Banks are playing an increasingly smaller role in the financial system as fintech and tech companies continue to put banks at the edge of their seats, Jamie Dimon, CEO of JP Morgan Chase & Co, said in his annual letter to shareholders.
“Banks have enormous competitive threats—from virtually every angle,” Dimon said. “Fintech and Big Tech are here… big time!”
Nigeria is a hotspot for fintech innovation in Africa with huge potentials. This gives a glimpse of what its growth could mean for the country’s banking sector in the future.
“Fintech companies here and around the world are making great strides in building both digital and physical banking products and services.
“From loans to payment systems to investing, they have done a great job in developing easy-to-use, intuitive, fast and smart products. We have spoken about this for years, but this competition now is everywhere,” Dimon wrote.
Fintech is an industry that uses digital technologies to improve the operations and working of the financial industry.
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In Nigeria, the biggest growth sector in the last few years has been financial services.
Between 2014 and 2019, Nigeria’s fintech scene attracted over $600 million from foreign investors.
These companies have attracted the highest share of $120.6 million FDI or foreign investments in 2020 in Nigeria’s tech sector.
In 2020, Stripe, an Irish-American financial services firm, purchased the Nigerian startup, Paystack for an estimated $200 million.
This year, Flutterwave, a payment gateway based in Nigeria, announced it has raised a Series C round of $170 million to improve its technology, product, customer support and expand to new frontiers, valuing the company at over $1 billion.
Fintech’s growth has also been boosted by a surge in interest in cryptocurrency and blockchain technology.
Dimon explained that their growth is a result of the ease they provide and also because they are subject to less regulation.
However, Nigeria has started to impose some regulations on its Fintech companies.
The Central Bank of Nigeria (CBN) through the Nigerian Interbank Settlement System (NIBSS) last week suspended the provision of the BVN validation service to all Fintech and third-party partners in the country.
This affects top Fintech companies such as Paystack, Flutterwave, and all non-bank firms that provide financial services.
The NIBSS suspension of BVN verification represents a revenue loss for Fintech companies that earn income from offering customers BVN verification services.
In his letter, Dimon pointed out that the Fintech firms will continue to be enormous threats for banks around the world. Therefore, banks must be well well-positioned for the challenge. They must begin to embrace technology as fast as possible so they can make better use of it to better serve customers.
For JPMorgan Chase, the CEO says it is ready to get more creative as competition grows tougher.
“While I am still confident that JPMorgan Chase can grow and earn a good return for its shareholders, the competition will be intense, and we must get faster and be more creative,” the CEO wrote.
“Acquisitions are in our future, and fintech is an area where some of that cash could be put to work,” he said.
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