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Fintechs Eye Banks’ Deposit, Loan Segments

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fintech - Investors King
  • Fintechs Eye Banks’ Deposit, Loan Segments

Some fintech firms have started targeting the deposit and loans segments of traditional banks, with a view to taking part of the market share of the financial institutions.

The Financial Derivatives Company Limited (FDC), disclosed in its latest report sub-titled: “Is Fintech a threat to Traditional Banks?”

It cited an example of PiggyBank, which uses recurring card payments to allow its customers create and fund a savings account on their mobile phone.

This, according to the report, has proven popular among working class Nigerian youths as it offers an alternative to a traditional fixed deposit account which requires a number of visits to a physical branch to set up.

“A logical next step for Piggybank would be to start offering loans. In the same vein, technology can prove an advantage, as algorithms have enabled start-ups to assess credit worthiness and deliver loans quicker than traditional banks.

“Even if a fintech firm does not successfully disrupt the banking industry, it has created cost-effective models that also provide quality financial services,” it added.

In the last couple of years, there have been a rise of many fintech platforms; from payment solutions to online lending applications, while the older fintech players like Square, Ant Financial and Sofi continue to hold strong.

Traditional banks have so far, remained resilient to this disruption, mainly due to advantages built up through their branch networks and expertise in providing credit.

The resilience also comes from their consumer base, which have been slow to adopt fintech their financial services partly due to a lack of urgency and a lack of awareness about the strategic benefits of the new tools, and partly due to concerns about privacy and security.

But the report stressed that fintechs present a threat to traditional banks as their platforms tend to broaden the scope of available financing, offer customers bespoke services at a lower cost and reach previously unbanked populations.

“While banks will adapt in the short term, the greater risk is in the long term as the world becomes more automated.
“The future of traditional banking in Nigeria will depend on how banks can quickly utilise technology to their advantage,” it added.

Fintech refers to an evolving range of start-ups and companies leveraging technology to provide financial services. Fintech models provide consumers the convenience that banks cannot yet match. For example, you can request a loan from ‘Paylater’ and receive a credit alert in two hours.

One can also get a new dollar debit card from ‘Get Barter’ and open a fixed deposit account with PiggyBank.

“In short, fintech platforms offer customers a superior service, at a lower cost, through the efficiencies of technology,” it added.

Banks are financial intermediaries: they take money from people looking to save (deposits) and give to people looking to borrow (loans). They generate interest on loans, and they collect fees and commissions on numerous value added services to the depositors, for example: money transfers, foreign exchange transactions, and bill payments.

A significant portion of bank revenues come from net interest income – the difference between interest accrued and interest paid out.

“Nigerian fintech platforms are yet to challenge this income stream. Nonetheless, banks have taken note. Wema Bank recently launched ALAT a digital only bank with a distinct feature – the ability to create and fund a savings account on your mobile phone.

“The greater threat from fintech on the banks’ operations will come in the medium to long term.

“Traditional retail banks are facing structural vulnerability issues like declining deposits due to multiple alternative investment options and the lack of innovation around products and services,” it added.

It, however, pointed out that another way banks can respond to this competitive threat would be by learning from and adopting best practices from the same firms that are challenging their very existence.

“Time is running out for banks to start adapting. The new wave of digital banking is upon us and those that fail to embrace new technology and keep up with the pace of the new digital age will simply go out of business,”it warned.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Social Media

Meta Shuts Down 63,000 Nigerian Accounts in Sextortion Crackdown

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In a significant move to combat online crime, Meta Platforms Inc., the parent company of Facebook, Instagram, and WhatsApp, has removed 63,000 accounts in Nigeria linked to sextortion scams.

This sweeping action is part of Meta’s ongoing effort to address the growing threat of digital extortion on its platforms.

Unmasking the Scammers

The crackdown, which took place at the end of May, targeted accounts engaged in blackmail schemes.

These scammers posed as young women to coerce individuals into sharing intimate photos, which were then used to extort money from the victims.

The removal follows a Bloomberg Businessweek exposé highlighting the rise of such crimes, particularly affecting teenagers in the United States.

