The Chief Executive Officer of Sparkle, a digital bank, Mr. Uzoma Dozie, has said that African traditional banks are doing far better than fintechs in terms of delivering value to their customers.
Dozie stated this in a medium blog post entitled “I am Betting on Banking, Not Fintech”. According to him, the fintechs, in their bid to acquire more customers, are jettisoning value creation, which is the core of banking operations.
Dozie, a banker, who later founded Sparkle, which could also be described as a fintech company, believes that anyone who has fintech experience, without banking experience, will struggle to genuinely scale and make a real impact or create meaningful value for their customers or their investors.
He, however, acknowledged that the fintechs are doing well in serving the unbanked and underbanked as well as in making banking easier.
Superficial fintech narrative
According to him, the fintech narrative that permeates all tech and finance discussions is quite superficial and global VCs have been “hypnotized by and bought into the narrative, with their chequebooks”.
- “I can see why — in Africa, we have a highly mobilized market that has traditionally been underserved by the larger institutional banks. Banks haven’t been able to serve the un– or under–banked; and fintechs have, on the surface, plugged that gap.
- “However, in their rush to sign up new customers and continuously update their pitch decks with their CACs, the fintechs seem to have forgotten the fundamentals of banking; how to create value for customers whilst extracting value to make the bank a revenue-generating entity.
- “Signing up customers is great; monetizing customers is greater still, but generating mutually beneficial value for all is truly the greatest,” Dozie wrote.
Fintechs’ wins
Dozie noted that fintechs won the UX battle and they won the dialogue with potential customers as they made banking “a little more palatable, a little sexier to the masses.” According to him, those are important because banking is mostly “unsexy; risk management; data management; cybercrime; and corporate and financial governance — all deeply unsexy to the huge majority of people.”
But in a twist, Dozie claimed that the fintechs seem not to be well secured and lack good corporate governance, unlike the banks.
- “But do you know what is worse? Having your data been stolen because the platform holding your life savings hasn’t invested in protecting itself from cyber attacks. What’s even worse?
- “Having chosen a fintech to hold all your business banking funds and the platform has such poor governance or understanding of treasury management that they cannot release your funds to cover your payroll because it hasn’t understood the difference between investment funds and customers’ funds,” he said.
According to him, keeping customers’ money safe is the absolute bare minimum when it comes to banking because a financial services institution is literally storing value and by doing that properly, it creates more value.
Dozie recently told Naiarmetrics in an interview that Sparkle, though using technology to deliver financial services, is a bank and not a fintech.
- “Why I said we are a bank is that we have gone through the rigour of acquiring a banking licence and we got a microfinance banking licence. That means that have secured the trust of the central bank,” he said in the interview.
