…As 90 percent of FS players are partnering or planning to collaborate with FinTechs
It is no longer news that technology is driving major development in various industries globally, and at a time when the world is going through digital revolution, financial services, which is a key sector to any economy is currently undergoing a transformation driven by trends in technology, consumer behaviour and changes in the financial landscape itself.
Nigeria’s financial services industry has taken technology heads on and in recent times, we have started hearing more about financial technology (Fin-Tech) adoption, its impact, opportunities offered in FinTechs and its threats to existing businesses.
Financial technology creates new opportunities for financial services, but basically they are financial technology companies that enable financial services.
What we have seen in the last few years in Nigeria and globally is that the FinTechs have created a sector because of their impact on society and is getting a lot of attention. In 2015, global investment in FinTech was 19 billion USD and this year, financial analysts expect it to top up to 20 billion USD.
Looking at the Nigerian market over the last two years, we have seen over 200 billion dollars in FinTech investment in the country.
As a result of the massive opportunities available in FinTech, PwC recently released the results of its survey carried out on Nigeria’s financial services industry leaders. The survey which had about 50 respondents highlighted the growing trend of mergence between the technology sector and the financial services industry, evident in mobile money payments, mobile wallet, banking mobile applications and others.
The survey had 51 percent of respondents from the banking industry, 29 percent from insurance, 10 percent from asset and investment management and 10 percent for funds transfers and payments.
In it’s findings, PwC estimates that in the next three to five years, cumulative investment in FinTech globally could well exceed $150 billion. It was interesting to find that a high percentage of respondents agreed that FinTech is of utmost importance in the sector, as 77 percent of respondents believed that part of their business is at risk of being lost to standalone FinTechs, 76 percent indicated that the most important impact that FinTech will have on their business is an increased focus on the customer and 84 percent of them agreed that FinTech gives opportunity for increased revenue.
Speaking to BusinessDay; Andrew Nevin, Financial Services Advisory Leader and Chief Economist at PwC said; “The survey shows that everyone is now very focused on technology and in the last year, we saw a lot of innovation and we would see a lot more especially in the banks with customer experiences in the mobile app, insurance companies are going digital, there are more companies involved in the payment space and value added services.
“Although adoption might have been a little slow, I think we are going to really accelerate in Nigeria, and in many cases, I think we are just going to leap frog. Mobile banking for apps for example, will be higher than developed worlds,” Nevin said.
When asked why FinTech adaption seemed to be a little slow in Nigeria, Adedoyin Amosun, Associate Director, Advisory Strategy and Operations at PwC said; “As with anything new, there is apathy to change. But what most players have realised is that technology is the way to go because that way, they would be able to reach more of their customers faster, more efficiently and they are able to meet the customers on the customers terms and a location that’s preferable to the customer (on the go) and when you find that you’re able to achieve all those objectives, mostly using the mobile and the internet, PwC survey shows Nigeria’s financial services industry leapfrogging in FinTech adoption you find that you’re able to make changes faster and understand the customer better and you probably can leverage technology a lot more than even the developed countries because you’re able to learn from their mistakes and develop a new way of collaborating with customers.”
Amos told BusinessDay that “90 percent of our respondents are thinking of FinTech. 35 percent are going into partnerships with FinTech companies, some are acquiring FinTech companies, some are buying their products and rebranding, so 90 percent of them are partnering or planning to go into collaborations with FinTechs. So it is not if it would happen, the discussion right now is what form of collaboration it would take.
Asked about the future of FinTech in Nigeria and its possible impact on financial services, Nevin said; “I think what is going to happen here is that Nigeria is going to end up leap frogging developed nations, but one of the issues in Nigeria is not lack of knowledge but that there is such a low level of trust. When it comes to payments, people are a bit nervous but what tends to happen with these technologies is that it’s driven by a very critical use, one of which is topping up your phone. We have already seen a dramatic change in one year. We used to go and buy recharge cards on the side of the road and that business is dropping very fast as most people now top up online or with their mobile phones. The use of cheque is dropping very fast and ATMs will go backwards as we develop new technologies, so I think we are hitting a tipping point.
“We know that a place like Kenya make most payments in electronic forms, that was because of the way they set it up a number of years ago but Nigeria is going to get there very fast too, and I have no doubt that in five years, whether its payments, banking, micro loans, insurance are all going to be largely digital in this country. Nigeria has more young population and young people don’t want to deal with any other way than digital, so I think it presents opportunities for the financial services players but also presents risks, because the ones that don’t keep up and offer innovative products are going to find themselves out of business,” Nevin added.
Results of the survey reveal that Nigeria’s financial services industry leaders acknowledge the emergence of FinTech and recognise its impact on the industry.
PwC says it has been very focused on FinTech globally and its Nigerian clients in the FS industry are very much interested in FinTech, hence the reason why the survey was conducted.
“The survey was carried out last year for the first time in Nigeria. We will continue to do surveys to see the impact of FinTech because it is important to test the ball to know what our clients are doing. There is actually a global survey that will be launch later this month,” Amosun told Businessday.
