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Whenever I see Nigerian bank ratings, the same question goes through my mind — “How did First Bank allow ‘upstarts’ like Zenith Bank and Access Bank get near her?”

First Bank started operations in 1894, Zenith Bank in 1990. If we consider that banks are in the business of deposit generation and deployment, how does a bank like Zenith Bank accumulate more capital to be deployed than First Bank? Was First Bank asleep? Was Zenith bank running? Looks like a bit of both.

Will the financial services landscape change again?

Will another “upstart” upstage Access Bank? Well for one, technology has equalized the game. With just N100,000 a FinTech startup can be created in Bayelsa with offices in Lagos, New York, London, South Africa and China. That startup can, via social media and mobile text, have access to the same markets any multinational has. Banking in Nigeria especially is due for disruption, and technology will enable that disruption. Nigerian banks are asleep on the lending wheel; they are not providing enough credit to the real SME sectors. Safe to say Nigerian banks are protected by banking licenses which create an artificial moat to competition. MTN Nigeria just got a financial services license but cannot accept deposits or offer loans (yet). If MTN and other Telcos could offer loans, then we may see Nigerian banks get creative in credit scoring and consumer finance.

CBN seeks standard practice from fintech operators

[READ MORE: Uproar as Banks, Telcos introduce charges on the use of USSD code]

The Enhancing Financial Innovation and Access (EFINA) to Financial Services 2018 survey says only 39.7 % of Nigerians are formally banked, and only 1.3% have accessed a loan, (no typo), i.e. First Bank and Co in 58 years could only get 39 out of 100 Nigerians to open bank accounts. South Africa has an 80% financial inclusion rate, while Nigerian banks are also dropping the ball on financial inclusion. Digging further, the report says 9.4 million Nigerians (nearly 10% of the population) rely solely on informal channels to do financial intermediation. Of this group, 81.6% save a part of their incomes. So, there are Nigerians in rural areas, earning less than N20,000 a month, but they still save. Nigerian banks have no product for this class of Nigerians. Where do these Nigerians save — in a co-operative group, or at home?

However, EFINA also says that these informally banked Nigerians also access loans, from family friends and cooperative groups. What are they borrowing for? To start a business, buy food and fertilizer — these are the top three borrowing needs. Do these rural borrowers payback? Yes, 75% of them do. Finally, what’s the size of this informal market? EFINA estimates the potential market value of deposits as N42 billion with a credit value of N68.7 billion. Note that we are speaking of Nigerians who want to bank but have no access to formal banking. The market for the financially excluded is about N128 billion.

Take mobile technology, in a Harvard Kennedy School paper on the Mobile Banking Revolution in Kenya by Jay Resengard, he found that due to mobile banking, the share of Kenyans with access to a financial account jumped from 42% in 2011 to 75% in 2014. The percentage of Nigerians with mobile phones is put at 60.4%; that is huge. How many of these Nigerians are registered use mobile banking? 1.7% yes, (again no typo). Why do Nigerians not use mobile banking? Well, according to the EFINA report, 83% of the sample polled say they do not know what mobile banking is… How is that possible? Access Bank, in her 2018 Annual Report, said it wanted to aid financial inclusion through the provision of digital services to the underbanked and unbanked. Access Bank spent N4.8 billion on advertising, yet 83% does not know what mobile banking is? What is Access Bank communicating? Nigerian banks have again failed to capitalize on the number of mobile phone platforms used by Nigerians to expand financial inclusiveness.

Why is mobile banking in Kenya booming and mobile banking in Nigeria stagnated?

The problem with mobile banking in Nigeria is the word “banking” attached to “mobile”. M-PESA is Kenya’s most popular mobile payment service; it was introduced by Safaricom, a mobile company, not a bank. Mobile payment systems in Nigeria are dominated by banks. In Kenya, a friend took me out in Nairobi and bought roasted fish from a buka, the fish seller had a piece of paper on her tent with numbers. My friend paid her by transferring cash from his MPESA wallet to that number which was her MPESA wallet. Magic! (if you have bought amala in any buka and paid via mobile banking, let me know.)

Deal book 300 x 250

Looking back at the EFINA data on Nigerian financial inclusiveness, 71% use mobile money to send money, 45% use it to receive money, and 26% buy airtime with it. Telco companies should be given the license to accept deposits and make loans, also offer payment services to Nigerians through their phones or debit cards that can be scanned by smartphones. The Telcos have deeper market penetration than banks, they are more suited for cashless transactions and can handle smaller transactions than banks. Companies should offer employees the option to receive their salaries via Direct Deposit into either bank accounts or GSM cash wallets. Let both platforms compete, the consumer will be the winner.


[READ ALSO: Banks’ online transactions rise by N12.8 trillion]

As business services move online, Nigerian banks must evolve. In the coming years, it’s possible that plots of land will be purchased with airtime and cryptocurrencies alone, bypassing the need for cash and banks. Nigeria now has online an only bank that is reducing fees as traditional banks are increasing fees — that is the future of banking, not large air-conditioned banking halls where cash is counted and stored.

Just as today we wonder how Zenith Bank surpassed a bank that was gathering assets nearly 100 years before it was formed, will we witness an upstart internet bank wipe out all the banking giants we see today?

Fortune, they say, favours the prepared.



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