Banks and technology firms in financial services popularly known as fintechs, have more to benefit from collaboration, according to the chief executive officer of Stanbic IBTC Plc, Demola Sogunle.
Sogunle told guests at the Lagos State Infrastructure Roundtable which held recently, that forecasts that see fintechs taking over traditional banks and ending the reign of incumbent financial institutions are mere figments of the imagination.
Stanbic IBTC is the leading stockbroking firm in Nigeria accounting for over 19 percent of trading volume on the Nigeria Stock Exchange (NSE). The bank attributes the achievement to the efficiency of its online trading platform.
Fintech, which refers to the use of technology to deliver financial services to consumers, is redefining and reshaping the sector in fundamental ways, and its growth is being fuelled by significant and increasing amounts of investment. Global investment in fintech was at $17.4 billion in 2016, representing an increase of 11 percent according to PitchBook. Nigerian fintechs have earned over $50 million in investments so far in 2017.
Although the digital revolution presents enormous challenges for financial institutions particularly as it demands a near 360 degree corporate culture modification, many banks have been quick to adapt.
Rather than cave under the digital onslaught, banks are responding by either creating or providing fintech services using its in-house team or collaborating with tech savvy and vibrant fintech start-ups. In some cases, banks acquire the fintech start-ups and integrate its products on its platform.
Collaboration between banks may be unlikely but Sogunle believes partnership between banks and fintech is very critical not only for the survival of both players but for the customers who will benefit from it.
One area of collaboration is data. Having been around much longer than fintechs and transacted extensively with the banking public, banks have accumulated a vast amount of data that may come in handy for new financial services firms using technology. Given that most of the services that fintechs offer require significant data processing and analytics, the banks can serve as major resource for mining these data.
The banks to a large extent have earned the customers’ trust and loyalty. This is one challenge most fintechs are still grappling with. Despite increasing the number of customers’ using their services, customer trust is still a long way from reality. However, a fintech backed by a bank with significant trust reserve have a better chance of scaling quickly than the one going solo.
