A chess game of sort has commenced between the 25 Deposit Money Banks (DMBs) and financial technology firms (Fintechs) operating in the country for the control of the nation’s payment service system.

Traditional banks, it would be recalled, had for over a century, dominated the Nigerian banking space with the provision of banking services like loans, cash withdrawals and deposits, among other services to customers.

However, bank customers always share their bitter experiences while banking like the long period spend on queues trying to get money, lack of access to proper products and services, poor customer support, as well as outrageous charges imposed on them by their banks.

Some of the payment innovations adopted by banks include, Vulte by Polaris, First Wallet by FBN, PayGate by Fidelity bank, and AccessGate by Access Bank.

“Banks have been sluggish to respond to customers complaints and yearnings, despite their deep pockets and massive branch presence across the nation.

“So, it was not surprising to some of us when they were sucker-punched by the rampaging fintechs. With fintechs, you don’t have to worry about bank troubles. In the comfort of your home, office or shop, you can get access to mobile payments, flexible savings, investments, quick/instant loans, and affordable payment channels”, stated Demola Turner, the IT manager of a fintech firm in Lagos.

Taking advantage of the loopholes and poor services rendered by banks, fintechs moved in to bridge the gaps, first with the entry of Interswitch into the Nigerian banking sector in 2002.

Interswitch largely addressed the issue of delay in getting money from banking halls with the introduction of Automated Teller Machines (ATMs) in and outside banks branches.

About 20 years later, the fintechs had totally disrupted the traditional methods of banking with the creation of smooth and easy financial services and solutions for customers with technology.

Available records indicate that the financial services sector is fully saturated with over 400 fintechs fiercely competing with traditional banks for the control of the loan and payment market.

The entry of mobile network providers has made the situation more difficult for deposit money banks who are still grappling to ward off the onslaught from fintechs that have grabbed a large chunk of their retail market.

Recently, the Central Bank of Nigeria (CBN) granted final approval for a Payment Service Bank (PSB) licence to MTN Nigeria’s fintech subsidiary, MoMo Payment Service Bank (MoMo PSB) Limited and Airtel Nigeria’s SmartCash PSB.

This brings the total to four mobile network providers with PSB licenses, as the CBN had in 2020 granted approval to Globacom’s Money Master and 9Mobile’s 9PSB, as well as a non GSM firm, Unified Payment (Hope PSB) to start payment service banks.

The five PSBs are outside the legions of fintechs that have been given traditional banks sleepless nights. The coming on board of these 5 PSBs, some financial experts argued, would further pose huge threats to DMBs’ profitability. However, Business Hallmark findings revealed that the banks are not just rolling over but are responding to the disruptive threat posed by fintechs.

According to BH findings, most banks have adopted innovative technologies and now offer more customer-oriented and digital experiences to their clients.

A top staffer in one of the nation’s top tier banks informed our correspondent that his bank has identified some opportunities, especially with the CBN’s financial inclusive programme and had keyed into them.

“A recent report by a media and research data analytics organization, Dataphyte, said a total of N26.17 trillion in transactions happened outside of traditional banking systems in 2021. “That means there is a huge gold mine outside there to be mined. Already, we had fully keyed into the CBN’s plan of targeting 38 million Nigerian adults (36% of the population) who are financially excluded.

“As you must have noticed, we now have our kiosks and pay points in all the nooks and crannies of major cities and towns of the country. We also have them in the rural areas but not as much as we have in the cities. “No one can be an island on his own. So, we are cooperating with mobile network providers to reach out to unbanked Nigerians.

“They too need us as most Nigerians are not yet aware of opening wallets with the firms to send or withdraw money. The fintechs have the technology and we have the market. What we have now is like the national electric grid system where gencos generate power but rely on the transmission company to deliver the power to the discos and the end users. It will take time, but we will get there”, declared the bank staffer.

