Technology has changed the way of life in many spheres of human endeavour, and though often scary in view of security concerns, financial systems have been significantly impacted as well.
Let’s say you are a bank executive. Imagine that you are competing against a truly global, multi-service, low-cost, digital bank: customers accessing their accounts through their mobile phones, paying with a tap on their wearables, sweeping savings to an ETF portfolio (designed by an AI (artificial intelligence) engine based on their savings goals and risk appetite profile) offering no-fee, cross-border payments. Imagine if you faced a competitor bank like this, with a low and nimble footprint, prototyping new services quickly, managing regulatory compliance transparently, using an AI system to limit fraud losses, and hedging currency risk using cryptocurrencies. This scenario, presented in a PWC report on FinTech 2020 does not exist today. But in the next few years, it is a very real possibility.
PWC’s Financial Services Technology 2020 and Beyond: Embracing disruption, noted that global investments in FinTech more than tripled in 2014, reaching more than $12 billion. In comparison, banks spent an estimated $215 billion on IT worldwide in 2014, including hardware, software, and internal and external services. This is a material number, and because it is so highly targeted, the FinTech spending will really make an impact.
The sentiment appears to be shared in Nigeria as many banks appear to be betting big on FinTech in redefining their business models as they aim for bigger portions of the market share.
Uzoma Dozie, CEO, Diamond Bank plc, said in an exclusive interview with BusinessDay, that “there are many things that we are going to be doing with Tech start-ups because it is important we do so. And I think there’s an opportunity for FinTech and small businesses to collaborate and grow further.”
There are small businesses that cannot afford to buy a big ERP product or a banking application but through FinTech, their needs can be met seamlessly, and cost effectively.
“A classic example is PayStack which is providing payment solutions that are more cost effective for those types of businesses where one can just plug and play, and we are also creating avenues for that,” said Dozie.
PWC’s report notes that the financial services industry has seen drastic technology-led changes over the past few years. Many executives look to their IT departments to improve efficiency and facilitate game-changing innovation – while somehow also lowering costs and continuing to support legacy systems. Meanwhile, FinTech start-ups are encroaching upon established markets, leading with customer friendly solutions developed from the ground up and unencumbered by legacy systems.
Customers have had their expectations set by other industries; they are now demanding better services, seamless experiences regardless of channel, and more value for their money. Regulators demand more from the industry too, and have started to adopt new technologies that will revolutionise their ability to collect and analyse information. And the pace of change shows no signs of slowing.
CALEB OJEWALE
