By Peter Egwuatu
WORLD’S leading accounting and management firm, PricewaterhouseCoopers, PwC, has revealed that the Nigerian retail banking and payments sectors will be the most disrupted by a group of new companies building Financial Technology (FinTech) solutions.
The PwC’s in its Nigeria FinTech Survey 2017 report released in Lagos, weekend, stated that the banking sector will be the most vulnerable by this technology .
The report is the result of insights gathered by PwC through the survey of over 50 Chief Executive Officers (CEOs), and Industry leaders across various segments of Nigeria’s financial services industry with additional insights and proprietary data obtained from DeNovo, PwC’s strategy and platform unit focused on FinTech innovation.
Findings from the survey by PwC also reveal that Nigerian financial services players see changing customer needs as the top impact FinTechs have on their business, with up to 60 per cent of respondents indicating that up to 40 per cent of financial services business will be at risk of standalone FinTechs by 2020.
Commenting on the survey report, Dr. Andrew S. Nevin, Advisory Partner and Chief Economist, PwC Nigeria noted, “FinTechs are empowering customers by providing services that are delivered via technology applications on customer’s mobile devices. This allows consumers conveniently initiate and complete transactions, connect to third party entities and access information without restrictions. All over the world, the increasing momentum of FinTechs and their success is challenging financial services players to devise a spectrum of strategic responses.”
He noted, however, that not all FinTechs pose the same threats or opportunities. In some cases, according to him, FinTechs will be viewed as enablers to traditional innovation and continuous improvement, while in others, it presents a series of disruptions and threats as they continue to make inroads into banks’ traditional territory by offering a competitive service or product.
PwC said the objective of this survey was to assess the rise of FinTech in Nigeria’s financial services industry, their potential impact on market players and the opportunities that may also exist following their adoption. It stated: “From the insights we gathered, we are able to make recommendations on the way forward for players in this industry.”
Adedoyin Amosun, Associate Director and Co-FS Advisory lead at PwC Nigeria, while presenting the key findings of the survey stated, “From our survey, retail banking and funds transfer have the highest likelihood of disruption at 92 per cent and 85 per cent respectively. Underwriters were of the view that insurance brokerage, auto and life insurance stand an equally high likelihood of disruption at 77 per cent.
While the threats of disruption is quite appreciated, our respondents also noted the opportunities FinTech adoption will bring especially as seen in the unlocking of opportunities for more revenue sources and reduce operational cost.
“A sizeable number also believe that Fintech adoption will improve customer retention and product differentiation. It is interesting to note that although more than half of respondents recognise the importance of blockchain, they are yet to articulate a business response to this trend. Bank and Funds transfer and payments players are the most familiar with the blockchain trend perhaps this is linked to the sectors in which we have the most use cases to date.
“Majority of respondents from traditional financial industry players believe that part of their business is at risk of being lost to standalone FinTechs, up to 92 per cent in the case of banks.
“Also banks ranked loss of market share at the top FinTech related threat, closely followed by increased pressure on margins. One of the ways in which FinTechs are able to do this is by significantly shrinking operating costs. Other FS incumbents ranked information security and privacy concerns as the key FinTech threat to their business.”
Shrinking operating costs
Commenting on the way forward, Nevin stated: “Overall, the results of the survey reveal that Nigeria’s Financial Services Industry leaders acknowledge the emergence of FinTech and recognize its impact on the industry. We see this impact manifesting in the development of new business models which will create challenges for both regulators and market players.
This will thus require incumbents to implement a customer-centric model focused on offering products and services that truly addresses customer’s needs and supports the completion of transactions through multiple accessible and connected channels.
“In addition, incumbents have to proactively approach the FinTech challenge with a clearly articulated strategy rather than the current approach of adopting reactionary measures. Incumbents also need to identify the threats and opportunities that are most relevant to their business and explore ways they can build, acquire or partner with FinTechs for the capabilities they lack.
“By focusing on incorporating new technologies, incumbents can prepare themselves to play a dominant role in the new financial services landscape and maintain strong positions even as innovation alters the marketplace”