Retail banking, driving future of financial services sector

Stakeholders who gathered last at the at the Annual Guest Lecture organized by Chartered Institute of Bankers of Nigeria (CIBN) in Lagos unanimously agreed that retail banking is the future for the financial services sector of the economy.

Retail banking according to Michael Lafferty, chairman, Lafferty Group, is different from corporate banking, because the customers are people and small businesses, rather than big corporations.

However, retail banking is also much more challenging than corporate banking, because people tend to bring emotions into their decision-making – while corporates are generally far less demanding because they make decisions on a rational basis.

Lafferty further explained retail banking is a much better business from a shareholder’s perspective than corporate banking, because of its capacity to generate sustainable, higher profits long into the future.

“Retail deposit-taking is the very lifeblood of banking, and these personal deposits are so precious that a value can hardly be put on them in times of stress”.

He believes that retail lending is also far less risky than corporate lending, because the individual amounts at risk are small and typically dispersed across a vast customer base. By contrast, a few corporate loans that go bad can wipe out much of a bank’s capital base – and all too often they do.

“We make so much money from corporate banking, but there is value in retail banking”, Segun Ogunsanya, managing director, CEO, Airtel, said at the event in Lagos.

He said if you must be a good retailer, there is need you remove bureaucracy. “There is value in retail banking but it must be done by retailers and not bankers”, he added.

Giving a remark at the annual guest lecture event, Emeka Anyaoku, former Secretary General of the Commonwealth advised banks to play greater role to national development by lending more funds to productive sector of the economy.

He said sectors like manufacturing, agriculture, oil and gas industry among others need greater support in other to empower entities.

“It is only by de-emphasizing funding importation and supporting the real sector that banks can contribute meaningfully to national development”, he said.

According to Lafferty, retail banking can only reach its full potential if it run through a separate bank – whether this be standalone or within a broader banking group. If it is part of the latter, the group CEO must also be a believer.

It is important to understand that retail banking is a different business from corporate banking – and it is even more important to keep retail deposits out of the reach of those who are at home in the world of trading and speculation.

He stressed that partnership between Mobile Network Operators (MNO) and banks is the way forward for retail banking.

“For sure, the Telcos are a threat, not least as they get banking licences, but the good news is that they will generally need to partner with banks. Their customer lists are the best-quality prospects lists available today”, he said.

HOPE MOSES-ASHIKE