Finance

Repositioning Financial Services for Digital Transactions

Published

7 years ago

September 7, 2017

Repositioning Financial Services for Digital Transactions

Digitalisation is driving disruption and re-shaping the future across payments, banking, trade and commerce, consumer and retail industries, healthcare and other industries, leading to convergence and collocation within some sectors.

The increasingly converging and interconnected sectors are rapidly adapting to new market realities and a landscape that is rapidly being redefined and dominated by FinTech disruptors.

Data, for example, is essentially becoming a competitive weapon in the hands of discerning players, and more than ever before, collaboration is increasingly becoming the key to survival.

Based on the increasing rate at which convergence is taking place, occasioned by the increasing rate of financial technology (FinTech) disruptions, Interswitch, a digital payment solution company, has initiated a lofty idea to host a two-day Interswitch Connect Tech/Payment conference in Lagos, from 14th to 15th of September 2017, designed to bring together, the entire digital financial ecosystem to discuss, debate and evaluate the future of digital transactions, amid threats from FinTech disruptors.

Disruptions in the digital space

New technologies emanating from FinTech companies are fast changing the old ways of digital payment, thus causing healthy and unhealthy transactions in the financial ecosystem, which many players see as threat to digital transactions.

FinTech is an industry composed of companies that use new technology and innovation with available resources to compete in the marketplace of traditional financial institutions and intermediaries in the delivery of financial services.

Over the time, their technology solutions have been embraced and adopted by some players in the financial ecosystem, while some players still see some of the solutions as big threat to digital transaction.
A recent survey report released by PricewaterhouseCoopers (PwC), raised deep concerns over possible disruption of Nigeria’s financial service sector by the FinTech players.

According to the report, the Nigerian retail banking and payments sectors would be the most disrupted by a group of new companies building financial technology solutions.

The PwC survey, which was conducted around 50 Chief Executive Officers (CEOs), and industry leaders across various segments of Nigeria’s financial services industry with additional insights and proprietary data obtained from DeNovo, PwC’s Strategy and Platform, focused on the FinTech innovation. The report concluded that FinTech solutions could cause a great deal of disruption in the country’s financial services market.

According to the report, FinTechs are redrawing the competitive financial services landscape and blurring the lines that define players in the sector. Their offerings range from competing financial services such as alternative lending, to additive solutions atop existing banking services, to enabling technologies for the banks themselves.
“Capitalising on the latest mobile, cloud and digital technologies, Nigeria is increasingly becoming home to many FinTech firms that are trying to shake up the banking value chain,” the report said.

Findings from the survey by PwC also revealed that Nigerian financial services players see changing customer needs as the top impact FinTechs have on their business, with up to 60 per cent of respondents indicating that up to 40 per cent of financial services business will be at risk of standalone FinTechs by 2020.

Presenting the report in Lagos, Associate Director and Co-FS Advisory Lead at PwC Nigeria, Adedoyin Amosun, said: “From our survey, retail banking and funds transfer have the highest likelihood of disruption at 92 per cent and 85 per cent respectively. Underwriters were of the view that insurance brokerage, Auto and Life insurance stand an equally high likelihood of disruption at 77 per cent. While the threats of disruption is quite appreciated, our respondents also noted the opportunities FinTech adoption will bring especially as seen in the unlocking of opportunities for more revenue sources and reduce operational cost. A sizeable number also believe that Fintech adoption will improve customer retention and product differentiation.”

The threat

According to Amosun, majority of respondents from traditional financial industry players believed that part of their business is at risk of being lost to standalone FinTechs, up to 92 per cent in the case of banks. Also banks ranked loss of market share at the top FinTech related threat, closely followed by increased pressure on margins. One of the ways in which FinTechs are able to do this is by significantly shrinking operating costs. Other FS incumbents ranked information security and privacy concerns as the key FinTech threat to their business.

Analysing the survey report, Advisory Partner and Chief Economist, PwC Nigeria, Dr. Andrew Nevin, said: “FinTechs are empowering customers by providing services that are delivered via technology applications on customer’s mobile devices. This allows consumers conveniently initiate and complete transactions, connect to third party entities and access information without restrictions.”

All over the world, the increasing momentum of FinTechs and their success is challenging financial services players to devise a spectrum of strategic responses. However, not all FinTechs pose the same threats or offer opportunities.

“In some cases, FinTechs will be viewed as enablers to traditional innovation and continuous improvement. In others, it presents a series of disruptions and threats as they continue to make inroads into banks’ traditional territory by offering a competitive service or product,” Nevin said.

Taming threats with Interswitch Connect

Some experts have suggested that implementation of a customer-centric model focused on offering products and services that truly addresses customer’s needs and supports the completion of transactions through multiple accessible and connected channels, will be ideal to address concerns of those who feel threatened by FinTech solutions.

