Fintechs do not pose a threat to top-tier banks in Nigeria, Credit Analyst at S&P Global Ratings, Samira Mensah, has disclosed.
Speaking on CNBC Africa recently, she noted fintechs and banks will collaborate to improve the financial landscape.
According to Mensah, the top-tier banks in Nigeria have a strong balance sheet and already have a competitive position in the market.
She said, “Let me start by saying, we don’t think that fintechs will pose massive challenges to top-tier banks. Top-tier banks in Nigeria have strong balance sheets, they have a strong competitive position in the market not only in Nigeria but across borders and they (the commercial banks) are collaborating with fintechs already. So, it will be more of collaboration and not competition.
“Particularly when you look at regulatory cost and compliance costs that fintechs have to face when they roll out new products/services. It is best for them to leverage the backend of banking back-end IT infrastructure because they are already embedded in all the regulatory/compliance requirements.”
She highlighted that the Central Bank of Nigeria’s open banking framework would further deepen the roots of collaboration between fintechs and banks as both entities would exchange data and leverage on the existing infrastructure.
Commenting on the growth of fintech in the country, she stated that this can be largely attributed to a demography that is supportive of technological trends.
The analyst noted that fintechs are on track to close the financial exclusion gap in about five years.
Mensah declared, “They are not working in a vacuum obviously; there is a terrain that is favourable in Nigeria. You have a young demographic that is supportive of that trend and who likes to consume financial services through their phone.
“Also, banks are not staying idle; they are supported by regulatory policies from a decade ago. They have shifted in their strategic operation, and they have come up with a diverse way and diverse digital channels to deepen their reach and close that gap. All these factors contribute to closing the gap in financial exclusion which we think can be done over the next five years.”
She explained that fIntechs were serving a good purpose in a country where financial inclusion was around 40 per cent of the adult population.
She noted that those online banks provided easy solutions, solving problems with essential products that are easy to understand, cost-effective, and fast.
She added, “Nigeria is one of the top three fintech hubs on the continent. The technology infrastructure is not that bad because mobile penetration is 100 per cent or close to. However, smartphones are not widely spread when it comes to usage. But there is an expectation that it would reach about half of the population owning a phone. For now, it is about two-thirds of people owning a phone.
“Also, you have the rollout of cutting-edge technology like 5G, which just happened recently. This will continue to foster fintech technology and there is the large young demography and a large informal sector that is strong enough to attract investors into the fintech space.”
Recently, Enhancing Financial Inclusion and Access disclosed that the number of financially included Nigerians rose to 74 per cent in 2023.
