Lawmaker representing Obokun State Constituency, Hon. Adewumi Adeyemi popularly known as Irekandu has commended the fintech industry for offering financial services through technological media and devices, including payments, savings, insurance, investments, e-commerce, and more.

Adeyemi, who also serves as the chairman of the Osun Assembly’s committee on innovation, science, and technology, revealed this on Saturday, December 9, while speaking to financial experts on the subject of the Fintech Industry in Nigeria: An Overview Introduction at the Osogbo Bankers Committee Dinner and Award Night organized by the Central Bank of Nigeria.

While acknowledging the contribution of the fintech industry to financial inclusion in Nigeria, Adeyemi said that since 2020, more than 20 million new bank accounts have been established through both traditional banks and fintech companies, making up 63% of the population. 

In addition, he noted that the new breakthrough has helped the CBN speed its financial inclusion agenda by 20%, which is an amazing accomplishment. He mentioned that local banks in Nigeria, such as savings, commercial, and community microfinance banks, were traditionally used for banking in the country. 

Adeyemi claims that Fintech has also entered other industries, including travel, healthcare, and even schooling.

Adeyemi further stated that the COVID-19 pandemic significantly contributed to the adoption of fintech since companies had to find ways to reach their clients without in-person meetings.

He also traced the rise of fintech in Nigeria to the Central Bank’s 2012 introduction of the cashless policy, which aims to reduce the amount of cash in circulation.

Additionally, he said that the fintech industry in Nigeria is growing at an exponential rate and that this has given many opportunities for businesses to offer services that heavily rely on technology, thereby promoting financial inclusion.

The speech reads in part,
Globally, fintech is transforming the financial landscape and rapidly changing the ways that  financial services are provided to businesses and consumers. The fintech market was valued at about $127.66 billion in 2018 and about $309.98 billion in 2022 at an annual growth rate of 24.8%.

FINTECH COVERAGE

Fintech covers a range of financial services, and start-ups are disrupting the financial services market. The areas where fintech companies are most prevalent are payments and transactions, lending and credit, and wealth and brokerage.

Other financial sectors, including blockchain, mortgages, and neo-banks, are also growing. While some financial services still use a mix of both advisors and algorithms, other transactions such as applying for a mortgage or a loan can now be done quickly and conveniently online, without any human interaction at all.

ANY THREAT?

This is great news for end-users but is causing a significant shake-up for more traditional players in the market.

According to the latest PwC Global Fintech Report, the question is no longer whether fintech will transform financial services, but which firms will apply it best and emerge as leaders.

Fintech is the best route to traditional banking’s survival, and many financial services organizations have already embedded it fully into their strategic operating model. It will be important for businesses to use fintech to improve the ease and speed of their services, as well as to facilitate the mass customization and personalization consumers have come to expect.

Not all fintech competes with traditional banking. In many cases, fintechs are working in tandem with traditional banks, allowing market incumbents to diversify their suite of products and further monetize their client base.

DIVERSIFICATION

As traditional banks continue to diversify their product portfolios and offer technology-based services, we are also seeing them harness fintech through their investments. For example, JP Morgan invested $25 million in fintech start-ups in 2019, Capital One has created technology focused ‘banking cafes,’ and Citi has launched the Citi Developer Hub to invite third-party programmers to test and share feedback on their APIs.

The rise of financial technology is both a blessing and a curse for the banking sector. On one hand, FinTech is providing ways to enhance the services it provides to its customers, with banking institutions using tools like chatbots to enhance customer experience, mobile apps to give customers a real-time view of their bank accounts, and machine learning to secure against fraud. 

On the other hand, fintech is providing stiff competition to traditional banking and financial services from every angle, which is threatening the future of some of our first generation banks and micro-financial institutions.

Considering that more than 65% of Nigerians are below the age of 35 years, everyone here today should disrupt and innovate. In these fast-paced times, fintech has permeated into every corner of the world as a way to provide consumers with efficient and cost-effective solutions to their financial demands.

It is revolutionizing the way people manage money and access financial services, making it easier and more convenient than ever before. In a world where access to financial services and high-speed broadband internet is not universal or affordable, fintech can democratize access to finance, and the world can move closer to achieving financial inclusion.

POSSIBILITIES/OPPORTUNITIES

Fintech has the potential to lower costs while increasing speed and accessibility, allowing for more tailored financial services that can scale. Over the last decade, 1.2 billion previously unbanked adults gained access to financial services, and the unbanked population fell by 35%, primarily boosted by the increase in mobile money accounts. While globally, 1.7 billion adults remain unbanked, fintech is helping make financial services more accessible to an increasing number of people.

Beyond mobile money, fintech has also shown promise in areas such as Government-to-Person payments and cross-border remittances. For instance, according to a World Bank Group report, global remittances may see a complete transformation through the use of financial technology. Cross-border remittances account for $600bn in value and often exceed official developmental aid figures. The average global cost to send these funds in the form of cash is 6.8 percent, while a fully digital transaction drops the cost to 3.3 per cent and reduces issues of liquidity

However, digital disruption is not new, and we have long been able to summon movies, food, and transportation at the touch of a button. Yet, the impact on the financial sector is different, 
primarily due to:

a) the impact it can have on financial integrity and stability

b) new entrants with unconventional business models that don’t fit neatly into existing 
legal frameworks and are difficult to monitor and

c) the bearing on consumer protection.
This has led to a dilemma for policymakers worldwide when trying to achieve the right balance 
between enabling innovative fintech and safeguarding the financial system. They have taken 
different approaches, such as the use of regulatory sandboxes to direct regulatory amendments.

Thematic areas to focus on include:

1. building the financial infrastructure and foundational building blocks, 
including regulatory and policy frameworks, digitally-enabled identity, and 
robust payment and credit infrastructures for sustainable, technology-led 
financial economies.

2. Boosting the capacity of governments to harness fintech, data, and expertise 
while responding proactively to changing regulatory and supervisory 
requirements.

3. Brokering collaboration between different players- both public and private in the financial ecosystem to bring about symbiotic positive change.

CONCLUSION

In using digital platforms, we must work closely with the governments and fintechs on the ground in Nigeria to urgently develop an application to support digital literacy while delivering targeted business insights and advice.

Moreover, this data, along with other alternative data such as repayment of the store or bank credit and collaborative behaviors, will contribute to a credit score providing a route for access to finance to those without formal credit histories like the bottom of pyramids, unbanked, smallholder farmers mostly residing in our rural areas, financially excluded women, and youth in places like Obokun where I come from.

Photo of the event…