Dipo Fatokun, director, banking and payments system department, Central Bank of Nigeria (CBN) recently spoke to journalist in Lagos on developments in the electronic payment space, where he said the relevance of FinTechs in the payment space is going to increase. Hope Moses-Ashike reports.
The emergence of financial technology (Fintechs) companies as a threat to the existence of banks in the e-payment space
To take it on a serious note Fintech has always been in the system. It is just that more prominence is been given to their roles and that is because most banks all over the world are now focusing on their core functions and leaving other functions to service providers some of which are now referred to as Financial Technology Providers. The need for collaboration between the Fintechs and the banks will always continue to be on the rise.
But the truth is none can displace the other. It is just that there will be more prominence for the Fintechs going forward. As I said in my presentation, in some jurisdictions Fintechs are being allowed or plans are on the way to allow Fintechs even to connect to the central bank which was the exclusive preserve of the banks.
But the question is even when such connections are made where will the money be? Because Fintechs are not licenced as financial institutions, they cannot take deposits. They can make payments out of bank accounts. They can only facilitate payment or make it easier but the banks will continue to play a very big role. When we talk of banking, what most of us experience most times is payment. We pay money and we receive money. Banks provide hundreds of services outside payment. They open letters of credit, they give you loan and you can only give loan if you take deposits. And there are other services they provide. For you to do all these, you need to be a licenced financial institution.
If you want to travel abroad you need a bank to get foreign services. In the payment space Fintechs will continue to be relevant and their relevance is going to increase. But are they going to take out the banks? That is a dream that is not likely to come true. But a flip part to it which is also an advantage to the bank is that the prominent role of the Fintechs will even make it possible for banks to provide services at a cheaper rate, as well as get to the nook and crannies where hitherto they would not be able to provide services. You know that before, a bank will need to create another branch, before it will provide services, you will need to work with the bank branch or even go to an ATM to have services from the bank. But that is changing. They are relevant. They will continue to play greater role in the payment system but they are not going to shove the banks aside.
