Nigeria's Banking Landscape Subjects to Transformation by Fintech

Digital banking is transforming the landscape of Nigeria’s financial system, attracting attention from both commercial players and government officials. Recent budget speeches and strategy plans have highlighted the significant role that fintech will play in the country’s economic future.

Since February 2013, the Janus Henderson Global Technology Fund has more than doubled, indicating robust investor enthusiasm for fintech developments. But this rapid growth also creates some difficulties. Now the old banks are competing with the GAFAMs that are entering the financial sector; therefore, the way the financial institutions work is changing.

In 2017, a PwC survey indicated that 45% of financial institutions globally partnered with fintech companies, suggesting a shift towards collaboration rather than full-on competition. But 80% of respondents were concerned about losing market share to their fintech competitors, particularly in areas such as payments and personal finance, where fintech solutions are booming.

Loans and payment products are the basis of the fintech boom in Nigeria, with 32 of the top 100 fintech companies in the 2017 Fintech100 rating in the loan market. We need to increase our efforts to fulfil the urgent requirement for accessible financial services, especially for young people eager to adopt digital solutions.

With Nigeria’s teeming population, the need to create innovative loan choices to meet this demand has never been more pressing. Artificial intelligence is emerging as a powerful engine of innovation in Nigeria’s fintech sector. The AI-enabled startups raised an average funding of $1 billion in 2016 and 2017, demonstrating the promise of AI to revolutionise financial services, optimise operations and improve customer experience. As AI technology becomes more mainstream, its applications in banking will grow, paving the way for additional changes in the industry.

Nigeria’s Information and Communication Technology (ICT) business is overtaking the conventional sectors and is contributing significantly to the country’s GDP. This development is particularly empowering for the youth who are increasingly embracing digital banking services. Fintech is having a significant impact, not just on financial services but also on sectors such as agriculture, healthcare and the wider economy. Intelligent technology platforms are doing it all.

Fast changes in the growing fintech field are making it hard for Nigerian regulators to keep pace. As digital financial services expand, the fintech sector must guarantee data privacy and security. But it’s not fully clear yet what specific regulatory measures are being implemented to overcome these challenges. Robust regulation will be crucial in establishing a secure and trusted environment for fintech to thrive. Such action will be key to promoting growth and building consumer trust.

This revolution is transforming the financial space and bringing a complicated combination of opportunities and difficulties. If the startups continue to innovate and the established banks adjust to their new environment, the collaboration between both could create a more inclusive financial ecosystem.

Since the fintech industry continues to evolve, it is important for all stakeholders to be able to manage the shifting landscape since Nigeria’s economic development is poised to be impacted greatly. Supporting partnerships between startups and existing banks would help Nigeria build a more inclusive financial ecosystem for all. There are hurdles and opportunities ahead, but the fintech industry can continue to thrive and benefit the country with the right approach.