Nigerian Retail banking and Payments sectors will be the most disrupted by a group of new companies building financial technology (FinTech) solutions.
This is according to PwC’s Nigeria FinTech Survey 2017 report released in Lagos today.
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 Service industry with additional insights and proprietary data obtained from DeNovo, PwC’s Strategy& platform focused on FinTech innovation.
According to the report, FinTechs are redrawing the competitive Financial Services landscape and blurring the lines that define players in the sector. Their offerings range from competing financial services such as alternative lending, to additive solutions atop existing banking services, to enabling technologies for the banks themselves.
Capitalizing on the latest mobile, cloud and digital technologies, Nigeria is increasingly becoming home to many FinTech firms who are trying to shake up and be accretive to the banking value chain.
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% of respondents indicating that up to 40% of financial services business will be at risk of standalone FinTechs by 2020.
Commenting on the survey report, Advisory Partner and Chief Economist, PwC Nigeria, Dr. Andrew S. Nevin Ph.D. noted that: “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.”
Nevin further said, “All over the world, the increasing momentum of FinTechs and their success is challenging financial services players to devise a spectrum of strategic responses. However, not all FinTechs pose the same threats or opportunities. In some cases, FinTechs will be viewed as enablers to traditional innovation and continuous improvement. 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.
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. From the insights we gathered, we are able to make recommendations on the way forward for players in this industry,” he stated.
Associate Director and Co-FS Advisory lead at PwC Nigeria, Adedoyin Amosun, while presenting the key findings of the survey said:“From our survey, Retail banking and Funds transfer have the highest likelihood of disruption at 92% and 85% respectively.
“Underwriters were of the view that Insurance brokerage, Auto and Life insurance stand an equally high likelihood of disruption at 77%. 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 & 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% 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.”
Commenting on the way forward, Dr. Andrew S. Nevin added that: “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,” he said.