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A report has shown that retail banking and fund transfers in Nigeria are the two biggest areas that are most likely to be affected by FinTech over the next five years.
The report, Nigeria FinTech Survey 2017 [PDF], which was released by PricewaterhouseCoopers (PwC), found the likelihood of disruption within these two areas amounted to 92 percent and 85 percent respectively.
Over the last few years, the banking and payments sub-sectors have experienced a large amount of disruption with new technology-driven payments applications and processes as well as innovative digital applications that aid simpler payments, and an increase in the use of electronic devices to transfer money.
FinTech is quickly evolving within the financial services sector which is seeing an increase in the number of technology-focused startups and other entrants changing how the industry works.
In Africa, FinTech investments are estimated to have increasde by a compound annual growth rate of $200 million from 2014 to $800 million in 2016. According to the report, this could potentially increase to a value of $3 billion by 2020, with Nigeria and South Africa receiving a significant portion of the investments.
Changing Customer Needs
The report found that financial services in Nigeria see changing customer needs as the main impactor FinTechs will have on their business. It revealed that 60 percent of those surveyed believe that as much as 40 percent of financial services firms will be at risk by 2020.
With 85 percent of the African population owning a mobile phone and Nigeria leading the world in mobile share of web traffic at 82 percent, financial service industry players need to embrace the digital experience offered by companies such as Facebook, Amazon, and Google, to ensure their customers get the same level of experience from their financial service providers.
Deji Oguntonade, head of the e-Payment Solutions Group, Guaranty Trust Bank Plc, said that FinTechs are more agile and are not bogged down with legacy issues from infrastructure, culture, and manpower perspectives.
They are therefore more open to try out new technologies and provide customers with endearing products and services in a much quicker manner. It would therefore be good for banks to partner with FinTechs and take advantage of their agility.
Blockchain: An Untapped Technology
Although the technology demonstrates a lot of promise, several challenges and barriers to adoption remain such as cybersecurity, privacy concerns, and restricted governance over decentralized networks.
As such, compared to other trends blockchain ranks lower on the agenda. While respondents recognize the blockchain’s importance, they are unsure of how to or unlikely to respond to this trend.
The survey found that 45 percent of respondents within banking are ‘moderately’ familiar with it while only a few consider themselves to be experts. This lack of understanding could lead market participants to underestimate the impact the blockchain could potentially have on their activities.
Featured image from Shutterstock.