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FinTech: Banking Hall Transactions Dip by 25%



  • FinTech: Banking Hall Transactions Dip by 25%

Banking halls are getting less attractive to customers. Huge transactions now happen outside the banking halls, courtesy of rising influence of Financial Technology (FinTech) in taking financial services to customers, the Managing Director, Nigeria Interbank Settlement System (NIBSS), Adebisi Shonubi, has said.

The NIBSS provides the infrastructure for automated processing, settlement of payments and fund transfer instructions between banks and card companies.

Speaking at the Accion Microfinance Bank financial inclusion seminar held in Lagos at the weekend, the NIBSS boss said banks-branch transactions had dropped by 25 per cent in the last one year, as more customers embrace electronic payment, especially Unstructured Supplementary Service Data (USSD) technology platforms.

Banking transactions are moving towards zero human interactions, saving cost and time for customers. The USSD is a Global System for Mobile (GSM) communication technology now deployed by banks to offer transfer services to their customers using Android phone.

Digital financial technology, or FinTech, and particularly the global spread of mobile phones, has facilitated expanding access to financial services to hard-to-reach populations and small businesses at low cost and risk.

Shonubi said so much had happened in the digital payment system with even microfinance banks now being admitted into it.

“Microfinance banks now own their own Bank Verification Number -BVN machines and that shows the level of acceptance of technology in banking. NIBSS provides a platform that allows financial services to be provided to customers at reasonable cost. Over the last few years, the volume of digital financial has been growing, and we have brought down the cost by over 80 per cent,” he said.

Shonubi spoke of deeper issues than technology. He said only 12 per cent of bank customers were using Point of Sale (POS) machines and they are knowledgeable people within the society. “There are certain things to take place for us to have more consumers change their behavior towards digital financial services. Education about the product is key and that promotes financial inclusion,” he said.

”We need to find ways of building scales. And the cost of setting up is very high. If you are a financial institution and 80 per cent of your capital is used to set up the business, that means you can only lend 20 per cent. Everybody is now targeting 30 million customers that are largely employed people. I think there is need to target more people outside this group,” he said.

Shonubi said more surprises awaited customers using the USSD device. “I think there is much that will happen in three years around smart phones. We need to use USSD technology to provide these services. There is already knowledge, but we need to build on that.”

He explained that even with the banks, bank-branch transactions have dropped by about 25 per cent, internet banking transactions have dropped by 15 per cent while use of Apps has grown by about 10 per cent.

“But where the real growth is seen is around the USSD that has grown by about 25 per cent year-on-year. Even with the knowledgeable people, they are finding it more convenient to use than going online. So, we need to start providing services that are appropriate. People are talking about knowing what to provide, but also using channels that are appropriate is important. And that is where the opportunities really lie,” he said.

The USSD has helped bank customers facilitate low-value retail payments, grow e-payments by providing accessible electronic channels to a wider range of users and to further enhance financial inclusion. It has helped to extend e-payment benefits to payers and merchants at the bottom of the pyramid where usage of cash has been predominant.

The USSD technology has become the most accessible channel for financial and non-financial transactions. Banks have a choice of allowing their respective customers to access this new service with their customised short codes.

Shonubi said Nigeria has only 30 million accounts with verified BVN and that these customers have registered 75 million phone numbers against their names.

Bank customers to open and enroll on BVN. “So, what are we finding out is that 50 per cent of those customers already have BVN. That means they already have accounts in other banks. That means there must be something they are going to the microfinance banks for that they can’t find in other banks, and I think it is credit,” he said.

He said the use of financial services by the larger population is still low, adding that out of 80 million bank accounts, only 30 million unique individuals can be identified with BVN.

“When we ran the analysis, only 3.5 million people use POS machines out of 30 million bank customers. And over 60 million cards have been issued. Why are people not using channels that are already there? What we are doing now is gathering data and trying to make it available. This will enable us understand what the issues are,” he narrated.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market.

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Sub Saharan Africa Mergers and Acquisition Hits US$10.3bn in Q1 2020



Sub Saharan Africa M&A Hits US$10.3bn in Q1 2020

South Africa – Refinitiv today released the 2020 first-half investment banking analysis for the Sub-Saharan Africa. According to the report, investment banking fees in Sub-Saharan Africa reached an estimated US$64.5 million during the second quarter of 2020, half the value recorded during the first quarter of 2020 and the lowest quarterly total since Q1 2012.

Around US$196.1 million worth of fees were earned in the region during the first half of 2020, down 27% from last year and a six-year low with fee declines recorded across M&A advisory, debt capital markets underwriting, and syndicated lending. Debt capital markets underwriting fees declined 45% to US$26.2 million, marking the lowest first half year total for bond fees in the region since 2016. Advisory fees earned from completed M&A transactions generated US$43.4 million, down 50% year-on-year to the lowest first half level since 2005, while syndicated lending fees fell 36% to a six-year low of US$71.5 million. Equity capital markets underwriting fees increased 164% year-on-year to US$55.1 million.