The Global Impact

The U.S. Federal Bureau of Investigation (FBI) has identified sextortion as one of the fastest-growing crimes targeting minors.

The schemes often lead to severe consequences, including the tragic suicides of more than two dozen teens.

In one high-profile case, the death of 17-year-old Jordan DeMay in Michigan led to the arrest of suspects traced back to Lagos, Nigeria.

The Role of the Yahoo Boys

Many of the dismantled accounts were linked to the “Yahoo Boys,” a notorious group known for orchestrating various online scams.

These individuals have been using social media to recruit and train new scammers, sharing blackmail scripts and fake account guides.

Meta’s Response

Meta’s spokesperson emphasized the company’s commitment to user safety, stating, “Financial sextortion is a horrific crime that can have devastating consequences.”

The company is continually improving its defenses and has reported offenders targeting minors to the National Center for Missing & Exploited Children.

To enhance protection, Meta has implemented stricter messaging settings for teen accounts and safety notices regarding sextortion.

They are also employing technology to blur potentially harmful images shared with minors.

Ongoing Efforts

Meta’s actions highlight the complex and evolving nature of online crime. The company has pledged to remain vigilant, adapting its strategies to counter new threats as they emerge.

“This is an adversarial space where criminals evolve to evade our defenses,” Meta noted.

Looking Forward

As digital platforms continue to grapple with issues of privacy and security, Meta’s recent actions demonstrate a proactive stance in safeguarding users.

By dismantling these networks, the company aims to reduce the prevalence of sextortion and foster a safer online environment for all.

The crackdown serves as a reminder of the need for continued vigilance and collaboration between tech companies and law enforcement to protect individuals from the harmful effects of digital exploitation.

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Fintech

Flutterwave Celebrates Inclusion in CNBC’s Top 250 Global Fintechs

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Flutterwave has been recognized as one of the Top 250 Fintech companies globally by CNBC and Statista.

Joining the ranks of industry giants like Ali Pay, Klarna, Piggyvest, and Mastercard, this accolade underscores Flutterwave’s impact on the financial technology sector.

This honor follows Flutterwave’s recent inclusion in Fast Company’s Most Innovative Companies list, highlighting the company’s pivotal role in transforming Africa’s payment landscape.

The recognition is a testament to Flutterwave’s dedication to innovation and excellence in providing seamless payment solutions across the continent.

Expressing gratitude, Flutterwave acknowledged its talented team, supportive board, reliable partners, and loyal customers for contributing to this success.

The company continues to drive progress in the fintech industry, reinforcing its commitment to enhancing financial accessibility and inclusion in Africa and beyond.

Flutterwave’s recognition on these prestigious lists marks a proud moment and a significant milestone in its journey, reflecting the company’s growing influence and leadership in the global fintech arena.

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Startups

Google Leads $250 Million Funding Round for Glance

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A logo is pictured at Google's European Engineering Center in Zurich

Google is leading a $250 million funding round for Glance, a mobile content provider.

This infusion of capital aims to expand Glance’s reach and solidify its market position amidst growing competition.

Glance, a subsidiary of InMobi Group, offers a unique service that delivers news, entertainment, and other content directly to users’ mobile screens without unlocking their devices.

With a user base exceeding 300 million across India, the US, Japan, and Indonesia, the startup has gained significant traction since its inception in 2019.

The funding round, expected to close in the coming weeks, marks a continued partnership between Google and Glance.

Google initially invested in the company in 2020, and this latest round will further enhance Glance’s capabilities to innovate and reach new audiences.

This investment reflects Google’s strategic interest in India, the world’s most populous nation, where it competes with tech giants like Microsoft, Meta, and Amazon.

With India’s rapidly growing middle class and increasing smartphone adoption, the market presents vast opportunities for digital expansion.

The support from Google comes on the heels of a previous $200 million investment by Mukesh Ambani, Asia’s wealthiest individual, which valued Glance at over $1 billion.

The startup’s largest stakeholder, InMobi, continues to thrive as a pioneer in mobile advertising, with Glance benefiting from its expertise and resources.

As Glance prepares for this new phase of growth, it stands poised to redefine how content is consumed on mobile devices worldwide.

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