How fintech companies struggle with commercial banks in Nigeria


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It is well known that FinTech companies use technology to provide customers and clients with easier ways to manage their finances. However, while some might say they do this better than commercial banks, there is no indication that commercial banks are the losers, as commercial banks remain widely used in Nigeria.

Still, while banks have the customer base and staff to tackle the disruptive potential of fintech startups, their responses have been fairly passive.

Fintech companies like Paystack, PiggyVest, Kuda Bank and others are breaking new ground from traditional institutions by making digital financial services like lending, saving or investing easily accessible to people. They were able to recognize pain points for users, which were not addressed by commercial banks.

Other fintech startups have fueled the growth of alternative lenders that offer both higher returns to investors and faster, cheaper, and more convenient loans for borrowers compared to traditional banks. Startups like Carbon and Branch offer lower lending rates than commercial banks and this is mainly because fintech companies are not subject to the operational costs of running a traditional bank with multiple branches.

In an exclusive interview with Nairametrics, Femi Oshinlaja, the COO of Cassava Fintech, a pan-African Fintech group that offers digital financial services to African mobile consumers, explained why digital solutions are spreading rapidly on the African continent by stating;

“With the growth in smartphone penetration and greater ubiquity of the Internet, we are seeing the convergence of online channels with more and more consumers choosing to use digital channels to send money home because they see the convenience of doing it from the comfort of their own home and not having to stand in line to complete the transaction plus the affordability of the online option.

Fintechs have considerable advantages over banks. They are primarily designed to meet the needs of the younger demographic, and they’ve gotten a lot of media buzz that has mostly shifted positively in their favor. Their main strength lies in the innovations closely associated with their brands.

But, it’s highly unlikely that fintech startups will replace commercial banks anytime soon, for a number of reasons. Femi Oshinlaja also added that he felt that traditional brick-and-mortar channels of sending money remain the dominant or preferred means of delivering money home. This is underpinned by the trust, confidence and limited risk that customers associate with drop-in outlets to send money. Customer behavior and habits take time to change and educating them about the value of online channels is essential.

Confidence: first, consumers still trust banks rather than startups to store their money responsibly.

Robust service offers: A significant percentage of consumers, especially among the older generation, are not necessarily enthusiastic about using different service providers to manage their deposits, borrow, invest and plan for retirement. Unlike fintech, which focuses solely on providing services around specific financial offers, banks are one stop shops for all financial needs. It can be quite stressful to get a loan on one platform and then download another app to invest etc.

In person relationship: Commercial banks tend to have strong relationships with their users, as they leverage in-person touchpoints in their branches to solidify relationships with their users, even when developing their digital strategies. This is different from fintechs which limit their interactions with users to digital channels.

While all of this is true, banks need to leverage their strengths and register their digital presence. Very few commercial banks want to improve the digital experience for consumers. You can see it in the quality of their mobile apps and the process it takes to set them up. This is different from fintech companies that deliver great user experiences in their mobile apps.

Banks should use Software-as-a-Service (SaaS) solutions offered by fintech start-ups so that they can easily integrate and streamline operational capabilities and move to digital / mobile delivery.

Most commercial banks like GTBank, Sterling Bank and Wema are drawing on their resources to better position themselves in this new digital age by investing in emerging technologies – such as mobility, artificial intelligence, machine learning and analytics. big data – to develop a broader understanding of what every customer really expects from solutions that address different segments of their financial lives.

The rise of fintech has opened up a world of possibilities. Commercial banks now have to do better in terms of providing better services and good customer response to their users.

What to expect

  • In the years to come, it is expected that we will see a proliferation of FinTech products and digital service companies in Africa as smartphone and internet penetration increases.
  • According to data from Disrupt Africa, fintech has attracted most funded by tech startups in Africa with 24% in 2020, and funded tech startups grew 27.7% in 2020.
  • With this, it is very likely that competition between fintechs and traditional banks in Nigeria will continue for the $ 9 billion value pool.
  • As this anonymous writer puts it, “Banks want to be FinTech companies, while high-tech companies want to be banks.” Therefore, we may see increased collaboration in the near future, similar to what we saw in 2017 when Nigerian bank Wema launched Alat by Wema.


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About Ruben V. Albin

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