A report says fintechs are a potential long-term threat to the Nigerian banking industry

The emergence of financial technology (fintech) companies in the country will pose a long-term threat to the banking industry and accelerate the adoption of digital banking in Nigeria, Pan African credit rating agency, Agusto & Co. has stated.

Agusto & Co., in its latest Banking Sector Report, noted that while fintech companies may not be a threat to the Nigerian banking industry in the short-term, they are the potential long-term threat to the sector.

The agency said it supported ongoing strategies by “proactive players in the banking industry to either partner with these fintech companies or create an alternative form in-house.”

Here are few findings from the report

- The report observed that banks with net interest spread (NIS) consistently above the industry average of 59% in 2017 garnered a large pool of stable, low-cost deposits through investments in technology to enhance digital services in their retail banking strategies.

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- Financial inclusion strategy aimed at capturing the informal and unbanked portion of the Nigerian populace, which accounts for about 47.5% of Nigerians, remains an avenue to get low-cost funds into the system.

- The young populace, particularly “millennials”, are available targets that can be on-boarded into the banking system through digital solutions like the mobile and agency banking.

Agusto & Co. said the use of digital platforms reduces the marginal (or additional) cost of serving customers, thereby maintaining profitability.

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The agency said the future of banking in Nigeria lies with the retail market and with banks ensuring that this segment of the market is well served using digital solutions.

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