The antelope cannot match the lion. Lion is big. Fearless. Fierce. Ferocious. He pounces on its prey at will. Some animals respect him. Others loathe him. Few despise him. The lion is still king over these animals. The king of the jungle flaunts this title. He walks the jungle like the owner of the wide expanse. He is arrogant. He is disrespectful. He is choosy. He does not eat leftovers. He visits the abattoir daily for fresh flesh. No one queries his authority.
Antelope, on the other hand, is nobody. He does not exist. In the world of the lion, the antelope is breakfast. A meal. So, why would the lion bother about the threat of the antelope? Why would the lion agree to a beauty contest with the antelope? Well, if the lion is not sure about his powers, he can accept the antelope dare. If he is envious about the agility of the antelope, he can be threatened about the antelope’s zigzag leap. But why? That is the intrigue this writing would try to unveil.
If we must do a good job, clearly, we must step into the ring. Here we go. Fintechs are gaining momentum. Fintechs play in the collection and payment space. Fintechs are not banks. Banks are not Fintechs. Fintechs offer banking services. Banks use technology to deliver quality services. Fintechs target customers that the banks are undeserving. Banks want to become Fintechs. Fintechs want the attributes of the banks. It is a difficult proposition. But, let us pause here. Can Fintechs become anything but the banks?
Can Fintechs take on the banks head-on? No. The regulator would not sanction it. It is a risky business.
Fintechs have brought innovation to payment and collection services. This change has transformed the financial sector. Fintechs have affected all aspects of life. Fintechs have changed the way we make payments. Some Central Banks determine the nature of money in a digital world. The Central Bank of Nigeria (CBN) determines how new players will reshape the financial services landscape. Industry 4.0 or the fourth industrial revolution, is aimed at using digital technology to further automate processes. And systems which normally required either physical or human capital. Although to some extent, it may seem a development of the third industry revolution. This combined information technology and electronics to facilitate the automation within production and business. It is not a revolution on its own.
Research has shown that Industry 4.0 is much faster. Due to the interconnectedness of systems, processes and technology. It thus brings significant changes to systems in each sector. It makes an industry-wide impact. With Industry 4.0, technology will not just complement the work of other services. It acts as a complete substitute. It brings technically-driven services. Here is where Fintech fits.
Fintech companies that are entering the market come with the latest automation processes. Whereas the banks need to implement these changes. Step-by-step. Unless the banks are the first to introduce the newest and latest technologies, they will be deemed as less competitive than their Fintech peers. But the banks do not unveil the latest technology. Fintech does.
With this latest automation process comes value addition. It is clear that any entity that delivers value, wins. Fintechs can do this. But Fintech cannot disrupt banking. Many Fintechs have a niche. Some have multiple touch points with consumers. Fintech is broad. Is banking broad? Some Fintechs are in payments. Some are in neo-banking. These firms accept deposits and lending. Some are in wealthtech, insuretech, APIs, and infrastructure players. Within Fintech, some tech startups enable business online such as Carbon, Branch etc. Other tech start-ups provide financial services online like Cowrywise.
Can Fintechs take on the banks head-on? No. The regulator would not sanction it. It is a risky business. That is why the CBN would allow the banks to set up Fintech firms. But the CBN would not license the Fintechs to become banks. That does not mean a Fintech cannot become a bank. A Fintech firm can own a bank. If it chooses, if it toes the line, if it subjects itself to the basket of regulations, it can own a bank. But it is hard, really. Why be just one of the banks? Why would you be a medium size fish in a medium size pond? When can you become a big fish in the ocean? In other words, why become another bank when you can become a unicorn among the global Fintechs? Well, yes, Fintech can drive the banks. If Fintech can give up its agility and dexterity without expecting the banks to give up any of their core interests. But can the antelope give up its zigzag leap? Can the antelope become the lion? It is difficult.
The market capitalisation of the most valuable banks is not N25 billion. Recent report shows that UBA as the sixth most valuable bank in Nigeria has a market capitalization of N38.15 billion in profit in the first quarter of 2021. This can increase. But some Fintech firms are valued at over $1 billion. These Fintech firms are called unicorns. Interswitch is a unicorn. Flutterwave is another unicorn. Paystack would soon be crowned a unicorn. Paga is eager to board the unicorn voyage. It does seem that it is easy to be a unicorn than to be a bank. Isn’t it? Are these two unicorns more valuable than all the banks put together? So, why would a Fintech envy a bank? When it can easily, with hard work, become a unicorn?
With this latest automation process comes value addition. It is clear that any entity that delivers value, wins. Fintechs can do this.
The banks are big. They are garnering deposits. They’re doing something right. They have the vault to invest in technology. They are improving. They’re gaining market share. But the customers are still dissatisfied. The banks do not meet customers’ needs. On the average, you are paying the banks more for keeping your money. You are billed for obtaining a new card. Your account is debited for a new chequebook. You are charged for using the ATM. Meanwhile, Nigeria has an insufficient unit of ATMs.
What is the number of ATMs? Some reports put it at 17,000. Others said it is more than that. But there is no official figure. Bank customers are struggling to find the nearest ATM. Queuing at the ATM points is not rare. While the bank customers are sweating on the queue, some Fintech firms are offering financial advisory service to their tech savvy army on the go. These Fintech firms help customers to make better decisions at the moment. Banks will copy as usual.
You would not gain customers unless you have a product that appeals to the customers’ pain points. What the bank does most of the time does not appeal to your pain point. Nor mine. That is why Fintech exists. To address your pain. To ease your pain. To soothe your pain. As Luvleen Sidhu, co-founder, president and chief strategy officer of BankMobile said, it is about Fintechs being able to recognize that consumer pain points are still not being addressed. And the consumers are saying, “Someone is listening to us. Someone is addressing our frustration. Someone is making this easier for me.” That’s why Fintechs are gaining momentum. For instance, you get 1% interest on your savings account. Fintech gives you more.
Fintech offers no-fee accounts. The banks offer collateralized loans. Some Fintechs give you a loan without collateral. You are charged an overdraft fee. A new Fintech gives you free overdraft. These products address your pain point. That is why the banks will, like the lion, run after the antelope. It is not an intrigue. It is part of life.
*Olaegbe ([email protected])
