IHEANYI NWACHUKWU
Bankers acknowledge that not all of them have perfected the winning strategy for competitiveness and broader market share and needs to upgrade as well as consider new business models
In recent times, banks have increasingly come to terms with the need to put the structures on ground for a more entrenched retail banking culture. Besides, banks are now more than aware of the huge opportunities and the implication for their bottom-line as well as for the shareholders if they can perfect the skills to harvest this all important banking business.
Banks themselves acknowledge that not all of them have perfected the winning strategy for competitiveness and broader market share and needs to upgrade as well as consider new business models which, according to Michael Lafferty, Chairman Lafferty Group-the global financial industry intelligence and research firm- will require the CEOs, board of directors, regulators and politicians to have enlightened view on retail banking.
This however, is not say that banks have not been aggressively pursuing market opportunities in responsive ways to a broader range of customer needs and bringing new customers into mainstream of the banking system
They are increasingly willing to finance household needs. From car loans to home-mortgages and household equipment, the banks are more involved and wiling to take the products to the customers.
But, the need to achieve excellence in retail banking best explains the key task Nigerian banks face in striving to emerge at the top of the industry as well as make their way to world-class position.
Topping the list of the task is the effort by bank executives to build a strong performance culture and world-class sales functions.
Adhering to these capabilities, in turn create a service culture that clearly distinguishes most banks from their competitors as many of them pursue similar initiatives, raising questions on whether their aspirations are high enough.
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Going by the meaning of retail banking, which refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations; the questions yet to be answered remains, the how banks match their aspirations with the services they render in retail banking.
In the real sense, services offered in retail banking should include: savings accounts, mortgages, personal loans, debit cards, credit cards, etc. It is also the part of a bank’s operations providing services at its branches for small (in bank terms) account holders.
Lafferty Group, a global financial industry intelligence and research firm carried out a survey amongst delegates at its Retail Banking Nigeria conference and this survey disclosed that lack of retail banking understanding among senior bank management and board members is the main obstacle to the development of retail banking in Nigeria .
Amongst other hindrances which include infrastructural costs, a skills deficit, the need for a better legal framework for mortgages and the need for a national ID scheme, more importantly, the survey also found that bank’s emphasis on crazy targets and short-term results were also major impediments to the evolution of retail banking in this country.
Even amidst these obstacles threatening the development of the retail banking market in Nigeria, using various parameters in measuring growth and considering the positive direction of the indicators, it appears that Nigerian banks earlier foresaw the potentials of retail banking market in Nigeria as it now evolves post consolidation especially as the country is now 6th world’s fastest growing consumer finance markets.
Not a few analysts at the conference including Michael Lafferty, said that local banks are now fortunate in being able to benefit from the experience and indeed learn from the mistakes of banking operations in Europe and elsewhere which now provided them the opportunity to leap-frog into a global phenomenon that has transformed consumer financial services over the past 25 years.
According to him, within five to ten years, most of the profits of Nigeria’s banks will come from retail banking and consumer financial services, just like banks in most other countries.
It afterall appears that with the market indicators that the potentials of retail banking market in Nigeria portend more opportunities in the market are up for grab.
As indicated in the Lafferty Retail Banking report, Nigeria is now the sixth fastest-growing consumer finance market worldwide, joining the first five which include Ukraine , Romania , Venezuela , Russia and Turkey.
Following Nigeria in the list of ten fastest-growing consumer finance markets worldwide are Vietnam , India , Slovakia and Qatar . Using a growth parameter, Compound Annual Growth Rate (CAGR), the research carried out by global financial industry intelligence and research firm, Lafferty Group was based on a universe of 65 markets worldwide.
In the same vein, Nigeria is the 8th lowest consumer indebtedness country in the world following India , Russia , Peru , Egypt , Argentina , Philippines and Vietnam .
The report shows that Nigeria’s compound annual growth rate (CAGR) on consumer finance is 45 percent close to Russia with 54.8 percent growth rate and relatively higher than India and Brazil with 30.6 percent and 29.9 percent growth rates respectively.
Also, in Nigeria , consumer finance outstanding at $3,703 is the least when compared with other countries like Brazil , India , Russia , South Africa , Indonesia , Chile , and Egypt .
Lafferty Group in the research showed that consumer indebtedness was evaluated as ratio between consumer finance outstanding and personal disposable income including mortgage and non-mortgage outstanding. According to the research, Nigeria is now one of the most attractive emerging markets for retail banking in the world today and will soon be seen internationally in the same league as Russia , Indonesia , India , Brazil and South Africa .
From its origins in financial industry newsletters and conferences over 25 years ago, Lafferty Group has continually evolved its service offerings to ensure that clients receive cutting-edge research, intelligence and advice that enables them to better manage their business in an increasingly complex, competitive, and fast-moving environment.
Michael Lafferty said retail banking is today the foundation stone on which virtually global banks are built while local financial institutions now make future decisions, structure and success of retail banking in the regions.
Before this can happen, however, Lafferty says banks will need to change their structures and create separate banks for consumers, small businesses and corporations. The needs of individuals are different from those of small businesses and are totally different from those of big companies. Each customer group needs its own bank with its own branch network.
While he called for a retail banking revolution in Nigerian banking, he said bank CEOs, board of directors, regulators and politicians should realise that people have balance sheets and cash flows requirements just like companies and should not be treated as the source of the raw material for corporate banking. The retail banking revolution starts with then CEO. If the CEO does not have an enlightened view on retail banking the bank will remain lost in the past and its competitors will take away its best customers.
Meanwhile, there is no doubt that these perceived and recorded growth in the retail banking market lured banks in concentrating more on the market through programmes that could impact on participants in the retail banking market.
According to the chief executive officer, global consumer bank, United Bank for Africa Plc, Angela Nwabuoku, the recent retail banking market conference targeted at considering different business models, potentials and approaches to market banks products while also considering ways of building customer trust and loyalty as well as providing an analysis of the consumer lending opportunities in Africa.
In spite of limiting banking strategy, the rapid transformation of Nigerian retail banking sector has redefined the role of banks in Nigeria from financing trade to one of mobilising and channelling resources more effectively to customer needs.
These changes were indicated by the emergence of many new financial institutions, the introduction of new financial instruments and services, the securing of financial operations, and the elimination of strict gender demarcation lines among different types of customers.
