By Babajide Komolafe

BANKS should adopt the strategy of increased investment in innovative payment solutions and collaboration with increasing number of financial technology companies in order to compete favourably for opportunities in the $6 trillion digital payment market.

These were part of the recommendations made by banking and electronic payment experts who spoke at   the annual retreat of the Committee of E-Banking Industry Heads (CeBIH) recently held in Abuja.

Among other things, they highlighted the inevitability of the emergence of fintech companies and the challenge they posed to banks and the traditional payment methods, stressing that banks have to become equally innovative to compete with the new entrants.

Ibukun Awoshika, Chairman, FirstBank Nigeria Limited and Dele Adeyinka, Chairman, CeBIH

The two day retreat focused on “Disruptive Technology and the Future of Payments, with emphasis on how banks and other stakeholders in the e-payment system can position themselves to take advantage of the tide of financial technological innovations.

Fintechs and digital payment: Fintechs, according to Uwa Uzebu, Director, Mastercard’s Non Traditional Channels, West Africa, are one of the forces driving the exponential growth in digital payment.

Global retail payment

He noted: “In 2015, digital payments accounted for eight percent of total global retail payment of $16 trillion adding that this is projected to grow to 24 percent in 2020 when global retail payments would have increased to $21 trillion. The number of FinTech Start-Ups has tripled and funding has grown seven times over the last decade”

Quoting a study by Accenture, John Obaro, Managing Director/Chief Executive, SystemSpecs, owners of Remita, said: “A total of $5.4 billion was invested in fintech companies globally in the first quarter of 2016 alone.”

While global investment in fintechs in 2015 stood at $22.3 billion. “Fintech inventions have the potential of altering existing financial systems, and revising the known roles and significance of banks,” he noted.

Setting the stage for discussion at the retreat, CeBIH Chairman, Mr. Dele Deyinka said:  “The payment industry has recently witnessed the entry of diverse nonbank digital players – both technology giants and start-ups who are presenting increased competition for banks.

“While these categories of entrants have generally not been major threats to the banking and payments industry in the past, the aggressive nature of the digital players,   the prominence of smartphones as a channel and rapidly evolving customer expectations have all made a difference in recent past.”

Investment in innovation

In her keynote address, Awosika however advised that banks must embrace the change represented by fintechs. “Change is here and disruption is real”, she noted, adding that, “No institution will survive without making the change to embrace digital innovations. She said that one of the ways banks can do this is to create specialised funds to finance young minds to create innovative payment solutions.

Also emphasising the need for investment in digital innovations, Oluwole Oyeniran, Technology and Digital Leader, West Africa, Akintola Williams Deloitte, said “Payments technology is evolving at an unprecedented speed. Contactless cards, online payments, mobile payments, are all becoming more prevalent.

Keeping pace with those technologies will require major investment from banks, and they have to contend with the fact that their   new competitors-for example Paypal and Aple already have an edge in digital technology. Banks will need to ramp up their investment to be able to make most of the opportunities that exist in payment technology,” noted.

Disruptive technologies: Chief Executive Officer, Interswitch Group, Mitchell Elegbe stressed while it is necessary for banks and other payment service providers to adopt disruptive technologies, it is not a sufficient condition. He said adoption of technologies must be complemented by focusing on glamour and growth, adding that disruptions around technologies that are cool   will continue to grow for years.

“You will also have to create your own monopoly, remain flexible and ready to adopt, after all you should expect to be disrupted. And beware of activity trap. Do not work so hard climbing a ladder only to discover it is resting on the wrong wall”.

Financial ecosystem

According to Valetino Obi, Managing Director/Chief Executive, E-Transact, e-payment providers should not be perturbed by the emergence of disruptive technologies but focus on how to use them to add value to their services and to the financial ecosystem.

Disruption, he noted has become the global norm adding:   “There’s a major global shift in consumer behaviour. People across many diverse countries and cultures are evolving a digital lifestyle.

In the near future, consumers will need banking services, but they may not turn to a bank to get them. Blockchain is emerging as a potentially disruptive force capable of transforming the financial services industry by making transactions faster, cheaper, more secure and transparent.”

To leverage on these developments, banks, he advised must follow the three step model for disruption namely exploration, discovery and innovation. “Exploration produces discoveries and these discoveries promote and produce innovation,” he said.

Case for collaboration

In their presentations, John Obaro of SystemSpecs,   and Adia Sowho, Digital Director of Etisalat emphasised the need for collaboration.

Obaro noted that while most banks consider Fintechs as a threat, they can both collaborate to make a fortune. He said: “Fintech has the capacity to once-and-for-all address many of the challenges banks’ customers encounter and thereby increase easy and safe access to money; and improve banking experience; as well as reduce transaction fees.

“Banks are the custodians; technology is the enabler. Banks will achieve further cost efficiency. Banking services would be dispensed at a greater speed. And financial inclusion would be entrenched in Nigeria, extending banking services to Nigeria’s unbanked population.”

Sowho on her part pointed out that Telcos face similar challenge from new technologies adding that Etisalat responded by developing quick wins for partnerships and structured itself for it. Banks, she said can do the same.



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