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Retail banking most susceptible to fintech disruption in Nigeria – PwC

17 Feb 2017, 04:31 pm
Financial Nigeria
Retail banking most susceptible to fintech disruption in Nigeria – PwC

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Respondents to the PwC survey said fintechs provide numerous opportunities for financial services incumbents to improve their traditional service offerings.

Bank customers at the ATM

Nigeria’s retail banking and payments sectors are most likely to be disrupted by financial technology (fintech) companies over the next five years, according to a new report released by PricewaterhouseCoopers (PwC) on Thursday.

The report provides insights gathered by PwC through the survey of over 50 chief executive officers and other industry leaders across various segments of Nigeria’s financial services industry. Additional insights and proprietary data were also obtained from DeNovo, PwC’s strategy platform focused on fintech innovation.

According to the report, 92 per cent and 85 per cent of respondents saw the banking and fund transfer/payment sectors, respectively, as areas most likely to be disrupted by the surge of new technology-driven payments applications and processes, alternative processing networks, and increased usage of electronic devices to transfer money.

However, respondents said areas of the banking sector least prone to disruption by fintechs are: commercial banking (38 per cent), microfinance banking (38 per cent), investment banking (8 per cent), mortgage banking (8 per cent) and central banking (0 per cent).

“All over the world, the increasing momentum of fintechs and their success is challenging financial services players to devise a spectrum of strategic responses,” said Andrew Nevin, Advisory Partner and Chief Economist, PwC Nigeria. “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 insurance and asset management sectors are also susceptible to disruption by fintechs, according to PwC. About 78 per cent of respondents said parts of the insurance sector most likely to be disrupted over the next five years include life insurance, auto insurance, and intermediaries (brokers/agents).

Survey respondents from the asset management sector said investment and wealth management services will be the most disrupted by fintechs, followed by brokerage services. About 60 per cent of respondents said that at least part of the asset management business is at risk of being disrupted by fintechs.

“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,” said Adedoyin Amosun, Associate Director and Co-Financial Services Advisory lead at PwC Nigeria. “A sizeable number also believe that fintech adoption will improve customer retention and product differentiation.”

Notwithstanding the threat posed by fintechs, survey respondents said fintechs provide numerous opportunities for financial services incumbents to improve their traditional service offerings. About 84 per cent of respondents identified additional revenues as the key opportunity provided by fintech, while 82 per cent of respondents said fintech solutions have helped reduce operating costs in different areas of the business.

“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,” Nevin said. “We see this impact manifesting in the development of new business models which will create challenges for both regulators and market players.”

The PwC economist said financial services incumbents can respond to the rise of fintechs by implementing a customer-centric model focused on offering products and services that truly address customer’s needs and support 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,” Nevin added.


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