Financial Inclusion: Why banks must leverage on technology to expand growth
The emergence of financial technologies and other online banking outlines have intensified the competition for financial inclusion in the Nigerian banking industry.
Nigerian banks today have continued to innovate digital products into the banking sector to provide technology solutions.
In fact, asides from electronic payment platforms, banks have now introduced chatbox and Whatsapp banking all in a bid to expand financial inclusion target, which has been seen as major contributors to the e-transactions by banks.
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To this end, gains of financial technology were said to have boosted the revenue base of electronic transaction of 11 deposit money banks to about N124bn.5billion.
Analysis of the audited 2018 annual reports of 11 banks showed that their revenue from electronic transactions grew by 43 per cent year-on-year (y-o-y)from the N86.72bn earned by the financial institutions in 2017.
The banks included Zenith Bank Plc, First City Monument Bank Plc, Access Bank Plc,
Guaranty Trust Bank Plc, United Bank for Africa Plc, Sterling Bank Plc, First Bank of Nigeria Limited and Fidelity Bank Plc.
Others were Jaiz Bank Plc, Union Bank of Nigeria Plc, and Wema Bank Plc.
The revenue was generated from the fees and commission that the banks charge their customers when they carried out transactions through Automated Teller Machines, USSD, Internet banking, Point of Sale payments and agency banking.
All these innovations are believed to have contributed to the growth experienced in the revenue from electronic transactions by the banks.
According to the World Bank, four key revolutions have brought about rapid developments in digital technologies which have boosted financial inclusion. They include: Disaggregation of the Value Chain: New players, including non-banks and non- MNOs (mobile network operators), increasingly offer financial products and services directly to customers or offer services such as data analytics, credit scoring, and payment mechanisms to financial service providers.
Opening of Platforms and Application Programming Interfaces (APIs): APIs enable new applications to be built on top of pre-existing products, thereby capitalizing on the product’s existing customer base. Open platforms and open APIs, which are still relatively rare, hold the potential to facilitate access to a broad range of products and services, and thus enhance financial inclusion.
Use of Alternative Information: Digitally collected data, including e-commerce and mobile transaction histories can complement or substitute traditional methods of client identification and credit risk assessment. Biometric data, such as fingerprints and iris scans, allows providers to meet due diligence requirements for customers with insufficient traditional forms of identification.
Customization: Better data collection and analytics inform more accurate customer segmentation and human-centred product design, such as clearer user interfaces or targeted alerts and notices to consumers.
Nigeria’s unbanked adult population stands at about 37m
Although the Central Bank of Nigeria Governor, Godwin Emiefele maintains that the National Financial Inclusion Strategy (NFIS) of the Federal government will target 95 per cent financial inclusion by the year 2024, however, it still remains sketchy considering the huge number of Nigerians that are unbanked and do not use financial services estimated at about 60 million
Also, a financial adult inclusion survey carried out by Enhancing Financial Inclusion in Africa shows that about 37million Nigerians are financially excluded.
A breakdown of the report shows that out of the 99 million adults Nigerian population (18yrs and above), banked Nigerians stands at 39.5 million (39.6 %) formally served stands at 8.9 million (9%), informally served was at 14.6million (14.6%) while the financially excluded population was put at 36.6 per cent.
The reason for the huge number being financially excluded according to the survey was the fact that out of the 99 million Nigeria’s adult population, 63.1 million (63.3%) live in rural areas as well as the hinterlands.
The report further said that access to banking services at the hinterlands and some rural areas often become a huge challenge which makes them automatically financially excluded.
However, it is believed in some quarters that removing barriers to financial access and inclusion is a crucial aspect of improving financial inclusion, also establishing policy incentives that will further attract more inclusion like tax holiday as well as the mitigating risk of data security is crucial to achieving the target of financial inclusion.
Experts’ reaction
The Chief Executive Officer of Unified payments, Agada Apochi says banks must embrace digitization to attract more customers into the banking systems
According to him, banking must be holistic in a manner that it ensures digitization that cuts across both, the banked and the unbanked will have access to banking in a cost effective manner.
“We have about 20 million Nigerians with mobile phones, and also 36 million Nigerian according a date from the Central Bank of Nigeria has shown that 36 million Nigerians have Bank Verification Number linked to their accounts, so the banking sector can leverage on technology so that everyone will be included in the financial space,” he added.
In the same vein, the Chief Executive Officer of Systems Spec Ltd, John Obaro, said banks are not doing enough with their data to maximize profit.
“Banks sit on data and do nothing about it they need to add value to it. Many bankers do not apply data analytics to maximize profit with their existing customers. All what they do is to pursue new customers and deposits.
“They must leverage on technology to grow, there must be a situation where data banks are used to develop the banking sector. Banks need to make more money by using technology to analyse their data to maximize profit big data is useless if it just sits in the bank,” he added.
