The Nigerian financial sector has significantly grown in leaps and bounds; thanks largely to technology. Currently, the services of banks have been automated. Customers are no longer required to visit their brick and mortar branches to perform any transaction.
With their smartphones, they can process local and international transactions. These are exciting times for the Nigerian banking sector as the long hours spent at the bank has been greatly reduced.
It has even gotten more interesting since the entry of fintechs (financial technology) into the banking game in Nigeria.
As a result of technology, fintech platforms such as Jumia Pay and others are disrupting the way banking business is done, that it now seems like the banks are playing catch-up.
Fintech, according to Investopedia “is used to describe new technologies that seek to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilising specialised software and algorithms that are used on computers and, increasingly, smartphones.”
Although Nigerian banks are exploring and exploiting fintechs to improve their services, they are not taking advantage of it as quickly as the private firms whose services are entirely online.
Key Services Offered by Fintechs
The edge that fintechs like Jumia Pay and others have over the banks are in the services they both offer. Many Nigerians and businesses are trooping to fintechs because of the flexibility of their services. This does not necessarily mean that they have abandoned the banks.
There are some key services that make fintechs stand out or unique. They include (1) eCommerce payment: online retailers can now seamlessly pay for their orders, thanks to the payment gateway service offered by fintechs. To make payment easy for its millions of customers, Jumia, Nigeria’s no 1 shopping destination launched Jumia Pay. This has enabled every Jumia customer to pay for transactions across the Jumia ecosystem (flight, hotels, food, production services among others. It is secure, flexible and offers seamless checkout experience. And you will even get 5% off for using Jumia Pay. (2) Loans: When it comes to loans, the fintechs are far ahead of banks. Without a collateral, you can apply for a loan and receive it within 24 and 48 hours. They also have a flexible payment plan. As an entrepreneur, you may need a loan to shore up your business, you can apply for Jumia loan and you can go and sleep because the repayment plan is the best in the Nigerian fintech world. (3.) They also provide mobile money transfer and Unstructured Supplementary Service Data Services.
Collaboration or Competition?
The no love lost relationship between Fintechs and Banks can seemingly be compared with that of traditional media and internet (social media).
Many of the traditional media in Nigeria have evolved and now have an online version of their publication as well as social media accounts. This has ensured that they remain relevant and they are not entirely overshadowed by the online news media.
In fact, some of them have moved their entire publication online. And it is working for them. Hence, they do not see social media or the internet has a competition. Rather, they see it as a tool to enhance their services.
This is exactly what banks need to do. There is no competition between fintechs and banks. Fintechs are only utilising the tech machinery available to them faster than the banks. There is nothing wrong with a bank owning payment gateway as long as they get CBN’s approval.
Even though they are already collaborating, it needs to be taken a notch higher. For example, the fintechs still need banks to keep all payments made using the payment gateway and of course banks will charge interest for keeping the money. Therefore, it is better for them to collaborate rather than compete.
Collaboration is also important in fighting the challenges facing the banking industry. The foremost challenge among others is fraud. The CBN recently reported that there were 20,768 reported cases of fraud and forgery (attempted and successful), valued at N19.77bn in the review period, compared with 16,762 cases, involving N5.52bn and $ 0.12m in the corresponding period of 2017. It is not gainsaying that fintechs are disrupting the Nigerian banking industry. Regardless they need to work together and collaborate to take the industry to the next level.