Banks move to Checkmate mobile networks with payment systems

By AYOOLA OLAOLUWA

A kind of chess game has started between the 25 depository banks (DMB) and financial technology companies (Fintech) operating in the country for control of the country’s payment services system.

Traditional banks, it should be recalled, dominated the Nigerian banking space for more than a century with the provision of banking services such as loans, cash withdrawals and deposits, among other customer services.

However, bank customers still share their bitter experiences while banking, such as long time spent in queues to get money, lack of access to proper products and services, poor customer support , as well as the exorbitant fees imposed on them by their banks.

Among the payment innovations adopted by banks are Vulte from Polaris, First Wallet from FBN, PayGate from Fidelity bank and AccessGate from Access Bank.

“Banks have been slow to respond to customer complaints and aspirations, despite their deep pockets and massive branch presence across the country.

“So it was no surprise to some of us when they got duped by the fintech rampages. With fintech, you don’t have to worry about banking issues. From the comfort of your home, your office or from your store, you can access mobile payments, flexible savings, investments, fast/instant loans and affordable payment channels,” said Demola Turner, IT Manager at a fintech firm in Lagos.

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

Interswitch has largely solved the problem of delay in getting money from banking halls with the introduction of automatic teller machines (ATMs) inside and outside bank branches.

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

Available records indicate that the financial services sector is totally saturated with more than 400 fintechs in fierce competition with traditional banks for control of the loans and payments market.

The entry of mobile network providers has made it more difficult for depository banks still struggling to stave off the onslaught of fintechs that have cornered much of their retail market.

Recently, the Central Bank of Nigeria (CBN) granted final approval for a Payment Service Bank (PSB) license 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 company, Unified Payment (Hope PSB) to start payment service banks.

The five PSBs are outside the legions of fintechs that have given traditional banks sleepless nights. The arrival of these 5 PSBs, according to some financial experts, would also pose huge threats to the profitability of DMBs.
However, Business Hallmark’s findings revealed that banks are not just rolling, but reacting to the disruptive threat posed by fintechs.

According to BH’s findings, most banks have adopted innovative technologies and are now offering their customers more customer-centric and digital experiences.

A staff member of one of the largest banks in the country informed our correspondent that his bank had identified some opportunities, especially with the CBN’s inclusive finance program, and seized them.

“A recent report by a media and research data analytics organization, Dataphyte, said a total of N26.17 trillion in transactions took place outside of traditional banking systems in 2021.
“This means there is a huge goldmine to be tapped outside. Already, we had fully embraced the CBN’s plan to target 38 million Nigerian adults (36% of the population) who are financially excluded.

“As you may have noticed, we now have our kiosks and payment points in every nook and corner of major cities and towns across the country. We also have them in rural areas, but not as many as in cities.
“No one can be an island on their own, so we are cooperating with mobile network providers to reach unbanked Nigerians.

“They too need us because most Nigerians do not yet know how to open wallets with businesses to send or withdraw money. Fintechs have the technology and we have the market. What we have now resembles the national grid system where the gencos generate electricity but depend on the transmission company to supply electricity to nightclubs and end users. It will take time, but we will get there,” the bank employee said.

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

Banks also provide enhanced services to their customers through relevant product recommendations and information to help make informed business decisions.

For example, some banks, through cookies and other IT tools that monitor customer activities online, are now able to recognize customers’ urgent wants and needs.

“I once went online to check which solar power system to buy as the power supply in my area is very poor. I saw one of N465,000 (1 kva) which matched my current needs.

“As I have no money at hand, I planned to save for this. However, I was surprised when my bank offered me a consumer loan of N500,000 to buy a solar power system.

“I was shocked and wondered how they had learned that I desperately needed a solar generator. It was about a week later at church when a fellow computer expert told me that all activities are monitored online, even the physical activities of human beings.

“I was baffled by this revelation, especially the claim that customers’ physical activities could be monitored online.

“But he quietly explained that most Nigerians unwittingly put their GPRS (location) online which allows them to be tracked digitally.

“He said that if a customer went to a phone shop, those watching him would likely conclude that he was looking for phone products. And before he knew it, offers for phone products would begin to flood his phones and computer system/

“Furthermore, a regular customer identified as a business owner via ‘digital bread combs’ will notice that business loan offers, insurance policies, direct vendor payment tools and other relevant products flood their phones and email address,” the IT engineer said.

BH has reliably discovered that most banks currently lack the technology to monitor customers online.

However, the banks, it was learned, had used the services of reliable data and IT companies that collect a lot of first-party data on their customers’ activities outside the bank’s environment.

Some banks, we also learned, benefit from data enrichment. For example, a corps member who recently completed his youth service in Enugu state, told our correspondent that he got 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 another to start enjoying a lot of benefits.

“I was stunned when I received the message, but a colleague of mine who studied computer science in school said that I had to fill in forms when accepting the job offer. Information , he assured me, must have fallen into the hands of my bank,” the new corpsman said.

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

Using this device, banks can now engage with their customers via SMS to recommend mobile banking channels, the nearest ATMs or banking agents, and relevant products.
“I think banks have become aware of the challenge posed by fintechs. I rarely enter banking halls these days to do business.
“I recently opened a bank account through the USSD option. The beauty of the option is that it meets the needs of offline customers. You don’t need to have data to do banking business” said Peju Adeyemo, a Lagos State government official.

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

“As organizations respond, we are starting to see patterns that differentiate digital leaders from others; models that are rooted in the experience consumers have through the digital touchpoints they interact with.

“We are seeing accelerated growth, increased engagement and buy-in with players who have intentionally invested in user experience.

“With this in mind, we conducted a series of assessments focusing on the user journey, culminating in the Digital Channels Scorecard for leading retail banks in Africa.

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

“They are relentlessly focused on simplifying user journeys, can onboard customers end-to-end across most channels, and empower customers with strong self-service programs.

“Laggards are still struggling with convoluted and disjointed user journeys, the inability to digitally onboard customers end-to-end, unstable channels and unresponsive contact centers,” says Ademola.

“To achieve these levels of experience maturity, retail banks will need to be more intentional in product design, journey optimization, data analytics and building resilient digital channels,” Boye Ademola said. , Partner and Head of Digital Transformation at KPMG.

About Matthew R. Dailey

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