How banks, telcos alliance can boost retail lending

Part of the discussion at a workshop on retail banking in Lagos last week was the merging of the financial services and the telecommunication to boost retail lending and enhance financial inclusion.

Bankers who gathered at the `2016 Nigeria retail-banking workshop organised by Ciuci Consulting in Lagos were concerned that they are gradually losing their market share to pay day companies.

They believe that collaborating with the telcos will enable them meet the financial needs of many unbanked and underbanked population in the country.

“At some point you will see more collaborations between banks and telcos. Right now there might be different reasons why there is limitation, which may be regulatory issue.  However, to get average person on the street will be the combination of the financial service and the telecom service,” Chukwuka Monye, managing partner, Ciuci Consulting said.

He said the future of retail is great, adding that the retail banking operators will begin to reorganise themselves.

Money added, “They have improved a lot in recent. Initially, they were still very corporate and commercially minded. Retail requires a lot of different organisation set up. I see a lot of changes happening from organisational perspective. I also see things changing in terms of the competitive landscape. If banks are not careful, it is possible to find value added services companies such as FinTech companies eating into their space.”

Some of the topics covered at the workshop included – the implication of ‘made in Nigeria’ in retail banking; Digitization versus digitalization; the characteristics of retail lending in Nigeria and the opportunity in the unbanked.

Funke Smith of Firstbank explained how sole proprietorships can take advantage of the new focus on ‘made in Nigeria’, sharing that they need to be well structured to enable them position better for different forms of funding that are available, while Adeola Dare of Ecobank shared different ways banks can improve on financial inclusion.

A key concern shared by many of the participants is the slow response of banks to market share loss by disruptive financial service providers. One of the participants said, “If we are not careful, these firms will eat our cheese. We must be better organised to better meet the requirements of an effective retail operation.” Another bank executive was of the view that the disruptive financial service providers are nimble and have an effective operational structure, that is the reason why even bank employees go to them for short-term loans.

There was also a shared frustration of regulatory constraints on industry competitiveness. A participant highlighted that many of the laws banks must abide by were written in 1991 and the banking industry has changed dramatically since then. Banks can only implement risk management solutions that are approved by the regulators, therefore it is crucial that the banks and the regulators collaborate to develop an effective framework that guides retail-lending activities. Based on this, Gbolahan Joshua, Chief Operations and Information Officer of Fidelity Bank, shared his optimism about some programs that the CBN is developing to make credit risk requirements more flexible and effective.

HOPE MOSES-ASHIKE