The CBN, BH recalled, had set a target of achieving 95% financial inclusion by 2024 (2 years away) to boost financial inclusion, especially in rural areas.

Banks are also providing improved services to their customers through relevant product recommendation and insights to make informed business decisions.

For instance, some banks, through cookies and other IT tools that monitor customers activities online, are now able to recognise customers urgent wants and needs.

“I once went online to check up on which solar power system to acquire as power supply in my area is very bad. I saw one of N465,000 (1 kva) that suited my current needs.

“Since I don’t have the money at hand, I planned towards saving towards it. However, I was surprised when I got an offer of a N500,000 consumer loan from my bank to purchase a solar power system.

“I was shocked and wondered how they got to know that I desperately needed a solar generator. It was about a week later in church when a colleague who is an IT expert told me that all activities are monitored online, even physical activities of human beings.

“This revelation confounded me, particularly the claim that customers physical activities could be monitored online.

“But he quietly explained that most Nigerians unwittingly put on their GPRS (location) while online which makes it possible to follow them digitally.

“He said if a customer visits a phone shop, those monitoring him will likely conclude that he is looking for phone products. And before he knows it, offers relating to phone products will start flooding his phones and computer system/

“Also, a regular customer identified as a business owner through ‘digital bread combs’ will notice that offers of a business loan, insurance policies, direct payment tools to suppliers and other relevant products are flooding his phones and email address”, the IT engineer stated.

BH reliably gathered that most banks currently don’t have the technology to monitor customers online.

However, the banks, it was learnt, had engaged the services of reliably data and IT firms who collect a lot of first-party data of their customers activities outside of the bank’s environment.

Some banks, it was also learnt, are benefiting from data enrichment. For instance, a corps member who recently finished youth service in Enugu State, told our correspondent that he secured a good job in April and was surprised when he received a massage from his bank to upgrade his account to a salary account in other to start enjoying many benefits.

“I was dumbfounded when I got the message but a colleague of mine who studied computer science in school said that I must have filled out some forms while accepting the job offer. The information, he assured me, must have fallen into the hands of my bank”, the newly employed corps member stated.

All the commercial banks, findings revealed, also have digital channels that do not rely on internet. These innovative channels include agency banking (POS), SMS and USSD banking. On the other hand, Terragon’s data-driven MarTech platforms deployed by banks have been able to target unbanked consumers, based on their device type, location, interest, spend power and others.

With this device, banks can now engage with customers through SMS to recommend mobile banking channels, closest ATMs or bank agents, and relevant products. “I think the banks have woken up to the challenge posed by fintechs. I rarely step into banking halls these days to transact business. “I recently opened a bank account through the USSD option. The beauty of the option is that it carters to the needs of offline customers. You don’t have to have data to do banking business”, declared Peju Adeyemo, a civil servant with the Lagos State government.

According to a professional services firm, KPMG, to ward off the threat posed by fintechs, banks must offer an experience that is more customer-oriented and digital.

“As organisations respond, we are beginning to see patterns that differentiate digital leaders from others; patterns that take root in the experience consumers have across the digital touch-points with which they interact.

“We are seeing an acceleration of growth, enhanced engagement, and stickiness with the players that have intentionally invested in user experience.

“It is in this light that we have performed a series of user journey-centered assessments culminating in the Digital Channels Scorecard for leading retail banks in Africa.

“We observed that digital leaders are intentional about personalised services, 24/7 reliability and availability of the digital channels, and real-time customer care.

“They have a relentless focus on simplifying user journeys, can on-board customers end-to-end on most channels, and empower customers through robust Self-Service programmes.

“Late starters are still grappling with convoluted and disjointed user journeys, inability to on-board customers digitally end-to-end, unstable channels and unresponsive contact centres,” Ademola states.

“To attain these experience maturity levels, retail banks will need to be more intentional with product design, journey optimisation, data analytics and building resilient digital channels,” noted Boye Ademola, Partner and Lead, Digital Transformation at KPMG.

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