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BankTech War: Segun Agbaje says GTBank not afraid of Fintech

GTBank CEO, Segun Agbaje, says the emergence of Fintech and Network Providers in the banking sector doesn’t frighten him despite their disruption of the banking industry.

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GTBank Chief Executive Officer (CEO) Segun Agbaje, says the emergence of Fintech and Network Providers in the banking sector doesn’t frighten him despite their disruption of the banking industry.

Agbaje made this comment following a question from Nairametrics analyst Olalekan Fakoyejo at a session at the Social Media Week 2020 held at Landmark Event Center.

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FinTech companies operating in the banking space are often termed “Neo banks” or “Challenger Banks” and have disrupted the sector all over the world with innovation and faster route to market.

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He stated that winning the digital payment race is more than just possessing the best of technology. While Agbaje admitted that the fintech and telecommunications companies are pulling their weight and making inroads into the banking space, their presence poses no threat to him and GTBank.

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Agbaje emphatically responded, “I have no fear for Telcos; we are ready for Telcos. All we ask for is an equal level playing field.”

READ MORE: GTB, UBA, Zenith, 7 other DMBs make N135.15 billion earnings from e-transactions)

There have been arguments as to which sector or firms will dominate the mobile payment market after the Central Bank of Nigeria (CBN) began to offer licenses to fintechs and network providers in order to ensure the growth of financial inclusion.

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Currently, the digital payment market is saturated by several digital  payment firms, but during his presentation, Agbaje identified the likes of OPay, PayPal, Cowrywise, Piggybank, MTN, Square, Monzo, Venmo, Cash App, Apple Pay, and Monzo as rivals that are exploiting the growing disconnect between the traditional banks’ services and the evolving customer needs.

Though public sentiment is in favour of the Fintechs and Telcos triumphing over the traditional banks, for Agbaje, anybody with the ability to leverage digital technology can become banks’ competitor.

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Why is Agbaje not fearful of disruptors? 

According to the GTBank boss, winning the digital payment race or dominating the market is beyond just acquiring the best of technology, because technology will become a commodity available to all.

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“I will take a leap of faith today. The easy answer will be for me to say to you, the best who has the best technology will win, but I will be lying to you because technology will become a commodity… So technology will never be the differentiator,” Agbaje stated.

READ ALSO: Like IMF, GTBank’s Segun Agbaje calls for subsidies removal 

He affirmed that the race would be won by the company using the best technology to offer the best of customer experience. This would result in customer loyalty and cause loyalty switch in the customer base of the digital payment market. “Today, customers don’t want service, they want experience,” Agbaje said.

“So the person that is going to win, whether its fintech, telco or bank, is the one built by technology but that can still give you that feeling that there are people who care about you, that this organisation cares about you.

“Whoever can give you that feeling on a digital platform is who is going to win,” Agbaje said while declaring that GTBank would win because of the digital products the bank possessed.

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Should disruptors be afraid of GTBank? 

Nairametrics learnt that while some traditional banks are stuck in the past or dragging their feet as technology evolves, GTBank appears to be ahead in the fight against disruptors. GTPay is competing in the payment system, GTCollections is also competing in the Aggregator’s market. GTBank is involved in Issuers and Acquirers market, while GTMoney Transfer is ruffling feathers in IMTOs. In the e-commerce and entertainment space as well, GTBank has Habari.

Also, the bank has been crashing lending rate to stifle competition. GTBank reduced its ‘Quick Credit’ interest rate on loans to 1.33 per cent per month from 1.75 per cent, making it one of the lowest lending rates in a space that still has some rivals offering interest rates as high as 7 per cent.

READ ALSO: Nigerian company to launch water-powered generators 

Aside from financial products, one of the ways GTBank is plugging into the customer base is through organising events that associate with personal and business needs of Nigerians. The bank deepens its retail service through events like GTBank Fashion Week, GTBank Food and Drinks, Lagos State Principal Cup, amongst many others.

Opportunities exist everywhere 

Agbaje explained that opportunities are not limited to one country, as Sub-Saharan Africa’s digital payment space still possesses enough potentials and could grow to $16 billion annually in the next few years, according to McKinsey.

In Nigeria alone, penetration rate is just 13 per cent, while Kenya has the highest at 68 per cent. So Africa would remain the frontier for platform-based payment. He pointed out that Africa’s young population would also drive competition.

Agbaje explained that Africa has a very young population which is industrious and tech-savvy, so the payment space would keep growing astronomically. He added that small and medium Enterprises (SME) is also a key component that would make the market viable. He disclosed that with over 180 million SMEs in Africa, over 4.5 billion transactions have been made by SME.

Financial Technology FinTech, Job loss, Accion Venture Lab, Fintech: Growth frontier of the next decade 

READ ALSO: Nigeria Fintechs take lead in Africa, attract $122 million fund in 2019)

Agbaje on job loss scare 

With banks reviewing their business models to accommodate technology advancement, there are fears that the eradication of traditional banking system could lead to job loss.

Technology has been projected to take over 30 per cent of bank jobs, but Agbaje said there’s no cause for alarm because as technology expands bank services, so will job opportunities be created. He said banks can’t remain stagnant because of job loss scare; the bank needs to evolve.

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: fakoyejo.olalekan@nairametrics.com.

1 Comment

1 Comment

  1. Ogar David

    March 3, 2020 at 7:18 am

    Electronic payment is away to go.

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Business News

IMF advises banks to suspend dividend payment

However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.

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In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.

According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.

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IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.

In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).

However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.

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Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.

(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)

That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.

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IMF advises banks to suspend dividend payment

 

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Economy & Politics

CBN reduces MPR to 12.50%, holds other metrics

Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.

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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.

Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja.  Meanwhile, other parameters such as the Cash Reserve Ratio  (CRR) remained at 27.5%, Liquidity ratio at 30%.

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Highlights of the Committee’s decision

  • MPC cuts MPR by 100 basis points to 12.50%
  • CRR stood at 27.5%
  • The Liquidity Ratio was also kept at 30%

According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate  was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.

He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.

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Economy & Politics

Just in: Buhari seeks approval from green chamber to borrow fresh $5.5billion

FG also seek approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

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President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.

This request was disclosed via the official twitter handle of the House of Representatives.

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The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.

In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.

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Details shortly…

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