• Wednesday, May 22, 2024
businessday logo


Why banks’ e-business revenue is rising despite fintech penetration

Nigerian big banks’ fintech foray spotlights valuation

Traditional banks have stepped up their game to improve e-business in Nigeria which has tremendously improved their revenue base in the first quarter of 2022 compared to the same period of 2021.

According to the analysis of the financial statements released by 10 banks quoted on the Nigerian Exchange (NGX), banks generated a sum of N77.01 billion from electronic business in the first quarter of 2022, growing revenues by 11.7 percent compared to N68.92 billion recorded in the corresponding period of 2021.

Traditional banks, over the years, had dominated the Nigerian banking space for over a century with the provision of banking services like loans, cash withdrawals, and deposits, among other services to customers.

However, the banks gradually became smug, with many customers sharing their bitter experiences while banking.

Some of the challenges mentioned by dissatisfied customers included long periods spent in queues trying to withdraw or deposit money, lack of access to proper products and services, poor customer support, as well as outrageous charges imposed on them by their banks.

Checks by Business Hallmark (BH) showed that over 400 fintech companies fiercely compete with traditional banks for control of the loan and payment market.

However, the banks refused to roll over and surrender to the new operators, as they responded to the disruptive threat posed by fintech by adopting innovative technologies as well as introducing more customer-oriented and digital experiences to their clients.

Banks also improved their services to their customers through relevant product recommendations and insights to make informed business decisions.

For instance, some banks, through cookies and other information technology (IT) tools that monitor customers’ activities online, are now able to recognise customers’ urgent wants and needs.

Findings revealed that all the commercial banks have digital channels that do not rely on the internet. These innovative channels include agency banking point of sale (PoS), short message service (SMS), and Unstructured Supplementary Service Data banking.

Read also: Nigerian fintechs grapple with KYC amid rapid growth

Also, Terragon’s data-driven MarTech platforms deployed by banks have been able to target unbanked consumers, based on their device type, location, interest, spending power, and others.

With the device, banks are now able to engage with customers through SMS to recommend mobile banking channels, closest ATMs or bank agents, and relevant products.

Meanwhile, banks embracing technology seems to be paying off, this is evident in the good showings they recorded in e-business in the last two years.

The ten analysed banks listed on the NGX, namely Access Bank, Zenith Bank, First Bank, United Bank of Nigeria (UBA), Guarantee Trust bank, Union Bank, First City Monument Bank (FCMB), Wema Bank, Stanbic IBTC, and Sterling Bank, recorded a strong revenue of N77.01 billion in the first quarter of 2022 from their electronic businesses.

This represents about 30 percent of the aggregated Profit After Tax (PAT) of N276.31 billion generated by the 10 banks in the first quarter..

The appreciable revenues from the banks’ e-business channels were realised from USSD charges, POS payments, mobile applications, internet, and agency banking, as well as automated teller machines (ATMs) charges.

Furthermore, top on the list of Nigeria’s biggest banks by customer size is Access Bank, which earned the sum of N20.13 billion from its electronic business, out of the total N57.39 billion of profit after tax generated in Q1 2022, the amount which represents a 26.1 percent of the total amount generated by the ten banks under review.