globe.

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E-commerce

Nigerians To Enjoy 85% Discount On Groceries, Phones, Home Appliances, Others As Konga Begins Yakata Black Friday Sale

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Konga

Consumers in Nigeria now have opportunity to get 85 percent discount on products of their choice in this year’s yuletide as Konga, Nigeria’s leading e-commerce group, has officially commenced its highly anticipated annual Konga Yakata Black Friday sale.

The offer that was launched on Friday, November 1st, will run through November 30th, 2024.

The Konga Yakata Black Friday campaign is a unique opportunity for Nigerian consumers to access premium products at unbeatable prices, while also benefiting from Konga’s trusted logistics and payment solutions. Shoppers are encouraged to visit Konga.com to take advantage of these exceptional offers throughout November.

According to the management of the firm, this year’s Yakata sale brings unbeatable offers across all Konga subsidiaries, including Konga Online, Konga Retail, KongaPay, Konga Travel and Tours, Konga Health, and Konga Logistics.

Touted as the “Biggest Sale of the Year,” Konga Yakata Black Friday offers consumers the opportunity to enjoy up to 85% discount on a wide range of products across categories, including groceries, phones and accessories, home appliances, fashion, and beauty.

It is believed that the sale campaign will usher significant relief to shoppers as Konga moves to cushion the effect of the nation’s harsh economic realities.

As a trusted and authorized retailer of leading Original Equipment Manufacturers (OEMs), Konga provides shoppers with unmatched access to genuine products from renowned brands such as Starlink, L’Oreal, Apple, Samsung, Philips, Zinox, Nokia, Hisense, Oppo, Infinix, Lenovo, and HP.

It further asked consumers to expect not only the convenience of authentic goods but also a distinct pricing advantage on these premium brands.

The Yakata campaign also supports Nigerian small and medium-scale enterprises (SMEs) by driving consumer demand through nationwide awareness and promoting e-commerce adoption.

It indicated that Konga has invested significantly in creating awareness for Yakata, enabling more Nigerians to leverage online shopping for their essential needs and lifestyle desires.

For this year’s offer, the deals do not end on Konga.com alone as Konga, through its subsidiaries, provides exclusive deals to customers during the Yakata period:

Konga Travel and Tours affiliates and top clients were asked to watch out for perks including free weekend hotel accommodations, and a zero-service charge for corporate clients who book travel during the Yakata campaign.

Konga Health is offering exciting discounts on renowned brands like CeraVe and on your favourite beauty and health products. Customers can also use your favourite Konga Health influencer’s voucher code to unlock even more exclusive deals and freebies! Stay tuned to Konga Health’s social media pages for the latest updates and announcements.

KongaPay is offering shoppers who use KongaPay for purchases on Konga.com will receive a 10% discount, with additional benefits like 10% off on bill payments including electricity, cable TV, and data.

It added that users who maintain a savings balance of at least NGN50,000 are eligible for a 15% annual interest rate. As part of a special promotion, shoppers who use KongaPay also stand a chance to win cash prizes in a 100k giveaway. To qualify, customers simply need to download the KongaPay app and create an account in minutes.

Assuring customers of a seamless delivery system, Konga Logistics noted that it offers delivery at competitive, discounted rates. Konga Logistics assured that a seamless shopping experience with reliable and affordable delivery options for all purchases made during the Yakata season.

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Telecommunications

MTN Nigeria Strengthens Working Capital By Raising N50bn In New Commercial Paper

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MTN

MTN Nigeria Communications PLC (MTN Nigeria) has disclosed plans to raise N50 billion through its latest issuance of commercial paper (CP) to boost its working capital.

The plan is under N250 billion Commercial Paper Issuance Programme.

Not only that this Series 11 and 12 CP issuance is expected to strengthen MTN Nigeria’s short-term working capital, it will also diversify its financing base.

A notification to the Nigerian Exchange Limited and the investing public further revealed that this proposed issuance is part of MTN Nigeria’s ongoing strategy to tap the debt market as a flexible funding source to meet immediate financial needs.

It builds upon the company’s series of CP issuances in the past year as it pursues a robust approach to balance its capital structure.

The funds are expected to support the company’s operational and growth requirements as it seeks to expand its infrastructure, improve service delivery, and cater to the increasing demand for telecommunications and digital services across Nigeria.

MTN’s financial statement as of September 2024 suggests it has negative working capital of about N1.49 trillion

The cash flow is necessary in order to enable the company meet cash flow demands and service short-term debt without over-relying on long-term financing

This approach provides financial flexibility, allowing MTN Nigeria to manage interest costs and adjust its debt profile in line with operational cash flow, which is critical for a company with significant external loans.

The issuance also serves the broader purpose of diversifying MTN Nigeria’s financing sources, reducing reliance on bank loans, and maintaining a balance between short- and long-term debt.

This financial strategy not only enhances MTN’s liquidity but also positions it to better withstand the economic challenges in Nigeria’s volatile business environment.

While the company has yet to disclose specific terms of the Series 11 and 12 notes, further details are expected to be shared in the coming weeks.

 

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