Before Automated Teller Machines (ATMs) and mobile money, Nigerians were often cash-strapped if unable to conclude their transactions at a physical bank before the weekend. Every itinerary had a “bank visit” at least once a week!! Long and frustrating queues in banking halls were the norm, and access to value-added banking services seemed exclusive to the influential and connected.
Fast-forward to the adoption of ATMs, where Nigerians welcomed the idea of transacting with a plastic-looking card with a chip on it – this brought a bit of relief to users as customers gradually migrated to interfacing with a machine, rather than waiting in long queues. Ever since then, it has been a case of innovative solutions, for example, USSD, Online/Web payments, Mobile Money, and then the most disruptive form of banking – Digital Banking.
Today, that hurdle is almost history as the financial landscape becomes increasingly digitized. In 2019, Nigeria recorded over 370 million mobile money transactions from 15.3 million customers. Self-service banking options, process automation and web-based services are almost taken for granted. And the trend has only just begun, as social distancing and other health concerns brought on by the coronavirus push Nigerians to adopt digital banking in increasing numbers.
This new-fangled digital adoption is not just a pastime. Nigerians’ growing preference for trusted platforms that aggregate all their financial affairs, solves their problems, and helps them achieve their goals necessitates it. The McKinsey Financial Insight Pulse survey conducted in October 2020 reinforces this. It found that the pandemic has produced consumers for whom digital and mobile banking services have become a necessity. They prefer banking with financial institutions aligned with this preference to deliver seamless digital transactions.
Wema Bank keyed into this growing trend long before the McKinsey report. In 2017, it launched ALAT, a full-service digital bank that helps customers access financial services without visiting a physical bank. This was a first of its kind, in Nigeria. Such fintech innovations have in the past few years, changed the face of Nigeria’s financial landscape, and prospects are good there will be more in the short to medium term.
Meanwhile, digital banking continues to deepen financial inclusion across the value chain. This is significant, because, in 2018, an EFINA survey found that 36.8% of Nigerian adults were unbanked, excluded from financial services that might grow their businesses and create income opportunities for others. While digital illiteracy may be partly responsible for this scenario, Nigerians’ aversion to convoluted documentation processes and long wait times in banking halls should rank a close second. Who wouldn’t be fazed by this? Customers stand to lose productive working hours taking time off work or business to conduct mundane transactions like account openings. Not with ALAT, surely. They designed the app to conclude this process in a matter of minutes, with a Biometric Verification Number (BVN) and phone number as the only requirements. Simplifying this process obviously means plugging more Nigerians into the financial network and possibly assisting the CBN in its quest to bank 95% of the adult Nigerian population by 2024.
But financial inclusion is just one part of the equation. Inflation has hit record highs and customers are looking out for investment options with reasonable interest rates. Unsurprisingly, Ponzi schemes cash in on the situation with enticing but unsustainable returns. The Securities and Exchange Commission recently announced over 3 million Nigerians have lost an estimated N18 billion to such schemes over the past few years.
Digital finance is slowly but surely thwarting this setback, helping customers differentiate legitimate investments from their Ponzi variants. It has democratized investment in stocks, cryptocurrencies, treasury bills, and forex, such that the average investor is eligible for participation just as much as the High Net Individuals.
(HNIs). The Nigerian fintech industry continues to produce a host of micro-investing platforms linked with customers’ bank accounts for hitch-free deposits, withdrawals and standing orders. Some fintech platforms like ALAT even offer annual interest rates as high as 10% and facilitate group savings with family members and friends. This nudges customers towards deferring immediate gains for long-term goals and passing on the tradition to their peers. If it keeps up, it will integrate savings into the psyche of the upwardly mobile youth, and cascade to other demographics.
But will digital banking continue to define Nigeria’s financial landscape? The answer is yes. Digital banking is no longer just a series of transactions, but a lifestyle adopted by the millennials and Gen Zs – most of whom grew up using the internet, computers, mobile phones, and smart television sets. The make up 60% of the Nigerian population and set the tone for traditions many consider hip. Nowadays, this means a digital-first culture involving USSD withdrawals/transfers and flight or movie tickets purchased online. It also demands access to the finer things of life, such as personal loans without collateral, luxury items bought in, installments and payday offerings to meet basic needs before the monthly paycheck. No excuses given, none taken. The youth has digital banking to thank for these opportunities and may not be settling for less soon.
Wema Bank had long foreseen digital banking becoming more of a lifestyle than a transaction. That’s why we tailored ALAT towards facilitating seamless transactions, instant loans, discount offerings, and, of course, helping customers achieve their goals with attractive interest rates and investment education. Small wonder, in the first year following its launch, ALAT gained a whopping 250,000 customers with well over N1.6 billion deposits. We were subsequently named ‘Best Digital Bank in Nigeria’ and ‘Best Mobile App in Nigeria’ for leading the charge in the Nigerian banking sector’s digital revolution at the prestigious World Finance Awards 2017.
Long story short, digitization is here to stay. It’s up to forward-looking financial institutions to align with the revolution or risk losing relevance. In the next few years, we should continue to see the Banking as A Platform (BAAP) concept gaining ground, as banks increasingly build partnerships with fintech and leverage data analytics to help customers make informed financial decisions. Rather than view Blockchain with scepticism, we should see financial institutions adopting the technology to facilitate faster and relatively inexpensive payment processing, stock trading, paperless international trade, and onetime identity verification for online transactions.
For existing digitized platforms like ours, continuous innovation is no longer an option, but a mandate. Customers will continue to demand improved mobile interfaces and experiences. They will always prefer hassle-free account openings, loan requests, and complaint resolution processes. We are growing and should get to a point where artificial intelligence is fully integrated into our digital banking applications such that online scheduling, video consultations, personalized financial recommendations, and reminders become the hallmarks of what we do. The future of digital banking is already with us, and only apps that catch the buzz and stay innovative will win! – Olusegun Adeniyi is the Chief Digital Officer at Wema Bank.
