It is well known that fintech companies are using technology to provide easier ways for customers and clients to manage their finances. However, while some might say they are doing this better than commercial banks, there is nothing to suggest that the commercial banks are losing out.
From 1892, when the first commercial bank was established in Lagos, the banking business in Africa’s largest economy has evolved to a point where customers can now complete transactions at the comfort of their homes.
Considering the monetary stance of the apex bank to keep interest rates low in order to encourage borrowings and stimulate the economy from the covid-19 induced recession in the previous year, Nigeria’s commercial banks are taking advantage of electronic banking to ramp up efforts to boost revenue from other generating units.
These banks are benefitting massively from the wave of mobile phone adoption proving easy-to-use banking apps that are secure and operate seemingly like social media apps.
In a usual fashion, BusinessDay presents the top-earning banks from their various e-business units. The list was dominated by the five tier-one banks in the country, commonly referred to as FUGAZ.
With the absence of First bank and Access bank who are yet to release their full-year financial statement, BusinesDay’s calculation showed total income obtained from electronic banking for Zenith, GTCO and UBA rose to N123.14 billion in the full year 2021 compared t0 N83.08 billion in the full year 2020.
Earnings from electronic banking include fees charged to customers for the use of digital channels, such as debit cards, mobile applications, USSD channels, POS, and other related online banking services.
United Bank for Africa (UBA)
UBA ranked first with the most income from electronic banking income among Zenith bank and GTCO with N64.59 billion in the full year 2021, as against N44.24 billion in the full year 2020.
The bank’s profit grew by 8.6 percent to N118.6 billion in 2021 compared to N109.16 billion in 2020. Net interest income jumped to N316.71 billion from N259.46 billion in the comparable periods.
Net fees and commission income stood at N101 billion in December 2021, a 22 percent increase from N82.61 billion in December 2020.
Africa’s global bank, UBA is connecting people and businesses across Africa through its retail, commercial and corporate banking, innovative cross-border payments and remittances, trade finance and ancillary banking services.
Zenith ranked second with its fees on electronic products which stood at N37.47 billion in December 2021, 38.4 percent increase compared to N27.07 billion in December 2020.
Zenith bank grew its profit to N244.5 billion in the full year 2021 compared to N230.5 billion in the full year 2020. Net interest income jumped to N320.8 billion compared to N299.7 billion in the comparable period.
Net fees and commission income surged 30.9 percent to N103.9 billion in 2021 from N79.33 billion in the previous year.
Zenith Bank has distinguished itself through customer experience and sound financial indices. It is also one the pioneers in the digital space in deploying innovative products and solutions that ensure convenience, speed and safety of transactions.
Guaranty Trust Holding Company Plc (GTCO)
GTCO recorded the least among the comparable tier-1 banks with N21.08 billion on electronic banking income, which jumped 79 percent from N11.77 billion in the comparable periods.
The bank’s profit dipped 13.2 percent to N174.8 billion in the full year 2021 from N201.4 billion in the full year 2020. Net interest income dropped to N220.6 billion in 2021 from N253.6 billion in 2020.
Net fees and commission income stood at N74.12 billion, a 39.3 percent increase from N53.18 billion in the comparable periods.
GTCO remains one of the most profitable and best managed financial services companies in Nigeria with leadership in the banking industry, with efforts at empowering people and communities.
Due to the absence of a full-year report, First Bank’s 2021 nine-month financials showed electronic banking income stood at N42.02 billion in nine-month 2021, a 21.4 percent increase from N34.6 billion in nine-month 2020.
Profit dipped to N40.8 billion in September 2021 compared to N68.15 billion in September 2020. Net interest income dropped to N163 billion in the nine-month period of 2021 from N192.7 billion in the nine-month period of 2020.
Net fees and commission income increased to N85.8 billion in September 2021 compared to N73 billion in the corresponding period last year.
Access bank’s latest financial report revealed electronic banking income increased to N46.2 billion in September 2021 compared to N38.8 billion in September 2020.
Profit jumped 19 percent to N121.9 billion in the nine-month period of 2021 compared to N102.3 billion in the nine-month period of 2020. Net interest income increased to N267.7 billion from N196.2 billion in the comparable periods.
Access bank grew net fees and commission income by 24 percent to N89 billion in September 2021, from N71.8 billion in September 2020.
Challenges from FinTech
Lamin Manjang, CEO of Standard Chartered Bank Nigeria, says through the recent impact of technology and financial literacy, the word ‘Bank’ now connotes different reactions to different people.
“Personalised financial growth, opportunities for business collaborations, access to foreign investment opportunities, transferable generational wealth, and financial security all on one’s terms are some of the prevailing thoughts for customers,” he states.
Despite commercial bank’s income, Fintech companies like Paystack, PiggyVest, Kuda Bank and others are innovating past traditional institutions by making digital financial services like lending, savings, or investing readily available to people.
They have been able to recognize the pain points for users, which have not been addressed by commercial banks.
Also, other fintech startups have fuelled the growth of alternative lenders which offer both higher yields to investors and faster, cheaper, more convenient loans for borrowers compared to traditional banks.
Startups like Carbon and Branch offer lower loan rates than commercial banks and this is mostly because fintech companies are not subject to the operational costs involved in running a traditional bank with multiple branches.