Many experts are of the view that financial players must have to proactively approach the FinTech challenge with a clearly articulated strategy rather than the current approach of adopting reactionary measures.

“Incumbents also need to identify the threats and opportunities that are most relevant to their business and explore ways they can build, acquire or partner with FinTechs for the capabilities they lack,” they said.

In the midst of the confusion, the organisers of Interswitch Connect have said the conference will discuss various strategies that will rest the fears of most financial players, as they relate to FinTech disruptions.

According to the organisers, the two days conference would feature keynote presentations, panel discussions, breakout workshops, case study presentations and product demos from the leading innovators and Original Equipment Manufacturers (OEMs) in the financial services industry, culminating in the Interswitch Connect Gala night where people would unwind, network and recognise key partners and clients.

The conference promises to be the first of its kind and will incorporate thought leadership within the ambits of the payments/fintech space with the keynote delivered by futurist and award winning author, Brett King.

The scope of the conference will be extended to include top OEM partners such as Thales, ACI, Stratus & Finastra and other knowledge partners such as PwC, MISYS, Kantar TNS, as well as Ecosystem partners including AfreximBank and TRANSSION Holdings. OEM Partners will also have an opportunity to present their solutions to the target audience.

Budding FinTech ecosystem

Some experts are of the opinion that FinTech should be groomed to provide financial services that will bring about healthy disruptions in the financial ecosystem, in order for it to gain traction and potentially locate Nigeria on the global map

as a FinTech hub. They are equally calling for collaboration between FinTech companies and the financial institutions, that will bring about the right mix of technical skills, capital investments, government incentives, regulatory framework and an entrepreneurial and innovative mind-set, as the catalyst needed to establish FinTech as a key enabler of financial services in Nigeria.

The past three years have been formative for the Nigerian FinTech sector and saw the emergence of numerous FinTech start-ups, incubators and investments.

Building a strong FinTech ecosystem where startup will engage in external partnerships with financial institutions, universities, research institutions, technology experts and government institutions is expected to facilitate growth and innovation in the FinTech sector, according to expert views.

The plan to hold the Interswitch Connect conference, will help address all grey areas and fears envisaged by financial players, as regards the perceived threat to business, posed by FinTech players.

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Samed Olukoya

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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Banking Sector

Zenith Bank Shareholders Approve Holdco Structure

Published

17 mins ago

April 29, 2024

Samed Olukoya

Shareholders of Zenith Bank Plc unanimously approved the restructuring of the Bank to a holding company during a court-ordered Extraordinary General Meeting (EGM) held virtually from Zenith Heights, Zenith Bank Plc, Victoria Island, Lagos, on Friday, April 26, 2024.

In accordance with the Scheme of Arrangement dated March 28 2024, pursuant to Section 715 of the Companies and Allied Matters Act (CAMA), 2020 between the Bank and the holders of the fully paid ordinary shares of 50 Kobo each in the Bank, the shareholders voted to transfer 31,396,493,787 ordinary shares of 50 Kobo each held in the issued and paid-up share capital of Zenith Bank Plc to Zenith Bank Holding Company Plc (the HoldCo) in exchange for the allotment of 31,396,493,787 ordinary shares of 50 Kobo each in the share capital of the HoldCo in the same proportion to their shareholding in the Bank.

Similarly, the shareholders approved that each Existing GDR Holder receive, as consideration for each existing GDR held, one new HoldCo GDR.

The shareholders also approved that all of the shares held by the nominees of the Bank in Zenpay Limited, a direct subsidiary of the HoldCo, together with all rights and liabilities attached to such shares, be transferred to the HoldCo.

The Board of Directors were also authorised to delist the shares of the Bank and the Existing GDRs from the official list of the Nigerian Exchange and the London Stock Exchange respectively as well as re-register the Bank as a private limited company under CAMA Act 2020.

In his remarks during the EGM, the Founder and Chairman of Zenith Bank Plc, Jim Ovia, CFR, thanked the shareholders for their unwavering commitment, which has been instrumental in the Bank’s outstanding performance over the years.

He expressed his delight at witnessing the transition of the Bank to a holding company, which is anticipated to position it advantageously for exploring emerging opportunities in the Fintech space while bolstering its digital and retail banking initiatives.

Also speaking during the EGM, Dr. Ebenezer Onyeagwu, the Group Managing Director/Chief Executive, lauded the Founder and Chairman, Jim Ovia, CFR, for his pivotal role in creating an institution that has consistently been a trailblazer in the nation’s financial services industry.

Dr. Onyeagwu expressed his optimism about the Bank’s growth trajectory in the coming years as it transitions into a holding company structure.

According to him, “The HoldCo structure presents an opportunity for us to unlock value for shareholders in terms of opportunity in other sectors beyond banking. The first part is Fintech, where we have already received the approval and the license from the Central Bank of Nigeria (CBN), which we are launching soon.