Government & Agency fees accounted for 26% of total investment banking fees earned in the region during the first half of 2020, up from 14% during the same period last year. South Africa generated the most fees in the region during the first six months of the year, a total of US$108.4 million accounting for 55%, followed by Nigeria with 13%. JP Morgan earned the most investment banking fees in the region during the first six months of 2020, a total of US$23.1 million or an 11.8% share of the total fee pool.

As for Mergers and Acquisitions (M&A), the value of announced M&A transactions with any Sub-Saharan African involvement reached US$10.3 billion during the first six months of 2020, 44% less than the value recorded during the same period in 2019, and a two-year low. The number of deals declined 18% over the same period. After just US$424.5 million worth of deals were recorded in April, marking the lowest monthly M&A total since October 2005, activity increased for two consecutive months to reach US$3.0 billion in June, a nine-month high.

Deals with a Sub-Saharan African target declined 76% by value to an eighteen-year low of US$3.2 billion, as domestic M&A within the region declined 71% from last year and the combined value of inbound M&A deals reached just US$1.2 billion, the lowest first-half level in more than two decades. The largest deal involving a Sub-Saharan African target was announced at the end of May – Afrimat’s US$644.3 million acquisition of South African mine operator Unicorn Capital Partners.

Deals in the materials sector accounted for 46% of Sub-Saharan African target M&A activity during the first six months of 2020. South Africa was the most targeted nation, followed by Uganda and Nigeria. Outbound M&A totalled US$3.6 billion during the first six months of 2020, 67% more than the value recorded during the same period in 2019, despite a 22% decline in the number of deals. With advisory work on eleven deals with a combined value of U$1.7 billion, JP Morgan holds to the top spot in the financial advisor ranking for deals with any Sub-Saharan African involvement during the first six months of 2020.

In the Equity Capital Market space, Sub-Saharan African equity and equity-related issuance totaled US$1.5 billion during the first half of 2020, 16% more than the value recorded during the same period last year, but lower than every other first half total since 2009. The number of deals recorded declined by 29% to the lowest first half tally since 2009.

Only one initial public offering was recorded during the first six months of the year. Malawian telecoms company, Airtel Malawi, raised US$28.7 million on the Malawi Stock Exchange in February. JP Morgan took first place in the Sub-Saharan African ECM underwriting league table during the first six months of 2020.

As for Debt Capital Markets, the African Development Bank raised $3 billion in a “Fight Covid-19” social bond at the end of March to help alleviate the economic and social impact the Coronavirus pandemic will have on livelihoods and economies in the region. With this deal, and Ghana’s US$3 billion Eurobond in February, Sub-Saharan African debt issuance totalled US$8.9 billion during the first quarter of 2020, the second-highest first quarter DCM total in the region of all-time. Only US$1.9 billion was raised during the second quarter, taking the value raised during the first six months of 2020 to US$10.7 billion, down 14% from last year and a four-year low. Deutsche Bank took the top spot in the Sub-Saharan African bond underwriter ranking during 1H 2020 with US$1.7 billion of related proceeds, or a 16% market share.

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Global Debt Rises to $258 Trillion in Q1 2020



Global debt

Global Debt Rose to $258 Trillion in the First Quarter of 2020

Global debt rose to a record high of $258 trillion in the first quarter of the year, according to the Institute for International Finance (IIF).

The IIF, the body that represents global banks and financial institutions, said debt to GDP ratio rose by over 10 percent to reach a record 331 percent during the period under review.

“While increasing debt levels raise concerns about debt sustainability, over 92% of government debt is investment-grade,” the report said.

In emerging economies, the debt-to-GDP ratio rose to 230 percent and expanded by $700 million in value to $72.5 trillion due to the decline in emerging currencies against the US dollar.

While debt-to-GDP in developed economies grew from 380 percent in 2019 to 392 percent. The report noted that the U.S. debt accounted for half of the total $185 trillion debt in developed economies while debt outside the financial sector was high in Canada, France, Norway and the United States.

The report noted that debt across all sectors in China was on track to hit 335 percent of GDP following a surge from 302 percent to 318 percent in the first quarter.

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PoS Transactions Decline by N97 Billion in April



point of sale

PoS Transactions Depreciated by N97bn in the Month of April

The Central Bank of Nigeria (CBN) said payments across the nation’s point of sale terminals declined by 26.2 percent in April when compared to March.

The federal government had imposed a lockdown on activities in Lagos, Ogun and Abuja on March 31, 2020 to curb the spread of the COVID-19 pandemic in Nigeria.

The lockdown weighed on economic activities and plunged PoS transactions by N96.7 billion in the month of April.

In the report put together by the central bank, data covers cheques, ATM, PoS, E-bills and NIP transactions for the month of April and excluded channels such as Web, Mobile, and NEFT.

The data collected by the apex bank showed the total volume of transactions declined from 251.9 million in March to 186.6 million in the month of April. The lowest since February 2018 when the volume of e-payments drops to 159.9 million.

Similarly, transaction values dipped by N4.6 trillion or 37.7 percent from N12.3 trillion in March to N7.6 trillion in April.

A break down of the report shows the value of PoS transactions depreciated by N96.7 billion or 26.2 percent from N368.9 billion in March 2020 to N272 billion in April.

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