July 3, 2018
By Feranmi Ajuwon
The Nigerian Banking Ecosystem is changing. Increase in the use of the internet as well as the rise of cutting edge technological innovations in the financial services sector is shaping the advent of Digital Banks.
So far the impact of the internet economy and digitalization in the banking industry is seen in the increased move to retail banking and use of ebanking channels, which has further led to improvements in financial inclusion. According to the Central Bank of Nigeria (CBN), the total value of electronic payment (e-payment) transactions recorded in 2017 rose by 32.5 percent to N83.1 trillion in 2017 from N62.7 trillion recorded in 2016.
As digital transformations continue to shape the way banks do business, technology we know moves at a breakneck speed, and the numerous trends will continue to emerge and facilitate disruptions within the banking sector. This is not farfetched because of the increasing focus on Consumers’ Experience, Compliance and Collaborative Competition.
Financial technology (Fintech) has been a game changer in recent times, and there’s no doubt that it is here to stay. Following the shift to an Experience Era as Brett King, CEO of Moven puts it; fintech moved from been a back-end application for financial institutions to any technological innovation in the financial sector including innovations in financial literacy and education, retail banking, investment, loans & credits and even cryptocurrency. Fintech advancement has increased with banks becoming more customer-centric, while providing cross-channel avenues through which customers can transact with them. It is expected that more of this will continue into the future especially as banks continue to innovate and try to stay neck to neck with new technologies and collaborate with Fintech Companies rather than see them as threats to their business.
Even big banks within the Nigerian market with huge investments in legacy systems are beginning to adopt more nimble/dynamic operating approaches and introduce products that are in sync with the emerging digital economy. Zenith Bank Plc for instance has innovated several new solutions that enable its customers transact more conveniently, safely and quickly. These include the Bank’s Scan to Pay App which can be used by Zenith and non-zenith customers to make online and in-store payments in seconds through quick response (QR) code scanning on any internet enabled phone. The Bank’s mobile app is also very functional, easy to use and offers enhanced functionalities such as instant account opening for new customer while its *966# Eazybanking service is now a favourite transaction channel for millions of Nigerians.
Another trend which is fast becoming a reality is the use of Artificial Intelligence (AI), as Big Data facilitates its integration into our everyday lives. AI is expected to help banks automate their processes seamlessly and improve customer experience. It will further impact the way banks accomplish their financial due diligence especially in risk management, credit allocation and fraud detection.
In relation to customer acquisition and retention, AI will go a long way in delivering intelligence about customer behavior and preferences which will help in the development of personalized responses, insights & product/service types tailored for each individual. Imagine being able to alert a customer about the decline in his/her deposits when it exceeds a threshold and then propose a loan related product; or being able to predict customers interests based on their withdrawal patterns. With Blockchain, Robotics and Chatbots gaining increased recognition, investment in AI is underway in Nigeria’s Banking Industry. A noticeable move within the industry is the adoption of an Enterprise Risk Management Framework and the use of Enterprise Resource Planning Suites.
Though banks are cautious in their adoption of cloud technology, the increased need to deliver quick deployment and faster go to market innovations in a digital economy can be accomplished with Cloud technology. Thus, for firms who seek to take advantage of scalability, lower costs, ease of operation and resilience; cloud based platforms will be the way to go. However as advised by Capgemini, “it is expected that banks will own and operate the cloud themselves with service providers taking increasing ownership and control of the cloud infrastructure as cloud computing matures and more rigorous controls become available”.
Alongside investment in big data technologies, banks now have to worry about the type of data collected, as well as the accuracy, availability and security of such data. With the introduction of the General Data Protection Regulation (GDPR) by the European Union, Data governance will become priority for financial institutions, as it compels both the institution as well as its support functions to embrace compliance.
While AI helps to identify customers’ needs and value added services that can be tailored to meet these needs; customer loyalty programmes are the specific vehicles that help to drive the impact of same towards increased patronage and retention. With customer experience becoming an increasing focus, with banks like Zenith ensuring to beef up its customer service networks; improvements in loyalty programmes such as the use of loyalty cards, reward cards, referral promotions, etc. will remain a key driver of customer retention in the banking space.