“It is going to be focusing on an area that we know has not been touched on by anyone. So it is more like us finding an open wide space where we can begin to operate, and with a HoldCo, what that means is that we have an opportunity to diversify our investment.

“We can begin to look at other business verticals that were restrained by the kind of authorisation we have. So, it presents a big opportunity for us to have a wider lens and scope in terms of what we can do. It will also position us to think of opportunities beyond Africa. We will be looking at key business verticals that have the potential to enable us to create value for shareholders.”

On the recapitalisation plan of the Bank, Dr. Onyeagwu stated that the Bank is on course to receive the needed shareholder’s approval in the forthcoming Annual General Meeting (AGM) slated for May 8, 2024, which will kickstart its capital raising effort in line with the CBN directive.

He expressed confidence in the Bank’s ability to raise the stipulated capital, stating that amongst its peers in the industry, Zenith was expected to raise the least amount due to its already robust capital base.

Loans

Akinwumi Adesina Calls for Debt Transparency to Safeguard African Economic Growth

Published

4 days ago

April 25, 2024

Samed Olukoya

Amidst the backdrop of mounting concerns over Africa’s ballooning external debt, Akinwumi Adesina, the President of the African Development Bank (AfDB), has emphatically called for greater debt transparency to protect the continent’s economic growth trajectory.

In his address at the Semafor Africa Summit, held alongside the International Monetary Fund and World Bank 2024 Spring Meetings, Adesina highlighted the detrimental impact of non-transparent resource-backed loans on African economies.

He stressed that such loans not only complicate debt resolution but also jeopardize countries’ future growth prospects.

Adesina explained the urgent need for accountability and transparency in debt management, citing the continent’s debt burden of $824 billion as of 2021.

With countries dedicating a significant portion of their GDP to servicing these obligations, Adesina warned that the current trajectory could hinder Africa’s development efforts.

One of the key concerns raised by Adesina was the shift from concessional financing to more expensive and short-term commercial debt, particularly Eurobonds, which now constitute a substantial portion of Africa’s total debt.

He criticized the prevailing ‘Africa premium’ that raises borrowing costs for African countries despite their lower default rates compared to other regions.

Adesina called for a paradigm shift in the perception of risk associated with African investments, advocating for a more nuanced approach that reflects the continent’s economic potential.

He stated the importance of an orderly and predictable debt resolution framework, called for the expedited implementation of the G20 Common Framework.

The AfDB President also outlined various initiatives and instruments employed by the bank to mitigate risks and attract institutional investors, including partial credit guarantees and synthetic securitization.

He expressed optimism about Africa’s renewable energy sector and highlighted the Africa Investment Forum as a catalyst for large-scale investments in critical sectors.

Banking Sector

UBA, Access Holdings, and FBN Holdings Lead Nigerian Banks in Electronic Banking Revenue

Published

5 days ago

April 24, 2024

Samed Olukoya

United Bank for Africa (UBA) Plc, Access Holdings Plc, and FBN Holdings Plc have emerged as frontrunners in electronic banking revenue among the country’s top financial institutions.

Data revealed that these banks led the pack in income from electronic banking services throughout the 2023 fiscal year.

UBA reported the highest electronic banking income of N125.5 billion in 2023, up from N78.9 billion recorded in the previous year.

Similarly, Access Holdings grew electronic banking revenue from N59.6 billion in the previous year to N101.6 billion in the year under review.

FBN Holdings also experienced an increase in electronic banking revenue from N55 billion in 2022 to N66 billion.

The rise in electronic banking revenue underscores the pivotal role played by these banks in facilitating digital financial transactions across Nigeria.

As the nation embraces digitalization and transitions towards cashless transactions, these banks have capitalized on the growing demand for electronic banking services.

Tesleemah Lateef, a bank analyst at Cordros Securities Limited, attributed the increase in electronic banking income to the surge in online transactions driven by the cashless policy implemented in the first quarter of 2023.

The policy incentivized individuals and businesses to conduct more transactions through digital channels, resulting in a substantial uptick in electronic banking revenue.

Furthermore, the combined revenue from electronic banking among the top 10 Nigerian banks surged to N427 billion from N309 billion, reflecting the industry’s robust growth trajectory in digital financial services.

The impressive performance of UBA, Access Holdings, and FBN Holdings underscores their strategic focus on leveraging technology to enhance customer experience and drive financial inclusion.

By investing in digital payment infrastructure and promoting digital payments among their customers, these banks have cemented their position as industry leaders in the rapidly evolving landscape of electronic banking in Nigeria.

As the Central Bank of Nigeria continues to promote digital payments and reduce the country’s dependence on cash, banks are poised to further capitalize on the opportunities presented by the digital economy.