One question I have been asking myself all week is: what does Softbank’s debut in our fintech industry through its first-ever African investment mean? Arming a fintech with a $400m war chest and $2bn valuation is really no joke. I just wonder how the Central Bank of Nigeria would react because this is getting more interesting.
Be that as it may, I would say for certain that Nigeria’s fintechs, led by the likes of Remita, VPD Money, Carbon, Flutterwave and a host of others, have done pretty well, going by how they have innovated and continued to pull more of the unbanked into the financial dragnet.
Nigerian banks must also be commended for always being willing to innovate, particularly when it comes to servicing large corporates and high-net-worth individuals. However, I’d certainly score them low in some aspects; for example, they hardly ever bothered about low-income earners as well as small business owners and their needs. This is where fintechs are simply changing the game.
Fintechs have employed the development of digital solutions for the satisfaction of users. The question now is: why does the financial service providers, especially the banking sector need digital solutions now, as compared to the ones offered through traditional methods.
Since the boom of fintech startups, the evolution of customers has been taken to another level of awareness, thus, even the unbankable are gradually accepting to execute their financial transactions through the use of digital solutions, even after neglecting the traditional means.
This has clearly shown how digital trends can bring about noticeable transformation in the polity. The impact of digital solutions on financial services has, therefore, helped to increase competition in the sector.
Digital solutions by fintechs have brought about a more personalised experience for users than ever before. This has by miles disrupted a good number of activities in the financial sphere, which, in turn, has resulted in increased pressure on banks and quick development of new products and services.
Investment in digital solutions has not only transformed customers experience with financial services, but has also impacted the workplaces where these various services are carried out. Digital transformation has been able to provide the best alignment between teams for more collaboration, quick and efficient results, as well as precise customer service.
It has brought about the ability for automation in terms of tasks involving administration, ease of workflow and the ability to simplify challenging work that would have appeared difficult, going by the traditional approach. It has also brought in a new approach to organisational transparency. The offering of digital solutions in financial services might appear not to have covered a lot of grounds when it comes to the subject matter of transparency, but compared to the traditional means, it has brought more transparency options to the table.
Since digital financial solutions have gone mobile, customers are expecting what would continuously guarantee them ease and convenience in their business dealings. Digital transformation often involves continuous experimentation and this gives room for learning. This, in return, produces outcomes that inform bigger changes in the financial industry.
Technology will continue to evolve, thus calling for more adaptation to the current processes employed. One cannot afford to get stuck in the traditional means of executing financial services in the 21st century. Only the adoption of digital financial solutions will see a lasting impact in that industry.
In the present digital world, technology has offered many platforms for entrepreneurs to explore new choices, conveniences and avenues in order to satisfy their consumers. For every action taken by a digital consumer, there is a corresponding financial transaction that has ensued.
The continuous rise of mobile banking has also changed the way financial transactions are carried out. Do not forget that the banking sector was one of the first financial industries to go digital. Some years back, the banking sector had to ensure the integration of risk management using technology, and this has played a great role in assisting banks and other financial institutions to tackle risk management.
The impact it has made in risk management has helped to join people and processes in such a collaborative way that risk management decisions are made at greater speed. This continues to impact positively on the financial industry. Continuous efforts have been made to drive modernisation in the banking sector and the fintechs are the ones on the frontline to execute this.
For effective impact on the banking sector to be felt more as part of the financial services industry, the central authority on finance needs to be the source, or at least partner with private organisations to drive massive innovative changes for digital financial solutions. Previous efforts have made an incredible impact, as banking has become more accessible to millions of people. The sector must continue to revolve around technology while embracing innovation, so it will meet the ever-changing needs of customers and boost the strength of the country.
Put simply, digital financial solutions are just the newly found opportunities for fintech to provide multiple options for consumers.
Fintechs providing digital financial solutions should not be seen as the enemy of the financial industry. The CBN can provide a pathway for mutual co-existence, considering their impact. This will ensure the promotion of economic development, innovation and healthy competition.
The recent policy directives by the CBN designed to curb some fintechs is simply not in the best interest of the ecosystem, as investor confidence will further plummet at a time when Ghana is attracting more foreign direct investment than its giant neighbour.
ICT Clinic by CFA is published weekly in the Sunday Punch