All available data on financial inclusion in Nigeria reveals that there is still a long way to go. There are also numerous gaps to fill across the country, especially in the rural areas populated by unbanked people excluded from the financial ecosystem. The traditional banks cannot reasonably hope to fill this gap in 100 years. This is why the emergence of fintechs is viewed as a game changer.
The United Nations Sustainable Development Goals, SDGs, aim to transform our world. The 17 goals are a universal call to action to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere. Achieving the SDGs may save the world.
One critical element to drive the fulfilment of the SDGs is financial inclusion. Financial inclusion has been identified as an enabler for, at least, seven of the 17 SDGs. It provides the tools and resources for individuals and communities to break free from poverty, access education and healthcare, create sustainable livelihoods, and contribute to broader societal development. Therefore, advancing financial inclusion is vital for the overall success of the SDGs. The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.
“Financial inclusion,” according to the World Bank, means that “individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.” It refers to the accessibility and usage of affordable and appropriate financial services by individuals and businesses, especially those traditionally excluded from the formal financial system.
All available data on financial inclusion in Nigeria reveals that there is still a long way to go. There are also numerous gaps to fill across the country, especially in the rural areas populated by unbanked people excluded from the financial ecosystem. The traditional banks cannot reasonably hope to fill this gap in 100 years. This is why the emergence of fintechs is viewed as a game changer.
Nigeria’s dynamic and ever-evolving financial services sector, FSS, has seen the continued emergence of traditional financial institutions and fintech disruptors. The landscape is a diverse and complex arena that caters to the financial needs of a rapidly growing population. Traditional banks have long held sway in this sector, offering a wide range of financial products and services. However, the advent of fintech companies has disrupted this status quo, introducing innovative, user-friendly, and mobile-based solutions that are often more accessible to the unbanked and underbanked populations.
It is clearly against the backdrop of the work that needs to be done in the financial services ecosystem that shock waves raced through the industry when news of a leading deposit money bank, DMB, restricted consumer fund transfers to neobanks, including Moniepoint, Kuda, OPay, and PalmPay. Customers of the neobanks found themselves unable to transfer funds or access services, and the neobanks themselves faced an uncertain future.
Reports indicate that the neobanks were no longer listed on the list of approved financial institutions on the deposit money bank’s app. A neobank is a type of direct bank that operates exclusively using online banking without traditional physical branch networks that challenge traditional banks. They are digital financial services providers, aka fintechs.
While everyone agrees that collaboration can play a significant role in boosting financial inclusion, this ill-advised move is not in the spirit of collaboration. The unilateral step by the DMB is not in sync with CBN’s cashless policy or global efforts to boost financial inclusion and thus inch closer to achieving the SDGs. Everyone and anyone who understands the tremendous importance of financial inclusion and the essential role fintechs are playing in that space should be concerned.
On deep reflection, one is tempted to ask loudly, why are traditional banks instead of stepping up to the plate, serving retail customers better, and protecting their systems against fraud, coming for fintechs? Some news reports claim that the bank’s action is in response to incidents of fraud as evinced by a recent news item in Businessday with the headline, ‘Inside N14bn fraud crippling Nigeria’s payment ecosystem’. While this is a valid concern, it does not in any way or form justify the action of the bank. Beyond the relationship between the operators, millions of customers have been left in the cold.
The DMB’s action thrust the intricacies of the ecosystem into the spotlight. Indeed, many in the industry see this as an example of what can be perceived as big bank behaviour. Experts contend that Fintechs, despite their innovative offerings, often find themselves at odds with traditional financial institutions due to competition for customers and the reluctance of incumbents to adapt to changing customer preferences.
The motivations behind the bank’s actions are complex and open to interpretation. Some suggest that jealousy over the success of the fintechs in gaining market share and resistance to change may be at the heart of the matter. Traditional banks are often slow to adapt to evolving customer expectations and technological advancements, and fintechs’ rapid rise has pushed them out of their comfort zone.
In the wake of these events, there is a clear need for dialogue, collaboration, and mutual understanding between traditional banks, fintechs and the regulator. Fintechs have demonstrated their ability to drive financial inclusion and innovate in a way that benefits the entire financial services sector. Traditional banks should be open to partnerships and collaborations that leverage the strengths of both worlds.
Today, the Nigerian financial services landscape is at a crossroads, and the actions of the DMB serve as a stark reminder of the challenges and opportunities within this space. The tyranny of the mighty must be replaced with cooperation and synergy to ensure the continued growth and evolution of the financial sector, ultimately benefiting the Nigerian people. It’s time for both traditional banks and fintechs to embrace the future together, ensuring that no one loses in this ever-changing landscape.
If SDGs will save the planet, financial inclusion will propel it. Fintechs are the engines of financial inclusion. Let Fintechs breathe!
Eromosele, is a corporate communication professional and public affairs analyst
